BPO Blogs, BPO Projects, Call Center & Outsourcing News
Drooping Dollar to Impact Revenues of IT Firms
Outsourcing has been termed the sunshine industry for a long time and rightly so. It has been able to survive the recession and going into recovery, it looks like outsourcing is here to stay. But there are a couple of glitches that may hinder its progress.
With India being one of the top outsourcing countries and host to outsourcing giants like Wipro, Infosys, and Tata Consultancy Services, the declining dollar stands in the way the Indian economy can balance its flux.
It's no surprise that the dwindling dollar has sent some pain down financial markets worldwide. And it looks like the dollar is facing the stark realty of having to be dealt with when it comes to investing. The International Monetary Fund has forewarned that the fall of the greenback can create an economic problem for the global economy. It is also not a secret that we might see another currency like the yen or the Euro replace the dollar as the currency of choice for many investors.
The reason for the dollar's adverse effects is because financial markets have a negative reaction to a declining currency. The greenback has already dropped 5 percent against the Sterling pound and the Euro, just this year, and it continues to plummet downhill.
The impact on outsourcing is also clear as exposure to the dollar for majors like Infosys as high as eighty percent of their total business, the drooping U.S. currency could be the most likely risk for software and IT firms. To provide an example, Infosys, the No. 2 outsourcer in India, lost $21.6 million in revenues during the April-June quarter in 2003-2004.
Outsourcenews.com reports that one study revealed that, "Indian software firms get 60 per cent of their revenues from the US and a one per cent appreciation of the rupee against the dollar can impact earnings before interest and tax margins by between 30 and 50 basis points. Irrespective of the fact whether the company is big or small, all of them have been hit. The margins may be impacted by as much as 4 per cent."
Nonetheless, the trade body NASSCOM is optimistic on the outlook on outsourcing. Kiran Karnik, president of NASSCOM said in a statement, that the impact of the declining dollar would not be very significant and would be along the lines of 2-3 percent. He added, that NASSCOMdoes not think it will adversely effect the competitiveness of software firms.
Jacob Cherian writes for SourcingLine, a leading provider of directories on top seo companies and mobile application developers
With India being one of the top outsourcing countries and host to outsourcing giants like Wipro, Infosys, and Tata Consultancy Services, the declining dollar stands in the way the Indian economy can balance its flux.
It's no surprise that the dwindling dollar has sent some pain down financial markets worldwide. And it looks like the dollar is facing the stark realty of having to be dealt with when it comes to investing. The International Monetary Fund has forewarned that the fall of the greenback can create an economic problem for the global economy. It is also not a secret that we might see another currency like the yen or the Euro replace the dollar as the currency of choice for many investors.
The reason for the dollar's adverse effects is because financial markets have a negative reaction to a declining currency. The greenback has already dropped 5 percent against the Sterling pound and the Euro, just this year, and it continues to plummet downhill.
The impact on outsourcing is also clear as exposure to the dollar for majors like Infosys as high as eighty percent of their total business, the drooping U.S. currency could be the most likely risk for software and IT firms. To provide an example, Infosys, the No. 2 outsourcer in India, lost $21.6 million in revenues during the April-June quarter in 2003-2004.
Outsourcenews.com reports that one study revealed that, "Indian software firms get 60 per cent of their revenues from the US and a one per cent appreciation of the rupee against the dollar can impact earnings before interest and tax margins by between 30 and 50 basis points. Irrespective of the fact whether the company is big or small, all of them have been hit. The margins may be impacted by as much as 4 per cent."
Nonetheless, the trade body NASSCOM is optimistic on the outlook on outsourcing. Kiran Karnik, president of NASSCOM said in a statement, that the impact of the declining dollar would not be very significant and would be along the lines of 2-3 percent. He added, that NASSCOMdoes not think it will adversely effect the competitiveness of software firms.
Jacob Cherian writes for SourcingLine, a leading provider of directories on top seo companies and mobile application developers
Comment
You need to be a member of BPO Voice : Network For Outsourcing Professionals to add comments!
Join BPO Voice : Network For Outsourcing Professionals