Infosys suffers as IT budgets are slashed

Infosys is predicting further decline as the recession deepens

Infosys has revealed a sequential decline in quarterly profit in its financial results (PDF) for the quarter ended 31 March 2009.

Although year-on-year overall profit has increased by 10 per cent to $1,281m (£858m), India's second largest outsourcing provider has seen a $54m (£36m) drop in profits since September 2008.

Infosys revenues reached $4,663m (£3,122m) for the year, an increase of 11.7 per cent on the year before, or 15.2 per cent in constant currency terms. But the firm expects revenues to suffer from the economic crisis until 2010, projecting a decline of as much as 6.7 per cent.

Infosys European chief BG Srinivas highlighted significant pricing pressure on customers, particularly in the fourth quarter.

"There has been a real slowdown in decision making," he said. "It is difficult to predict when it will get better, but we believe in around six months."

Srinivas claimed that most of Infosys' clients had cut their IT budgets by five to 10 per cent, adding that Infosys is employing a number of techniques to ensure business growth in an economy showing "no room for optimism".

Infosys employees will have their expenses cut, and there will be no pay increases during the new fiscal year, Srinivas said. This contrasts with the previous 12-month period, when average pay increases ranged from 6 to 12 per cent.

Srinivas added that Infosys will use its cash assets of more than $2m (£1.33m) to promote the company and develop new operating models, such as transaction-based pricing. Infosys will also invest in its client facing teams and plans to hire 100 new members of staff, particularly in Europe and the US.