While the Indian multinational software giant Tata Consultancy Services earns 51 per cent of its revenue from North America, the American multinational IBM depends on its domestic domain for only 35 percent of its revenue. The different market strategies of the Indian and the American software companies are also affecting their earnings as well, given the impending recession in the USA. After its earnings being less than expectation in the fourth fiscal quarter, the TCS stocks have declined by more than 10 percent on 21 April. On the other hand, IBM’s stock prices are rising with its earnings rising above expectations.

Therefore, the moral of the story is that instead of over reliance on a single market, diversification helps. The Indian software companies have realized this amidst fear of US recession pulling down their demand. They are now looking for new markets in China, Latin America and the Middle East.

The US recession is expected to bring bad news for the Indian IT industries with possibility of job cuts and arresting salary hike. The latest trend among the IT industries is to go for fresh hires instead of lateral hires to push average salary cost down. However, some see a silver lining to the recessionary condition in the US. Job cuts in the US could also mean more outsourcing of jobs to India. However, with huge decline in demand, the US companies might not need much capacity. With Philippines, Indonesia and Ireland emerging as new attractive outsourcing destinations, Indian companies should be careful about their strategies.

Source:Business Week
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