How much have new technologies impacted the IT and BPO services demand?
Today, clients expect a partner that can help transform their business and translate into few key attributes, which is where our experience and focus comes in. Firstly, a partner who could help clients transform business, understand and focus on how the clients’ business is changing and its implications.Second is about technology, whether it be cloud, mobility, big data or social media and how all these technologies are integrating with the business, so knowledge of technology is essential. Third area is based around our tag line — “Consider IT Done” and “Small Enough to Listen and Big Enough to Delivery”- which says that the partner needs the vision and knowledge of technology, and focus on transformational initiatives is essential.
Eventually, clients expect us to be absolutely positive on delivering promises, which is our focus. At Syntel, our 22,000 plus associates makes us big enough to focus on what we decide and on the flip side, right from juniors to the senior most leadership, we work closely and listen each other. Eventually, people do business with combinations of performance of people, experiences and understanding of markets.
Indian rupee has slipped against the US dollar. In your view, how much will the rupee volatility impact the Indian IT and BPO industry?
Clearly, no expert can predict how currency can go in short term. The current rupee level is the weakest in many years touching Rs.60 to a dollar. When the business is either in dollars, pounds or euros in a global delivery model, against rupee it does help in short term but in the long term it is not good for businesses and the economy.
Interestingly, in last 10-12 year history of exchange rates, there’s been a few anomalies where rupee actually became strong at a rate lesser than Rs.45 to a dollar compared to the present Rs.60 level. Baring those anomalies, most of the 12 year period, the rupee has rallied between Rs.46 to Rs.49 against the dollar. Currency consistency is good for businesses and organizations like ours and a stable currency rate is what most businesses expects and wants.
Currency’s impact is purely mathematical. One rupee moves 30- 40 bps, so when rupee gets weaker, it impacts the operating or gross margins by 30- 40 bps and when it gets stronger, then it contracts the operating margins. Given this, we certainly do the occasional hedging because we take the clients’ order, so we know the backlog, know its cost, and also know the clients’ commitment to do the business. So we tend to lock-in at a particular exchange rate. Hedging at a point in time of getting an order if the rupee gets weaker or stronger, helps maintain the operating margins. That’s how most IT companies hedge on currencies to mitigate the currency movements.
How has been Syntel’s business and the demand environment this year?
First of all, for Syntel the demand environment has been stable, certainly lot better than 2 or 3 years agao, when every segment and industry faced the economic uncertainly and financial meltdown. Within Syntel, we are very pleased because in our last 5 year performance we have delivered 18% CAGR, 24% earning growth and have increased our strength by 17% annually. So, Syntel had a strong Q3 of profitable growth and all these years our performance has been above the industry average.
Will the new US visa-immigration bill impact the Indian IT and BPO sector?
Clearly some of the current bill’s provisions as being discussed, will impact the entire industry. But the law enactment requires both the Senate and the House approval and thereafter, will have to see whether it is implemented or not. So there’s a range of possibilities based on the bill that is being considered. The Senate is likely to pass the bill while House timing would be roughly in the fall of this year. There’s high expectation and possibilities that the House bill provisions would be different and more watered down from the Senate bill. I would like to point out here that today businesses are tuning free trades across regions and are absolutely essential in a long run, which is specific to our industry and Syntel.
So this is not something that is going to happen between today and tomorrow morning. There are possibilities in terms of how we can get impacted but are confident to navigate through with our company’s history and the fact to implement different models in response to whatever law is enacted at appropriate time.