BANGALORE, India A sense of disquiet in India has set in as a result of the terror attacks against the United States and threats of retaliation by Washington.
The pessimism within the Indian software industry comes in the middle of a business slowdown that has already wracked many companies. The attacks in New York touched individual companies as well: Four engineers from Wipro, India's largest IT company, remain missing since the Sept. 11 attacks on the World Trade Center.
Industry reaction to the attacks ranges from the view that it will only be a temporary problem to the possibility that the U.S. focus on Afghanistan will cause overseas customers to view India as too risky a place to entrust with software development, especially mission-critical projects.
The United States accounts for more than 60 percent of India's software exports, and anything that affects the United States affects India's software business. Companies here understand that one likely outcome of the attacks is tighter restrictions on U.S. entry visas. That in turn will affect on-site projects performed by Indian companies for U.S. clients. A sizable part of the revenues of Indian software companies comes from on-site projects, which are also more profitable than domestic projects.
Top industry executives here have mixed feelings about the impact of the attacks on their business. "There will be a slight slowdown in the business due to the events of Sept. 11, but I believe this will only be temporary," said S. Devarajan, the head of Cisco Systems Inc.'s software development center in India.
Devarajan based his optimism on the fact that "the IT industry in the United States has not stopped functioning and neither has any of the other industries." He said Cisco's development work continues and that "Cisco's work in India has in no way been impacted by what has happened in the United States."
Others like Tektronix (India) managing director Ashok Kapoor said the attacks made the earlier slowdown look normal. To get back to where it was, the industry will first have to get through whatever consequences are in store for the region.
Swaminathan Krishnan, chief marketing officer of Sasken Communication Technologies, said the company "does not foresee any adverse impact owing to its sole focus in the telecommunications area." He added that in the "telecom area, secure communications and electronic surveillance may even witness a spurt in the short to medium term as will disaster-management systems."
Others foresee tough times. Subash Menon, managing director of Subex Systems, said the attacks could propel the economy into a long slump.
"The economy could slide into a deeper slowdown, resulting in extremely slow decision making and cancellation of projects due to paucity of funds," Menon said.
Since Washington has named Osama bin Laden as a prime suspect in the attacks, the focus of retaliation is aimed at India's neighbors: Pakistan and Afghanistan. An industry analyst said any U.S. military action in Afghanistan would "severely hurt India's software exports." The chance of a military conflict there would have major geopolitical implications for India as well.
That worried executives like Menon. "Any conflict in the region will lead to instability, which in turn will be viewed as a higher risk to operate in and out of India. This could result in withdrawal of critical projects from the country," he said.
Indian software companies were already seeing lower billing rates for outsourced U.S. software projects, and new clients have been hard to find. But Phiroz Vandrewala, chairman of industry association Nasscom, said the attacks may at worst result in lower annual growth rates for overall software services. While the results of the third quarter (October through December) may show a dent, a clearer picture of the effects won't be known until next month, he said.
For now, most companies have dropped travel plans, which means a lag between signing new customers or pursuing new projects with existing customers. India must wait for U.S. clients to overcome their fears about the timing of the delivery of projects if war breaks out in the region. As a result, India's software companies are likely to see barriers to overseas operations, lower profit margins and lengthy negotiations just to reach agreements.
One impact companies here will not be able to escape is declining revenues from on-site projects in the United States. With U.S. immigration officials expected to tighten visa restrictions, on-site work will slow considerably.