The Hindu : SARS-gazing IT firms count their stars

Online edition of India's National Newspaper
Sunday, Apr 13, 2003

Business

Business

SARS-gazing IT firms count their stars

By Shanthi Kannan

CHENNAI APRIL 12. Indian IT companies have become fidgety. The fast spreading SARS (severe acute respiratory syndrome) has left them groping in the dark. They are not quite clear if they are SARS-struck. They are equally unsure if they are at a safe distance from SARS. What is clear, however, for them is that the proverbial sword hangs over their heads at the time of contract renewals and new projects. Not surprisingly, their business development is under SARS pressure.

The governments of the affected countries, no doubt, have promised that the situation will return to normal soon. The fact, however, is that most companies located in the SARS-hit regions function only with thin staff in the wake of a `typical pneumonia scare'. This has not only affected the daily routines of companies but also their interactions on new projects and other business schedules, according to S. Sriraman, Chief Executive Officer, SilkRoute Indchem Limited.

Most companies located in these countries are not clear about meeting their schedules. The personal touch/ rapport that builds up in `across-the-table' discussions is conspicuous by its absence in high-tech communication processes such as video conferencing, he feels. In the quick-changing situation, at least a couple of sure contracts of SilkRoute have been kept on hold indefinitely. Most of the business travels are rescheduled. Foreign delegations, that are supposed to visit India or Indian delegates visiting SARS-affected countries, have been cancelled. According to him, even projects in the pipeline are going to be delayed now as the travelling has been considerably reduced.

Most companies informally concede that the going will be tough in the next few months. This is bound to increase the pressure on pricing and operating margin.

As the productivity is hit, the cost is sure to go up thanks mainly to the uncertainty in the U.S. economy, the Iraq war and the killer flu.

Companies such as Tata Consultancy Services (TCS) have started to re-route their business travellers. Though steps have been taken to protect its employees, according to its Vice President, Ravi Shah, things are far from normal at the moment. Mr. Shah feels SARS may not greatly impact TCS. Though confusions abound on its clients' visit to these places, works in these places are progressing normally, he says.

The IT companies keep claiming that there have been clients from China visiting them, but one cannot just ignore the fact that the World Economic Forum to be held in China has been rescheduled. According to projections released by the World Travel and Tourism Council (WTTC), business travel was expected to generate almost $6 billion for the Chinese economy this year. With SARS, some assessments point to a loss of 3-4 million jobs in China and tourism growth of only 2-3 per cent at the most, with flow-on effects being felt in aviation, hospitality and restaurant trades.

However, Hong Kong and Singapore, with their greater dependency on travel receipts, are likely to suffer more on a per capita basis and could even slip into recession if the downturn is particularly severe.

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