Infosys CEO Says Demand Won’t Recover Until Mid-2010

May 29 (Bloomberg) -- India’s biggest technology companies won’t see a rebound until mid-2010, said S. Gopalakrishnan, chief executive officer of Infosys Technologies Ltd., the country’s second-largest provider of computer services.

“We hope then that companies will start to spend,” Gopalakrishnan said in an interview in New York.

The company, which is predicting its first drop in annual revenue, gets 90 percent of sales from North American and European customers. Those companies are cutting spending as they cope with the global slump. Gopalakrishnan expects “flat” revenue growth for the industry this year.

Businesses hire Infosys to handle their finance and computer functions in India, where costs are lower. The company ranks behind Tata Consultancy Services Inc. in computer-services revenue.

Indian software companies such as Infosys face a “rocky road” in the next six to 12 months because of the recession, Richard Parower, who manages the global technology fund at J&W Seligman & Co., said last week.

Infosys is investing in emerging markets such as Latin America, China and the Middle East, Gopalakrishnan said.

“We want to reduce our dependence on the developed markets,” he said.

Wipro Ltd., India’s third-largest provider of software services, expects its Middle East business to grow 50 percent this year, Chairman Azim Premji told reporters this week.

European Acquisitions?

Infosys also wants to make acquisitions that build its presence in Europe, where the company gets about a quarter of sales.

Gopalakrishnan plans to go after smaller companies that could easily be tucked into existing operations. He declined to name specific targets. Infosys has about $2 billion in cash.

Revenue in the year ending March 31 will fall at least 3.1 percent to $4.52 billion, the company said last month. Customers remain tentative about spending decisions, Gopalakrishnan said. Infosys is renegotiating prices to attract clients.

“Spending will start when customers are convinced that there is a recovery,” he said. “Right now the focus is on conserving cash and reducing expenses.”

Indian Growth

The company is banking on growth in its home country, he said. The Indian government is increasing investment in technology, which creates more opportunity for the domestic computer-services market, Gopalakrishnan said. The company plans to get as much as 5 percent of revenue from India, up from about 2 percent now.

“The expectation is that they will continue to invest in technology, disproportionate to other markets, because there’s a lot of catching up to do,” he said of India. Gopalakrishnan, 54, helped found the company in 1981.

The Indian economy is “definitely in better shape” after elections this month, he said.

Prime Minister Manmohan Singh’s ruling Congress Party will be able to form a government without needing the support of communist lawmakers, who frustrated plans to entice foreign investment in his first five-year term. The Congress Party won the most seats since 1991 in the election, which ended May 16.

“We expect the reform process to continue,” Gopalakrishnan said.