Auto Crisis Makes Indian IT Vendors Edgy - By: carazoocars0

U.S. auto giant Chrysler is already filing for bankruptcy and is most likely to be taken over by Fiat, while it is feared that General Motors may also go the same way. These signs of bankruptcy by automotive companies are making IT companies jittery about their projects. Some of them fear loosing big projects. Top Indian IT companies Tata Consultancy Services (TCS), Wipro and Satyam Computer Services fear loosing automotive clients.

For almost two decades the rise of automobile industry was stupendous. Many major projects flowed to India in this time. A majority of the projects came from General Motors and Chrysler. It is estimated that, together these two automobile manufacturer account for Rs 1,000 –Rs 1,500 Crore worth projects to India. However, when these two companies are the worst affected by the global economic slowdown, project are likely to be cancelled or withdrawn. Analysts put the dip in revenues up to 20-25 percent.

Chrysler had signed a deal worth Rs 600 Crore with TCS after a previous deal worth Rs 500 Crore. Additionally, the GM had also signed a contract for another Rs 500 Crore with the company. General Motors is a big contributor to TCS. Together these companies account for revenue of 2-3 percent to the Indian IT major.

The worsening crisis could put the IT major into a doom. The yearly results are expected to fall even as TCS has openly admitted that the U.S. crisis could lower their performance.

Another major IT company Wipro too could face setback. General Motors had signed 300 million U.S. Dollars world deal with Wipro for a five year term, in 2006. Apart from these it had also signed other contracts with the company. Every quarter, GM contributed 30 million U.S. dollars to TCS has revenue. If the contact is not extended, TCS could face a major financial problem.
The Hyderabad based Satyam Computers had won a major $ 150 million worth deal in 2006. It was before the Scandal broke out. Satyam, recently acquired by Tech Mahindra said that GM is a small client and there was nothing to worry about.

Analysts say that the companies will be affected in the short term, but outsourcing will not stop. Companies those are good enough will survive and continue to get contracts. It is mainly because U.S. companies are under pressure to cut costs. Hence outsourcing may not stop. But it has to be seen, if U.S. automobile industry will choose MNCs IT companies or Indian IT vendors. Also the new management that takes over these companies after the crisis has eased will favour Indian IT companies.

As cars and other vehicles are increasingly using computers it is inevitable fro car manufacturers to not seek assistance for maintenance and support of these. Many European car companies like Mercedes, BMW, and Audi are also sourcing technologies from India. These technologies improve passenger comfort and safety on many occasions. Out there in Europe and U.S. many companies like to showcase new technologies in their cars. Therefore IT vendors will continue to receive projects in the long run. But for some time they too need to weather the storm like the automobile companies of the West.

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