Indian software services companies are moving their limited operations out of Russia over geopolitical tensions arising out of its invasion of Ukraine while helping clients maintain business continuity by shifting work to other locations.
Analysts agreed that Indian IT companies may find an opportunity to tap into the displaced talent pool. “Ukrainian citizens have been displaced due to war and may not be available immediately to work for clients, hence that will work in favour of the Indian IT services firms,” said Sanchit Vir Gogia, chief analyst and chief executive, Greyhound Research.
He said the war has directly impacted key industries like oil and gas, manufacturing, and semiconductors, and therefore Indian IT services companies with exposure to these industries will be impacted by the uncertainty in the supply chain and related pricing.
“Indian IT companies can also stand to gain from additional contracts trickling in from Europe and other parts of the world that have to date relied heavily on Ukraine for IT support and development work…but such events always slow down decision making and that is already being felt in many deals that are currently being negotiated or are under technical consideration. The impact of this will be seen in the results of the coming quarters,” said Gogia.HT Mint
Additional analyst comments:
1/ A global event of this nature always impacts various levels – what may seem like an isolated geopolitical issue has a much more profound and far-reaching impact on financial markets and economies. Moreover, this ripple impact may not be felt in weeks and months but over quarters and years. In this instance, the Indian IT services companies are caught in a conundrum. While, on the one hand, they must manage the political pressure in key markets like the US and UK that are anti-Russia, they also need to work with the government at home in India that has a more neutral stance on the topic. This isn’t an easy line to walk, and they have to wait and watch before deciding which way to go. While some have come out more openly about not working with clients with Russian connections, and some have decided to cease operations in Russia, not all can take such a definitive stand.
2/ What is also important to note is that this war will change the balance of power between nations and allies, which will directly impact trade and related industries. This means the Indian IT services companies will need to watch the developments closely and take corrective actions basis developments.
3/ The war has directly impacted key industries like Oil & Gas, Manufacturing, semiconductors, etc. The Indian IT services companies exposed to these industries will be affected by the uncertainty in the supply chain, the related prices, and more.
4/ Albeit the US has not enacted any sanctions against India till now, we can reasonably expect H1B visas and immigration at large to be a topic of crucial discussion, focus, and sanctions. This directly impacts Indian IT services firms.
5/ The developer resources based in Ukraine have been a good source of talent, and the Indian IT services companies have a decent, if not a large, share of exposure on that account.
6/ We may want to keep in mind that companies like IBM and Accenture, the key competitors of the Indian IT services companies, have all been rather vocal about their anti-Russia stance. While this does not directly impact IT decision-making behaviour, such factors always have a subtle, if not a direct, impact on the process. Moreover, given the exposure in terms of revenue and investments in the US markets, the Indian IT services companies will need to weigh this in when participating in deals against the US and EU HQed IT services firms.
7/ However, assuming the Indian IT Services firms take a relatively straightforward stance on the topic, they can gain from additional contracts trickling in from Europe and other parts of the world that have relied heavily on Ukraine for IT support and development work.
8/ Let us not forget that many Ukrainian citizens have been displaced due to war and may not be available immediately to work for clients; hence that will work in favour of the Indian IT services firms.
9/ A word of caution – this war is also being fought in the digital space, and since India still doesn’t have a clear stance on this topic, its companies are likely to face a new wave of attacks on their systems sooner than later.
10/ And yes, lest we forget, such events always slow down decision making. This is already being felt in many deals currently being negotiated or under technical consideration. The impact of this sluggishness will be seen in the results of the coming quarters.
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