Previous

Page - 9

IT service companies, who have focused on building strong vertical expertise in the areas of credit risk management, compliance and business intelligence, will have a first mover advantage in quickly aligning their service portfolio to the needs of the
business and still generate new sources of revenues in the Banking and Financial Services sector. IT product companies with niche products on risk management and compliance will lead the pack during the initial budgetary control periods.

Impact on Manufacturing - Automotive, High-Tech

These industries in the US will have the most knock-on effect of the sub-prime crisis on their sales volumes. Negative savings and higher monthly payments on mortgages will make sizeable population of the Americans in the average and low income ranges to think twice before owning a new car or savvy electronic equipments. In addition, the credit crunch will also impact the availability of easy credit for acquiring new automobiles and expensive electronic goods. Rising oil prices will only make things worse.

In the face of reducing sales volumes and the need to keep up the productivity growth, job-cuts will be prominent in these industries. Although the reducing sales volumes will have an overall drag on IT spends, more job cuts will call for further automation of business processes. Rising pressure on margins with competition from Asian and European manufacturers will create the demand for leaner and efficient business processes resulting in a demand for process re-engineering and system integration services. Although most large Indian IT service providers have focused verticals around these industries (Approximately 10% of the revenues of both TCS and Infosys come from Manufacturing), niche IT and business process consulting service providers will have an advantage over others in this segment with a stronger focus on building business process consulting capabilities.

Impact on Retail

Standing next to automobile and electronics segment is the retail segment, which will have a considerable impact due to reduced consumer spending induced by higher mortgage payments and a psychological drag to spend on further credit with credit cards. Although the 2007 Christmas sales volumes of major retailers in the US did not show any alarming signs of reduced consumer demands, a possible recession in the year 2008 will force most retailers to slice down their product prices to attract consumers.

Next

* Contributed by: -
Sunil Kumar Panda,
PGDBM, 1st Semester,
Fortune Institute of International Business, New Delhi.
Article posted on Fenruary 14, 2009.