It may be early to quantify the business impact of the global coronavirus outbreak on India’s $190 billion information technology (IT) services industry, but players across the spectrum have sprung into action with precautionary measures to contain foreseeable risks and ensure business continuity.
Most leading Indian IT services companies, including TCS, Infosys, HCL Technologies and Wipro, run operations across the world and in China, where the coronavirus or Covid-19 outbreak seems to have originated.
China as a market accounts for less than 5% of global IT services spends, and as a delivery centre, the resources there also represent less than 5% of most IT service providers’ global networks.
In terms of prospecting, travel to China, South Korea and Italy has been essentially eliminated by all IT services firms and the companies are relying heavily on teleconferencing to maintain sales momentum, said a number of industry executives TechCircle spoke with on Wednesday.
“However, India plays a critical role in the IT services industry worldwide and if coronavirus is not contained in India, the impact will be much bigger. A pandemic is an operational risk that must be managed at the highest levels of the organisations because it cuts across every department and location in which the organisation operates,” Gartner analyst DD Mishra said.
IT industry lobby Nasscom said that it does not see any immediate business impact while continuing to monitor developments around this issue closely.
“The industry has a large footprint of on-shoring centres/offshore and client requirements can be met through such centres, if required. The industry has also put in place business continuity plans and has internal task forces to monitor the situation continuously,” Nasscom told TechCircle in an email statement.
For most Indian IT services firms, around 90% of their employees are in India. HCL, TCS and Infosys together have more than 10,000 employees in the US, a market which contributes to around 50% of their revenues.
The IT services companies also have large operations in the UK and Ireland, which service the European market, which contributes to about 25% of these firms’ revenues.
Meanwhile Nasscom is lobbying with the government to allow flexibility in specific policies for IT companies working out of Special Economic Zones and Software Technology Parks of India to allow employees to work from home, the industry association said.
The current rules of SEZ/STPI restrict work from home for employees working in these units. Nasscom said that this is critical for companies to ensure business continuity.
Mishra of Gartner said that while the January-end assessment of the risk arising due to coronavirus and its potential impact on the IT services industry was low, in recent days, the situation has deteriorated.
“We have so far not received too many calls from customers about this issue and it shows that industry is not feeling the heat of yet. We are also seeing more travel restrictions across the board to many other countries as well. While the direct impact has been minimal, the level of concern for future growth opportunities has certainly increased in recent days,” Mishra added.
Bengaluru-based Wipro said it has a significant number of employees in China though not specifically in the Wuhan province where the virus outbreak was first detected.
The company has asked those employees to work from home and also requested them to be on self-quarantine in case they or their family members show any symptoms.
"We have taken all necessary measures at our offices there, including thermal screening, surgical masks and frequent sanitisation of premises," a company spokesperson told TechCircle in an email response.
The company has suspended travel and transit through mainland China, including Hong Kong and Macau, until further notice. It has also advised employees to avoid non-critical travel to Singapore, South Korea, Japan and Italy.
"Any employee who travelled to an affected area within China in the last few days has been asked to work from home for 14 days before returning to the office. We have advised our employees to be vigilant, especially those based in China and those who have visited the country recently," the spokesperson said.
Wipro has operations in more than 50 countries and 21 delivery centres.
Noida-based HCL said it is continuously monitoring all information sources including World Health Organisation alerts and complying with government advisories globally.
"We have invoked our epidemic contingency plan in the impacted geographies and are providing full support to our employees, wherever possible," HCL said in an email statement.
"HCL is proactively invoking all required measures to ensure business continuity and will also be providing full support to our clients and employees,” it added.
Meanwhile, Mumbai headquartered TCS also said it is working closely with all relevant global, regional and local health institutions and is implementing the latest recommendations given to the company.
"We are ensuring that our staff have all the information and support they require. In addition, we are also working closely with our clients to coordinate any measures in this situation. Specifically in Italy, as a precautionary measure, we have implemented work from home and travel restrictions. This had also been put in place across some countries in the Asia Pacific and is being monitored and modified based on the situation in each location," TCS told TechCircle in an email.
As the country’s largest IT services exporter by revenues, TCS runs an extensive network of 183 delivery centres across multiple countries with more than 30 in Europe and more than 15 in North America and Latin America. The company also has a few delivery centers in China.
Pune-based Tech Mahindra has postponed all internal events which required large gatherings. "In the case of COVID-19 symptoms, employees are being asked to avail work from home as well. All our office locations and guest houses are also being stocked with adequate supplies of sanitisers, emergency medicines, food rations, etc.” the company said.
India’s IT services firms are slated to report annual and fourth quarter earnings for the financial year 2019-2020 in April. The last quarter saw Infosys and HCL reporting robust quarterly growth of revenues and profits while TCS and Wipro reported muted growth rates.
Earlier in February, Nasscom said that the growth will be similar to the current fiscal while not giving a growth projection, where the industry is expected to grow at 7.7%. Last year, the sector grew at 7%.