Infosys: Lean Times Benefit Outsourcers

(MoneyWatch)  If Infosys is any kind of guide, companies haven't responded to the economic slowdown by slashing away at their IT budgets but by switching to providers who can do the job for less.

Infosys posted its first ever billion-dollar profit in the year that ended March 31, 2008. The number of active clients rose to 538 from 500 in the previous year. Clients in the financial industry made up 36 percent of revenue, down only slightly from 37 percent. But telecom and retail clients made up a larger share of its revenue: 22 percent and 12 percent, respectively, up from 19 percent and 10 percent.

The core businesses of application development and maintenance made up a smaller share of Infosys' business last year. Those operations are still growing, but newer areas are growing faster. Consulting services, infrastructure management and system integration all made up a larger share of overall revenue in the most recent year.

A fund manager told Bloomberg that companies are relying more on outsourcing rather than eliminating IT projects.

"The primary reason why work was outsourced to India was because the same quality or better quality could be done cheaper,'' said Sanjay Sinha, the chief investment officer at SBI Mutual Fund who oversees $6.5 billion including 1.13 million Infosys shares. "That is precisely the reason why you would continue to outsource to India when you are faced with a scenario where your business needs to cut costs.''

But the IT spending isn't limited to India. Infosys' encouraging numbers come a few weeks after IT consulting firm Accenture had a strong quarter and expressed optimism about the year ahead.