Wednesday, August 31, 2005

‘Wipro, Infosys may face serious crisis’

‘Wipro, Infosys may face serious crisis’


Mumbai: Indian IT majors Wipro and Infosys could be heading for a serious crisis if they continue to divert their reserve funds from the core IT business to setting up in-house utility services such as power generation and hospitality services, according to Gartner's research analyst Paratha Iyengar.

The international consultancy firm's analyst said shortage of power and availability of quality hotel rooms in Bangalore have forced Infosys and Wipro in investing large sums of their surplus cash for generating power and constructing hotel rooms instead of utilising it for their core business of information technology.

''Such diversification of funds from the core business would ultimately impact on their businesses in longer term'', Iyengar observed.

The IT majors in Bangalore, he said, are facing shortage of power and hotel rooms because State government failed to upgrade these basics to fulfill needs of fast-developing IT sector.'' You need to book hotel rooms four to six months in advance in Bangalore'', he added.

Infosys, which already has its in-house power units for uninterrupted supply to its world class campus, has now started constructing hotels and entertainment facilities within its complex to provide world class comfort to its visiting foreign clients and delegations.

Wipro, too, is following the same path to reduce its dependence on the services provided by the State utilities in Bangalore, he said.

Iyengar said a similar situation is emerging in other major IT centres like Hyderabad and Mumbai. The collapse of infrastructure in Mumbai, the business capital of India, due to heavy rains on July 26 thoroughly exposed poor planning, development and maintenance by State and local authorities. Even Reserve Bank of India, in its latest annual report, has criticised governments for their failure in developing commercially-viable infrastructure projects. RBI report said investment in urban infrastructure is hampered by the fact that local governments are not credit-worthy and urban projects are not found to be commercially viable.

''Limitations of urban infrastructure were evident during the recent heavy rains in Mumbai and rest of Maharashtra in the last week of July,'' the Central Bank said in its report.

While stating that weak infrastructure impeded economic activities in large cities, RBI said it is imperative for state authorities to upgrade infrastructure to boost economic activities.

''It is essential that all aspects of city management including fostering of a professional workforce are strengthened which in turn would improve the credit worthiness of city Governments and help attracting the necessary investment for vital infrastructure projects'', it added.


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