MUMBAI: Infosys, India's second-largestsoftware exporter, is shunning Italy and Spain as risks from the worsening sovereign-debt crisisoutweigh a goal of doubling the share of sales from Europe.
"We have stayed away from these markets," said BG Srinivas, head of Europe at Bangalore-based Infosys, referring to Greece, Portugal, Italy and Spain.
"Especially in a crisis, I don't think that we will revisit that decision soon. It's the wrong time to enter." Uncertainty over payments and exchange-rate volatility means Indian software companies are wary of striking outsourcing deals in Europe's weaker economies even as they try to reduce their dependence on the US for revenue.
Spain became the fourth euro member to seek a bailout since the start of the crisis with a request on June 9 for as much as 100 billion ($126 billion) to rescue its banks.
Infosys's strategy underlines the chilling effect the turmoil in Europe is having on companies and economies around the world.
With the euro area registering no growth in the first quarter and India's expansion the slowest in nine years, Infosys is betting it can do without a slice of the combined euro 58 billion that Forrester Research estimates governments and businesses in Italy and Spain will spend on information technology goods and services in 2012.
Right strategy
"It's the right strategy," said Shashi Bhusan, an analyst at Prabhudas Lilladher in Mumbai who rates Infosys a buy. "If an implosion happens in the eurozone, there's going to be a wider impact --not just in terms of IT spending."
Forrester predicts the European information technology market could shrink by as much as 10% in 2012 if a country exits the euro.
The single currency slipped to an almost two-year low against the dollar this month as policy makers clash over how to resolve the crisis, now in its third year. Citigroup economists are assuming as a "base case" that Greece will leave the single currency on January 1, 2013.
Bank of America Merrill Lynch strategists estimate the euro-region's gross domestic product would contract at least 4% in the recession that follows, similar to the decline suffered after Lehman Brothers Holdings's 2008 collapse.
Infosys has declined 12% in Mumbai trading this year, compared with a 6.3% gain for larger rival Tata Consultancy Services ( TCS). India's benchmark Sensitive Index has rallied 9.1%.