Indian IT service sector may take a big hit as US retail suffers to stay open
By MYBRANDBOOK
Infosys, Cognizant, Tata Consultancy Services and Wipro service the retail sector in the US and analysts said their clients would eventually cut overall IT services budgets.
Neiman Marcus has reportedly shut more than 40 stores and furloughed thousands of employees as it declared bankruptcy last week in the wake of the Covid-19 pandemic. Before Neiman Marcus, specialty apparel retailer J Crew also filed for bankruptcy. And, it has been reported that JC Penney, one of the biggest retailers in the country, has shut many stores and is contemplating filing for bankruptcy.
The retailers’ offline business has been hit, as consumers avoided making non-essential purchases due to restrictions imposed by several US states to contain the pandemic. The core store support areas at these retailers - such as support for software used in stores for billing, data management, application testing and management - could drop 50-75% over the next three to four months, said Phil Fersht, CEO of HfS Research.
“Any IT services company with higher exposure to luxury retailers is bound to take a hit. The non-essential retailers are not going to come back strong soon,” commented, Sanchit Vir Gogia, CEO of Greyhound Research.
Peter Bendor-Samuel, CEO of Everest Group, said the slowdown at retailers would have “the effect of initially postponing large projects, then it will likely give way to aggressive cost take out programmes. Such cost reduction may, however, also create an opportunity for some Indian technology services providers.”
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