Skip to main content

Strong Rupee - Reason for ITES Companies to go Europe!

A common joke in Hyderabad these days as the intense Indian summer sets in is which is higher - the Rupee vs. USD exchange rate or the temperature. Both are hovering around 40, with unfortunately the temperature out performing often at above 40°C.

The Indian Rupee (INR) as fallen a full 10% since the beginning of the year (from Rs. 44.11 to Rs. 40.93 at the time of this writing). This has some severe implications on the ITES industry as most earnings of Indian ITES companies are in USD. The currency rate adjustment primarily means that the worth of those earnings has just fallen by 10%.

The trend in fall of USD is predicted to continue to about Rs. 35.00, although this might happen in a progression over the remainder of the year. This would be a full 25% in fall of value of USD earnings for ITES companies that have long focused on the US market.

Having campaigned actively to Indian software companies to increase investments in European market development, I find this a paradigm shift in the way Indian companies would view the global software market hereafter. Unlike the US market, continental Europe is a remakably difficult to penetrate. It often takes full-blown market development campaigns for several months before being accepted in the market as a credible supplier. Companies have been reluctant to make these investments though, since their expectation has been for the European customer to come looking for them in India and hand them contracts on a silver plate. Only a very few have accepted the reality in Europe that serious market development strategies and campaigns are needed here to establish presence, win customer confidence, revise delivery processes and develop competences needed to be successful here.

The weaker USD might compel Indian companies to more seriously consider market development investments in Europe. This would be an ideal risk-mitigation strategy to have earnings in EURO so that truly global positioning is achieved and business can be sustained through global macro-economic upheavels.