Smaller,specialised software services firms are likely to see better pricing in FY12,as demand for the services they offer rises,partly offsetting the impact of higher costs on margins. Analysts expect rates in verticals such as banking,financial services,insurance,energy,utilities and manufacturing to increase about 1 percent,along with applications such as enterprise resource planning,consulting and package implementation. For niche-focused companies,it is likely to play out strongly,Angel Broking analyst Srishti Anand said,adding she does not see top-tier firms such as Infosys and Wipro benefitting from any rise in pricing due to their broad-based portfolios. There would be a marginal rise in pricing in BFSI,energies and utilities,and even retail up to a certain extent,but if you take the entire portfolio,it won't amount to much,Anand said. Companies such as Hexaware ,KPIT Cummins Infosystems ,Persistent Systems and Polaris Software Lab are expected to see some improvement in pricing in the current fiscal. Anand said an across-the-board price rise of 2-3 percent will take place in FY13 rather than FY12. She expects aggressive wage hikes and higher personnel expenses to dent margins in FY11,which could be partially made up for by the inching up of pricing for specialised mid-caps. Overall,margins should be down 100 to 150 basis points in FY11,she said. Spark Capital Advisors analyst Srivathsan Ramachandran expects margins to be stable,helped,in part,by the expected rate hike. Since mid-CY08,there have been no price hikes so that could drive pricing now,we could see some improvement,about one or two percent,he said. Software services firms have not seen a boost in pricing since 2008,when major economies dunked to a downturn,demand suffered and IT companies were compelled to slash rates,in an attempt to sustain business. Now software services firms' business in North America,Asia Pacific and other emerging regions is increasing,while the European region,which was relatively slow to recover,is also showing signs of growth. The National Association of Software & Services Companies (NASSCOM) has forecast software and services exports to increase by 16-18 percent in FY12 due to robust demand for outsourcing from Western clients. Anand Deshpande,chairman and managing director,of Persistent Systems,which provides services such as cloud computing,business intelligence and analytics,expects an improvement of 2-3 percent in pricing. It's because of the demand and supply situation,Deshpande said. Demand is robust. Earlier this week,Kishor Patil,chief executive at KPIT Cummins had told Reuters the company expects a 3-5 percent increase in rates across its verticals. That coupled with high growth rates should lead to a 2 percent increase in operating margins in FY12,he added. KPIT Cummins provides services such as enterprise resource planning,business intelligence,BPO services for finance and accounting,and product and intellectual property-led services to automotive,industrial and consumer electronics companies. Hexaware Technologies has already started benefitting from better pricing. On Thursday,the Mumbai-based firm said its Jan-March net profit zoomed almost five times,helped by several factors,one of which was a rise in prices. The company,which provides services such as enterprise solutions,product engineering,business intelligence and analytics,and infrastructure management services,said it saw a 1 percent increase in onshore billing rates and 1.5 percent in offshore rates. Going forward,pricing will remain stable,Chief Executive P.R. Chandrasekar said. Clearly,we are going to be asking for better pricing from existing customers.
