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MUMBAI, India--Indian software makers will be looking to beat the U.S. computer slowdown by offering products and services at cheaper rates when the nation's biggest annual information technology meeting starts this week.

The three-day gathering is crucial for Indian software developers, who sell about 65 percent of their products and services to North American companies such as Cisco Systems and General Electric. With the world's biggest economy expanding at its slowest pace in more than five years, there are concerns that the flow of orders may slow.

"You are going to see lower utilization rates, lower bill rates and slower growth in business," said Arjun Malhotra, chairman of U.S.-based TechSpan. Malhotra will speak at the conference organized by the National Association of Software and Service Companies (Nasscom).

India exported $4 billion worth of software services in the year ended March 2000. GE got about $150 million, or 4 percent, of its software from "preferred vendors" such as Patni Computer Systems, said Hitesh Zaveri, head of technology research at Prabhudas Liladher in Mumbai.

With growth is slowing in the U.S., "companies will use Nasscom 2001 to do confidence-building measures and see how they can use the slowdown to increase business," said Zaveri.

Spreading risks
Many analysts expect the U.S. slowdown to benefit companies such as Infosys Technologies, India's second-biggest software maker by market value.

Infosys charges a "blended" rate--the average of rates charged for work done at customers' sites overseas and software developed at its own offices in India--of $43 per hour. This compares with the approximate $150 U.S. companies such as Sapient bill for similar work.

The savings in rates could prompt many potential customers to consider tapping the expertise of Indian developers, say analysts. In turn, this could mean more opportunities for companies overseas to farm out business to Indian designers.

To spread risk, companies such as Wipro are increasing their presence in Europe. Last month, India's biggest software developer by market value opened an office in Paris to target the French market.

Indian companies "have an obvious market in the U.K. and Europe too," said Michael Finney, managing director of the European technology research team at SG Cowen Securities in London. "They can get a foothold in Europe by joint ventures, acquisitions and partnerships."

In the next two years, 46 percent of some of the biggest companies in the United States plan to contract out their IT needs to countries such as India, Ireland and Israel, among others, according to a report by Merrill Lynch.

Venture funding
At last year's conference, companies did $250 million worth of business, said Nasscom. The group predicts the total will rise to $535 million this year, as companies such as Eastern Software Systems, an Indian software maker that's 11 percent owned by Intel and Aptech, showcase software products and services.

"The event is proving to be a beacon for not only the large software ventures but also for the fledgling start-up entities that still need mentoring," said Dewang Mehta, president of Nasscom. For the benefit of such start-up companies, the conference will also discuss venture capital funding. With the Nasdaq plunging, though, venture capital funds aren't yet ready to bite.

"We are going to be cautious with funding," said Saurabh Srivastava, chairman of Infinity Technology Investments. The focus is going to be on "high quality" companies.

Indian software companies, which were among the best-performing stocks in the early part of last year, have since slumped. Wipro's market value has in the past 12 months declined by 70 percent to $14.2 billion.

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