Flare-Up Between India And Pakistan Puts Damper On Infosys' Business.(INTERNET & TECHNOLOGY)(Q & A)

Byline: J. BONASIA

The unrest between India and Pakistan has dampened the fortunes of Infosys Technologies Ltd. and the Indian tech sector in general. Shares of Infosys, one of the largest tech firms based in India, have fallen nearly a third since early March, from 73 to about 50.

On May 31, the U.S. government urged Americans to leave India because of the conflict. Tension has cooled somewhat between India and Pakistan since their standoff heated up over the disputed Kashmir region. But many Western executives remain wary about investing in South Asia. They fear that instability between the two nuclear powers could lead to disaster, possibly even atomic war.

India still gets about 80% of U.S. offshore outsourcing for information technology services, says research firm Meta Group. Labor there is cheap, education levels are high and English is widely spoken.

Giga Information Group analyst Stephanie Moore warns companies on the verge of hiring Indian vendors to take a wait-and-see approach. Those companies need to assure U.S. corporate customers that their facilities are secure and that they have plenty of backup for computer systems.

"Companies must engage with their vendors to work out a viable contingency strategy," Moore wrote in a recent report.

Infosys provides software and services for tech projects worldwide. It helps companies integrate systems and manage business processes. Its rivals include the former Big Five consulting firms, IBM Corp.'s IBM Global Services unit and Electronic Data Systems Corp.