Offshore Outsourcing: What Role Will Recession Play?

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Industry experts have reversed their predictions and now warn that Indian IT providers should prepare for slower growth and lower profits. Vice president and principal analyst with U.S. research firm Forrester, John McCarthy said that It is naive to say an economic slowdown is good because cost-cutting will lead to higher offshoring. This is no longer a recession, it is fundamental restructuring of financial services that is taking place."

As 20-40 percent of the revenue of offshore outsourcing was related to the finance industry, the collapse of the financial industry has forced the outsourcing firms to look for other vertical markets. But the problem with other vertical markets is that they are also facing the heat of the economic downturn and are impacted by the reduction in consumer spending. The economic downturn is also leading to pricing pressure, reduced profitability, and less growth. It will also become difficult to generate new business, which will result in generic and inefficient players getting wiped out of the market.

It is time for outsourcing service providers to innovate and build differentiating factors as this time the customer is in the drivers seat. Many of the major outsourcing service providers in India have also revised their annual hiring estimate. TCS has reduced its estimate by about 30 percent, Wipro had already reduced headcount in IT services last quarter, Polaris has resorted to just-in-time hiring, and Infosys is visiting fewer campuses.

It may be the end of the Indian golden age of offshore outsourcing, but it also heralds a new dawn, where offshore outsourcing delivers real, tangible business value, and service providers are focused on making things work for customers in unique and innovative ways.

Sources for this article can be referenced by contacting the author or by accessing the links found in the bio section of this article.

About the Author:
Dr. Joe Greco is Director for the Center for the Study of Emerging Markets (CSEM) located in Fullerton, California. As part of the Mihaylo College of Business and Economics at California State University, Fullerton, CSEM was established to promote the flow of global information and technology between the academic and business communities. In particular, CSEM studies the economic and cultural impact of offshore outsourcing on emerging markets. You may contact Dr. Joe Greco at 714-278-4125 or csem@fullerton.edu
Sources for this article:
http://www.infoworld.com/article/08/10/06/Offshore_outsourcing_what_role_will_recession_play_1.html



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