o far, India's outsourcers have suffered little from troubles in the U.S. While
the mantra for most Indian outsourcers these days is "ascend the value chain," it's
hard to move up if your best clients are headed in the opposite direction.
Nevertheless, the impact of the U.S. slowdown on offshoring
budgets is unclear. Financial firms, hammered by the subprime mess, make up the
largest customer base for India's outsourcers.
A report from Wachovia Capital Markets said the collapse of
investment bank Bear Stearns was followed by a "sharp, several-week pause in decision-making"
on offshore projects.
But the Wachovia report also said reined-in technology budgets
might not prove to be a hammer blow to IT outsourcers.
"The very slow recovery from the credit crisis, and potential
for further losses among capital markets and banking firms, is likely to keep a
damper on overall IT spending growth, offset in part by a continuing shift of work
to lower-cost offshore locations."
Gartner's Kurt Potter, however, said in the past that economic
uncertainty caused a mild decline in outsourcing activity as companies focused on
immediate cost-cutting initiatives. And he added that "the perception that outsourcing
growth would increase more due to economic uncertainty, thereby being countercyclical,
has not proven to be entirely true."
Still, he says, the troubles in the U.S. have so far failed
to slow the amount of work being sent offshore. "At this time, we are not seeing
an impact on outsourcing due to the economic uncertainty."
Any effect from the tremors on Wall Street will likely be
brief. After the short dip in business after the collapse of Bear Stearns, Wachovia
reported, "Channel checks suggest that the pace of business is improving ... within
the financial services vertical, the insurance sector is indicated to be seeing
the most dramatic improvement." Potter reckons the market for IT outsourcing will
still grow by $77 billion over the next five years, putting it over the $400 billion
mark.
Workforce Management Online, September 2008 -- Register Now!
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