Mixed Forecasts On IT Outsourcing Growth For 2011

March 11, 2011

There is a difference of opinion about the outlook on IT outsourcing in 2011. Some outsourcing giants say that demand for outsourcing will beat the figures for last year, while some say that the growth observed in the industry during 2010 was accidental.

In early February, NASSCOM, Indian software export trade association announced that it projects growth in revenues to hit a rate of 18.7% for this financial year ending in March 31. This speed is unlikely to be sustained and the pace will plateau to 16-18% in the next year. Nonetheless, NASSCOM says client budgets for IT will climb 2-4% in fiscal year 2011-12.

Estimations of forecasts and revenues takes into account the budgets of foreign clients that follow the calendar year.

Cognizant Technology Solutions Corp., an outsourcing firm based in the U.S. with 75% of its staff from India sees lower demand in 2011 as well. In 2010, the company increased its revenues 40 percent to $4.59 billion in 2010. The management has allocated the spending to non-essential technology requirements by customers. This occurred following a couple of years of decreased investment due to the downturn in the global economy. Despite all this, cognizant is forecasting a growth of 26 percent in revenue.

Gordon Coburn, CFO and COO at Cognizant, commented, “Discretionary spending I think remains quite healthy, but certainly you don’t have two years of spend all pent-up and released all at once” as was the case in 2010, reports wsj.com.

Cognizant forecasts that it will see single digit growth as far as client budgets for IT are concerned.  However, the firm began last year with a forecast of 20% growth and closed 2010 with approximately 40% growth. Perhaps there will be a repeat performance for Cognizant in 2011, in which case India’s biggest outsourcer comes up ahead of analyst expectations.


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