IT Outsourcing Buffers Outflow of Funds During Recession
March 17, 2010
IT outsourcing continues to be of great concern to many companies. Most firms are interested in doing what they do best and they are not overly concerned about the technicalities of making software. Hence, the practice of IT outsourcing has become a relevant and dominant practice in modern business.
In the last decade or so, India has remained the key outsourcing location. However, that is fast changing with newly emerging markets in Eastern Europe, Russia, Latin America and Southeast Asia opening up their boundaries to tap into this lucrative market. The main advantage of outsourcing remains higher quality at lower costs, although the recession has redefined outsourcing and how it is practiced.
Although India’s dominance will continue to be strong in the sector, analysts say that companies are looking are more than just profits, in the wake of the recession.
For instance, nearshoring offers a slightly different advantage to firms who want to have service providers closer to home. More than that, rural offshoring has its own benefits of low wages and quality skills offered in parts of the U.S. where the cost of living is low. In this regard, onshoring has also become potentially a means to cut costs and improve efficiency, where the company headquarters deals largely with its fundamental business and operations.
According to a recent survey done by Pricwaterhousecoopers revealed that improving efficiencies is the most urgent requirement recently as pressure on margins has pushed firms to enhance productivity and to spend less. This is the basics behind IT outsourcing since companies typically take defensive action to protect outflow of funds.
Some analysts say that IT outsourcing in India offers firms an edge to combat recession. Some of the highlighted advantages include time zone advantage. The time zone advantage between India and the U.S. and Europe is a key factor why firms are outsourcing to India. In this way, customer support is offered round the clock, 24/7.
India also offers a stable government, which is key to outsourcing. The bill ‘IT acts 2000’ has underscored India’s potential as a major offshore destination. IT centers are flourishing throughout India in hubs like Hyderabad, Bangalore and Chennai. Additionally, the Indian government has allowed for 100% foreign equity with a vital economy to add to the stability.
However, cost efficiency remains the main reason why India has taken the top spot in offshoring.