Rebound in Confidence Expected in Outsourcing Sector
January 26, 2010
Although most industries are expecting a slow recovery at best, reports suggest that the outsourcing sector is on the heels of a boom. In the upcoming months, the demand for outsourcing is likely to climb, say analysts.
Subsequently, outsourcing firms like Wipro, Infosys and Tata Consultancy Services have already begun expansions and are offering brand new services. There is also stiff competition in new emerging markets like Latin America and Eastern Europe while China, Philippines and other parts of Southeast Asia are already deep into the outsourcing realm.
Due to optimism in the industry, businesses in outsourcing are also anticipating a fair amount of consolidation. Outsourcing firms that are bullish are likely to takeover less competitive firms in order to make their entries into new markets.
Nonetheless, the challenges for outsourcers in North America and India continue to plague the industry. Hence, finding a competitive edge will be the name of the game for outsourcers in 2010.
It is no surprise that for most firms in the industry, the priority has been survival for the last two years or so, with the financial downturn taking a drastic toll on the economy in 3Q of 2008. In addition, clients as well as vendors are seeking to slash costs. Suppliers are in the process of renegotiating the value of their services, particularly among Indian vendors as the Rupee has appreciated against the dollar.
David Skinner, of Global Sourcing Group at Morrison & Foerster said in a comment, “We saw a trend of ‘DIY sourcing’ in 2009, where some customers did not have the time or the budget to follow a more structured procurement process.”
He added, “Instead, customers went straight to one preferred supplier and tried to close a deal as quickly as possible with an upfront saving baked in. We believe that this will result in many more deals needing renegotiating or realigning over the coming six to 18 months, once service expectations are not met or business users realize that procurement has not won a deal that works for them,” reports financierworldwide.com.
With a rebound in confidence and more financing available following the credit crisis, new deals in the outsourcing sector are expected this year.
Jacob Cherian writes for SourcingLine.com, a leading source of data for outsourcing country profiles and handheld & PDA directories linked to outsourcing.
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I think you are on to something here. I am out in Bangalore this week and while there is mixed demand for senior IT personnel, university hiring seems to be going strong. This is a sure sign confidence is rebuilding.