Global outsourcing market yet to recover: TPI
By siliconindia   |   Thursday, 22 July 2010, 19:57 IST   |    1 Comments
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Global outsourcing market yet to recover: TPI
Mumbai: Technology Partners International (TPI), global advisory firm, has released its data showing that the global outsourcing market is not yet bouncing back as economic uncertainty continues to weigh on the firms around the world. Highlighting the decline in the contract value of outsourcing deals in key markets, the report raises the fear that the demand for Indian IT firms might be short lived, reports Lison Joseph from the Mint. At $9.5 billion, the value of contracts (each worth at least $25 million) awarded in the U.S. in the three months to 30 June fell by 9 percent compared with the quarter ended 31 March, shows the TPI Index. The decline in Europe, West Asia and Africa is 21 percent. Despite the slow market, innovations like cloud computing are beginning to influence the approach companies take to their service-delivery strategy. TPI said the outlook remains cautious and "uneven activity shows global market is not yet bouncing back." The caution comes at a time when economists are warning of a sharp general slowdown. Indian outsourcers earn 80-90 percent of their revenues from the U.S. and Europe. Helped by robust sales in the U.S., India's largest IT firm TCS reported a 6 percent revenue growth in the June quarter over the March quarter. Infosys Technologies reported a 4.3 percent revenue growth. Infosys had revised its revenue growth guidance for the ongoing fiscal from 16-18 percent to 19-21 percent. Analysts say that pent-up demand from the economic slowdown that started in late 2008 partly caused the sudden spurt in IT outsourcing deals in the past two quarters. "A good portion of the recent growth that we saw in IT outsourcing came from restructuring of past deals," said Sid Pai, Managing Director of the Indian arm of TPI. Future growth, he said, will depend on how quickly firms are able to move deals from the pipeline into the order book. "There is still no clarity on whether that conversion time is shortening." "While we do believe that the next two quarters will continue to be good from a demand standpoint, the drop in TCV (total contract value) and weak order bookings in IBM will raise concerns on the sustainability of the demand in 2011," noted Manoj Singla, Rumit Dugar and Udit Garg, analysts at the Mumbai-based brokerage Religare Capital Markets, in a 21 July report.