Who said outsourcing is going to end?
By Renjith VP, SiliconIndia   |   Thursday, 07 October 2010, 10:09 IST   |    27 Comments
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Who said outsourcing is going to end?
Bangalore: Be it the H1B visa price hike or the anti-offshoring policy that breezed past the U.S senate, India seems to be the offshoring abode for U.S companies to outsource despite all odds. As per a survey done by Harvey Nash of a UK-based IT staffing and managed services firm, 90 percent of CIOs will be maintaining or increasing offshore outsourcing projects in 2010 and 2011. In the first quarter of this year, financial services companies reported 40 outsourcing deals, versus 26 in the previous quarter. Notable deals in early 2010 include Deutsche Bank's $114 million contract with GFT Technologies in which GFT will take responsibility for applications that handle payment transactions, online banking, credit card management and securities transactions; and the multiyear contract that U.S. Bank signed with TSYS for card processing services. Cheap labor and quality output seems to drive U.S companies to India as they face simultaneous pressures of cost savings and software-centric innovation while competing with other companies. Many U.S companies now believe in the need to be realistic about the potential for developing software within the country, recognizing that it is more cost-effective to "offshore" large-scale projects to nations such as India. US-based insurer Fidelity National Title Group Inc has decided to scale up its business by outsourcing to India eyeing an opportunity to cut the costs by 30 percent. Optimation, a Wellington IT firm formed an alliance with Indian outsourcing giant HCL which bore fruit spectacularly this year when the pair won a deal valued at about $100 million to develop and support software for the Corrections Department. "Large-scale builds are more economic offshore. Let's embrace that rather than try to resist." says Neil Butler, founder of Optimation. India Inc. is also relieved by the US Senate's decision to block the anti-offshoring bill that sought to deny tax breaks to American companies moving jobs offshore. Infosys, TCS and Wipro, India's three big software outsourcing firms are set to regain double-digit growth rates during the second quarter, as customers in the US and Europe revive technology spending for addressing new markets, and start offshoring their IT and back-office projects to cut costs by nearly half. 62 percent outsource software-application development and 53 percent outsource software maintenance, points out this year's Global CIO survey. According to it, nearly half of CIOs - 48 percent - spend 10 percent of their IT budget on outsourcing. Numbers speak all about the state of affairs. Data shows that U.S. banks' outsourcing activities are growing -- both offshoring to lower-wage regions like India via the multinational outsourcing firms (including Tata, Wipro, Infosys, HCL, IBM and Accenture) and through captive arrangements, as well as onshore engagements with U.S.-based service bureaus and outsourcing providers.

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