Indian outsourcing firms face short-term challenges

By siliconindia   |   Wednesday, 26 November 2008, 10:59 Hrs   |    2 Comments
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Bangalore: Indian outsourcing firms are optimistic in getting big deals from foreign companies. They believe that Indian offshore industry is now facing short-term challenges due to the financial crisis which causes many companies either delay or cancel the projects. As most of overseas companies plan to cut the cost aggressively to overcome the crisis, the long-term growth prospects of Indian outsourcing sector look safe.

"The overall outlook for us is fairly positive. However, the industry will face short-term challenges as a temporary set of events has created a level of uncertainty in decision making by clients," said Anantha Radhakrishnan, a Vice President at Infosys BPO.

BPO arms of India's IT majors like Tata Consultancy Services and Infosys have acquired many large deals from overseas clients, mostly from U.S. The presence of English speaking work force and relatively cheap wages help these firms to get big deals.

The flow of deals started declining when Wall Street banks, some of whom are major clients of Indian IT companies, began to announce staggering write-downs related to the subprime mortgage crisis, and the wider U.S. economy headed towards recession.

"We are absolutely seeing some delays happening but it's pretty small right now. Amidst the doom and gloom there are new markets to be explored, new territories to visit, new products and services to launch and new customers to be won," said Pramod Bhasin, Chief Executive Officer, Genpact, a business process services provider.

Radhakrishnan, Infosys BPO expects the high-margin knowledge process outsourcing (KPO) business, which accounts for about five percent to six percent of its revenue, to form about eight percent to 10 percent of its revenue pie in the next couple of years. "We will continue to aggressively make investments in the newer delivery models, be it KPO or business platform solutions," he said.

Suresh Senapaty, Chief Financial Officer, Wipro said, while the company was not seeing much pricing pressure now, it would not be "unrealistic" to face demands for price cuts in the near future.

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