Economic downturn hits Indian outsourcing market

by | Apr 16, 2009 | Business Insights | 0 comments

Today I received updated information about the Indian outsourcing market from two different sources within one hour. Too much of a coincidence. Due to the economic downturn companies in the US and the UK recently cut their IT budgets by up to 45%. Many projects have ben put on hold. Since most of the outsourcing projects in India come from the US and UK a lot of good IT people are available on the labour market today. Rates have dropped for the first time in years.

For sale: Satyam, India's fallen outsourcing giant

Recently I have noticed an increased activity in my mailbox related to Indian IT providers. About a year ago I started looking for a potential partner for GOYELLO. The offered rates were not that attractive at that time. Over the last few weeks I have received some better offers. But for the price alone we are not going to outsource to India of course.

Although there is a significant decrease in the IT spendings in the US and the UK, India seems to manage the downturn quite well. This is  mainly because of contract renewals and the rise of the spendings in the local market. To attract other income sources, most vendors are trying to climb the value chain by offering (business) consultancy services. Nevertheless, most IT vendors are facing the need for cost cutting. Some smaller vendors might not survive, but the main players will still exist if the market is going to improve again.

Although, this is not applicable to every vendor. Satyam,one of the biggest vendors in India announced a tremendous loss in January for the first time since the beginning of the company.

From the second half of 2009 new projects are expected to come from the US thanks to the governmental stimulus packages. Till that moment it is possible to enjoy the more attractive rates.

For further reading: PMR Report – “India – the leading destination for outsourcing IT services”


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