[sbinews] Outsourcing in 2004

  • From: sbistcbangalore@xxxxxxxx
  • To: sbinews@xxxxxxxxxxxxx
  • Date: Tue, 23 Dec 2003 07:19:28 +0500

Outsourcing backlash to haunt Indian IT sector in '04

IANS[ MONDAY, DECEMBER 22, 2003 01:19:05 PM ] 
India's globally recognised Information Technology industry showed clear signs 
of reviving in 2003. Not only did it face excess capacity in 2002 but overseas 
clients also postponed decisions on technology spending. Still, analysts, and 
even industry representatives, are reluctant to declare that the business will 
be as bullish - if not more - in 2004 as it was in 2003. 

Their sense of cautiousness stems from mounting protests in the West against 
outsourcing technology jobs to India. “Indian software firms have really shown 
their resilience in 2003 and proven why we are the most attractive outsourcing 
destination," said Nasscom (National Association of Software and Service 
Companies) president Kiran Karnik. "Looking ahead, I think the protest against 
outsourcing will continue to be a cause for concern. But overall, 2004 looks 
really good for Indian technology companies," Karnik said. 

India's vast pool of English-speaking manpower, coupled with its educational 
system and training programmes, have helped transform the country into a global 
outsourcing superpower. The rapidly growing BPO industry has virtually turned 
the country into an electronic housekeeper of the world, taking care of a host 
of routine activities for multinational giants. 

As Indian training institutes churned out tens of thousands of computer 
literates a year, the vast majority had jobs waiting for them overseas with the 
local firms rushing to spread wings to offer services at sharply lower rates. 

With global recession tightening its grip and job losses in many economies 
becoming a norm, India's cost-effective software army is increasingly becoming 
the envy of foreign lands. The backlash against Indian firms in the tech world 
is gaining ground, whether in the form of opposition to US and British 
companies outsourcing jobs to India or European nations imposing visa 
restrictions on Indian IT staff. 

Software companies are concerned about their businesses in countries ranging 
from the US to Indonesia, where political parties and trade unions are becoming 
increasingly twitchy about "foreign" workers snatching away jobs. 

In a latest move, global investment banking major Lehman Brothers has decided 
to withdraw its help-desk from Wipro Spectramind, the outsourcing arm of 
Bangalore-based Wipro, and moved it in-house. This came close on the heels of 
Dell announcing it had moved back support for some of its corporate customers 
to the US from India. 

"When everything seemed hunky dory for Indian technology companies after the 
infamous dot com bust, the outsourcing backlash has really come as a major 
dampener," said Neeraj Deewan, an analyst with Quantum Securities. "I think 
Indian software companies will have to grapple with protests against 
outsourcing in overseas markets in a major way in 2004," he added. 

On the positive side, the stubborn technology spending slowdown in the US, 
India's prime software export destination, is likely to get over next year as a 
recovery in the world's largest economy is on the way. 

The past few years have been difficult for the IT industry worldwide, which had 
been faced with overcapacity and consumers postponing their investment 
decisions. But things are looking up once again, as evident by the surge in the 
prices of technology stocks around the world, including those on the Bombay 
Stock Exchange, during the past six months. 

Shares of Hyderabad-based Satyam Computer is up 31 per cent from the beginning 
of the year and Infosys Technologies, India's largest listed software exporter, 
is trading nearly seven per cent higher. "The investor appetite for technology 
companies has really increased in the last six months. Its quite a change from 
a year back when tech meltdown had made software stock untouchables," said 
Deewan of Quantum Securities. 

India's cost-effective software army caters to a wide customer range, including 
global financial giants and telecom equipment makers. While price 
competitiveness has been its strong point, the slowdown that hit last year has 
made it a necessity. 

On the back of a vast pool of English-speaking, tech savvy and cheap manpower, 
India's IT market has grown from $1.73 billion in 1994-95 to $16.5 billion in 
2002-03, accounting for three per cent of gross domestic product last year. 

The country's software exports totalled $9.5 billion in the fiscal year that 
ended on March 31, 2003. According to Nasscom, software exports could grow at 
26 to 28 per cent during the current fiscal year ending March 2004. 

The year 2003 started on a negative note for Indian software makers with 
financial reports of companies reflecting the ripples of SARS, which had hit 
many countries, mainly in Asia, and the Iraq war. The tepid growth projections 
by high-flying software makers and the subsequent battering of their stocks in 
the first half of 2003 made experts say that turbo-charged growth rates will 
elude the IT industry for a long time to come. 

Analysts say the softening demand and intense pricing pressure would ensure 
that the differential annual profit growth rate between the once robust IT and 
other sectors is not going to be as high as before in the years ahead. Already 
reeling under severe billing pressure and a cut back in order by overseas 
clients, the rising rupee inflicted more pains to India's technology industry. 

The unabated rise in the value of the Indian rupee against the US dollar badly 
pinched the earnings of the export-oriented software makers in 2003. The rupees 
has risen over five percent in 2003 on increased foreign inflows. 

Notwithstanding the adversities, top rung software makers showed some signs of 
bullishness in the October-December quarterly results on strong volume growth 
and tapering billing rate declines that had muted the profit and sales growth. 

The industry mood was also boosted towards the yearend by blocking of a bill in 
the American state of Indiana aimed at banning non-US citizens from seeking 
government contracts. In a major development, lawmakers in Indiana have opposed 
a bill, introduced by Governor Joe Kernan, to ban non-US citizens from 
government contract jobs, as they felt it could affect the American state's 
drive to attract foreign investment. 

The state of Indiana in November dropped a $15.4 million outsourcing contract 
for IT services with an Indian software company. The move was part of an 
initiative launched by Governor Kernan to protect local companies and jobs. 

Mailing list (sbinews@xxxxxxxxxxxxx) related information:

News/articles about SBI and Banking related matters published  in the print 
media, Internet etc will be circulated through this Mailing List. 

The messages in this list will help in improving awareness of SBI and its 
activities vis-a-vis the happenings in the Banking industry. This should be of 
help to all staff members of SBI, particularly those who are preparing for 
promotional written tests/interviews/group discussions. Subscription to this 
Mailing List is simple and FREE. Please check the procedure below. Please share 
this information with other colleagues/branches that could be interested in 
subscribing to this Mailing List. 

The messages circulated here should not be deemed to have the official 
endorsement of the SBI or any of its employees. The correct factual position 
may be ascertained from official sources. 

To join this mailing list, just send an email to sbinews-request@xxxxxxxxxxxxx 
with the word 'subscribe' without the quotes in the subject of the email 

To leave this mailing list, just send an email to sbinews-request@xxxxxxxxxxxxx 
with the word  'unsubscribe' without the quotes in the subject of the email 

Archives (old messages) are available for viewing at:
Click on the month-year at the lower left corner to view messages posted during 
that month. 

This is an announcements/newsletter type mailing list i.e. only the Moderator/s 
can post messages to the list. 

This mailing list is maintained and moderated by Sri. R.S.Pai, currently 
working as Chief Manager(IT-Internet Banking), SBI, Corporate Centre, Mumbai. 
Moderator: Smt. S. Vijaya, CM (Training), SBI, STC, Bangalore.
Visit http://rspai.tripod.com for some useful Banking, Reference and Utilities 

Other related posts:

  • » [sbinews] Outsourcing in 2004