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`US firms to double outsourcing to India'

Our Bureau

NEW DELHI, Oct. 18

AFTER reeling under the US economic slowdown for nearly two years, the Indian software industry can now look for sunny days again.

A Merril Lynch survey of Chief Information Officers (CIOs) in the US says that American IT users are planning to double their outsourcing to India in 2003.

The survey of 50 CIOs from Fortune 1000 firms as well as the Government says that though outsourcing to India make up for a meagre three per cent of the current IT spending, it will double to six per cent in 2003 as clients are shifting work from high-cost contractors in the US and Europe to India. The US is the Indian software industry's biggest market, accounting for nearly 60 per cent of the total software exports from the country in 2001-02.

Merril Lynch said 37 per cent of the CIOs indicated in the survey, conducted in September, that spending with Indian firms is expanding the quickest, compared to their spending on traditional outsourcers such as IBM and EDS and other consulting firms.

More CIOs are planning to start outsourcing from India next year, the survey says. "Of the total CIOs, 67 per cent had no outsourcing to India this year, but in 2003, some CIOs intend to start India outsourcing and the percentage of CIOs with no India outsourcing is likely to drop to 56 per cent in 2003," it said.

The CIOs expect that IT budgets would grow by 2.5 per cent next year, even if the recession continues. In 2002 IT budgets are expected to grow by three per cent over the previous year.

However, the overall IT services environment continues to remain weak, with CIOs reporting uncertainty, cautious spending and delay in awarding contracts. A few CIOs even anticipate a significant cut in their IT spending.

The survey found that project pricing has been modestly down in India over the past six months. However, in the recent months, clients of Indian vendors have reported price stability.

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