Financial Daily from THE HINDU group of publications
Thursday, Jul 17, 2003
Consolidation in outsourcing may hit Indian cos: Gartner
Mumbai , July 16
THERE is good news as well as not-so-good news from Gartner Inc for the Indian IT offshore outsourcing industry.
Offshore outsourcing is the world's fastest growing IT industry segment, with IT services growing at 29 per cent compound aggregate growth rate and offshore business process outsourcing growing at 68 per cent CAGR, from 2002 to 2007, according to Gartner Inc.
However, the trend of Amercian enterprise buyers consistently turning to Indian external service providers has started to change over the last six months, according to Ms Rita Terdiman, Vice-President and Research Director, Offshore Outsourcing, at Gartner Inc.
"Vendors worldwide have begun to leverage the cost arbitrage and new vendors are now appearing on the customers' request for proposal list," she said at a news conference.
"Each category of vendors comes from a different heritage and has a unique set of competitive `assets'. Going forward what will emerge is a set of `global players' rather than the notion of US or Indian vendors."
While India in the past was a destination of choice, there is now a consolidation at an international level with tremendous current and latent options for customers, said Gartner in a statement today.
Ms Terdiman admitted there is a lot of political agitation over job losses in the US (which she predicts at 10 per cent of existing jobs by the end of 2004) would create a backlash, and that this would "make things worse before they got better."
But Gartner does appear to believe that things will get better. "Commercial enterprise will look at shareholder value in their approach towards offshoring," she said. There is money coming into outsourcing too. The significant cost savings typically associated with global sourcing and the continuing economic malaise in the US has created extraordinary interest among enterprises for cross-border service delivery options, said Mr Bob Hayward, Senior Vice-President, Gartner APAC.
"Consequently this market segment is among the few, globally, that is getting venture capital and private equity funding."
The trend will be towards large global players acquiring smaller companies with knowledge of local (offshore) resource pools, culture and business practices, said Mr Debashish Sinha, Principal Analyst, Offshore BPO, Gartner.
"Many providers are evaluating acquisitions or joint ventures of small outsources looking for exit options."
According to Gartner, the top two Indian contact centre outsourcers by revenue are Wipro Spectramind with $41 million and Daksh e-services with $40 million.
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