Buoyant outsourcing

More positive signals are emerging about an upswing in the IT industry. The latest is the Merrill Lynch report which indicates that more US and European companies are actively considering plans to outsource significant IT work to Indian companies. In fact, the percentage of companies outsourcing to India is set to double, according to the report.

This is what top Indian software companies were hoping to happen in the wake of the global economic downturn. For outsourcing a lot of high cost routine computing work to India would lower the costs for the foreign companies due to the low cost environment in our country. And many predominantly software companies had been preparing for this to happen and beefing up their infrastructure, invest in upgrading quality and waiting.

The wait seems to be over. The evidence comes from the latest quarterly reports of software majors. Wipro is inducting some 1600 more software professionals. TCS intends to add another 2000 to the list. Satyam and others are making significant investments in BPO (business process outsourcing) units. And a global ERP major, JD Edwards has announced its intention to move a lot of development and software testing work to India.

What is significant about the Merrill Lynch report is the fact that India is gaining as an outsourcing destination. The survey covered 50 chief information officers (CIOs) major IT organizations which figure in the Fortune 1000 list and also governments. In all, 67 percent of the CIOs had not outsourced work to India. But they all are considering moving work to India in 2003. A 11 percent drop in companies not outsourcing to India is predicted to happen.

Equally significant is the fact that IT spends is expected to increase 2.5 percent next year, indicating the increased importance attached to technology investments. Increased outsourcing activities to India should be music to the ears of IT hardware vendors. This means that Indian software companies will be placing orders of a host of computer hardware and also related services.

The downstream effect too will be multifold. The software professionals employed by these companies may also emerge as consumers of a host of products including IT hardware and services at homes. And in the long run, demand for upgrades too will happen. As the size of the IT industry grows it has a positive rub off on the policy makers and the society, which will lead to more awareness and in turn more investments in the sector. Everyone gains by this slowdown abroad.