IT Outsourcing Witness Growth from New Markets and Divesting
Company leaders are compelled to creatively move their businesses to profitability by unloading excess baggage and looking for new markets. Hence, a growing number of companies are divesting to achieve a leaner structure and at the same time looking for new markets to tap into.
IT Outsourcing Providers Tap into Domestic Market
With the current pressures faced even by Outsourcing Providers especially the IT service providers as the demand for it this year is expected to decline by 1.7 percent according to Gartner, they are continually challenged to develop sharper eyes for new markets to target and new ways to make it more cost competitive.
Infosys Technologies Limited (NASDAQ:INFY) and Wipro (NYSE:WIT) are tying up with rural service providers to be able to create a service offering for India’s domestic market. By recruiting rural talents, Infosys and Wipro will be able to offer cheaper services to the domestic market. This strategy then will allow them to cash in a similar gross margin for domestic and international business.
This kind of local partnership will be an interesting phenomenon to keep an eye on. Aside from achieving cost efficiencies it also expands talent pool diversity as well as decentralization of economic growth in outsourcing hubs like India, China and Philippines.
Manila and Cebu for instance are the major outsourcing hubs in the Philippines hosting the offices of TeleTech Holdings, Inc. (NASDAQ:TTEC), Convergys Corporation (NYSE:CVG), eTelecare Global Solutions, Inc. (PSE:ETEL) and Aegis Group plc (ADR) (Public, OTC:AEGSF) to name a few. These providers should consider partnering with other provincial companies or even provincial governments. Although investing on rural talents should not be merely an attempt to reach head count and put quality at risk. High standards should be maintained by scrutinized hiring and continuous employee training otherwise risking global deals and reputation.
IT Divisions Transfer to Outsourcing Providers
Aside from tapping into new market, IT service outsourcing providers also enjoy growth from company divesting.
Lloyds TSB (NYSE:LYG) announced two weeks ago that in order to attain cost efficiencies, it will be outsourcing a major part of its IT division, replacing 80 percent of its local IT workforce with those from top Indian tech outsourcing firms such as Wipro and TCS . Similarly, Barclays (NYSE:BCS) will also be moving its global infrastructure and service delivery (GISD) to India, Hungary and Singapore as a move to become leaner. More job cuts in IT jobs globally are expected to come according to Ralph Silva of Towergroup.
Carrefour (EPA:CA), a French retailer operating supermarkets expects to cut costs by EUR4.5 billion over the next three years. This news increased its stock price by 5.7 percent. As part of its leaning process, Carrefour signed a EUR 180 million IT management and maintenance deal with technology outsourcing giant IBM (NYSE:IBM). The outsourcing deal is expected to make Carrefour cut down energy expenses and increase its security and upgradeability levels.
If companies are looking for new markets beyond its geographical zone, individual talents and even governments should exercise the same keenness as well. Outsourcing is an evolving business which not only changes companies but also people.
Author: Chris V.
Tags: Barclays (NYSE:BCS), Carrefour (EPA:CA), Convergys Corporation (NYSE:CVG), eTelecare Global Solutions, IBM (NYSE:IBM), Infosys Technologies Limited (NASDAQ:INFY), IT outsourcing, IT service outsourcing, Lloyds TSB (NYSE:LYG), outsourcing hubs, Outsourcing Providers, TeleTech Holdings, Wipro (NYSE:WIT)
July 31st, 2009 at 6:27 am
Outsourcing is becoming a must do part for organizations that want to be globally present and globally competitive. Outsourcing provides organizations with many advantages including the ability to scale-up quickly, a chance to improve quality and an opportunity to enhance customer service. The current recession is a great time for organizations to do away with the inefficiencies that may have cropped up in the last few years when the economy was booming.
This recession is not only a good time to do away with the inefficiencies but also to prepare for the next boom. Business Process Outsourcing provides organizations with that very advantage. By allowing exerts to take over various key processes the organizations stands to gain.
Organizations need to understand how to make most of this recession and be future ready. Mr. Vijay Rangineni, CEO, Mahindra Satyam BPO has authored a white paper titled ‘Benefiting from the recession through outsourcing’. It talks about how partnering with the right BPO service provider can help organizations not just outlast the recession, but benefit from it. The white paper can be accessed at http://www.mahindrasatyam.net/about/documents/Benefiting_from_the_recession_through_outsourcing.pdf
August 6th, 2009 at 7:06 am
Companies SHOULD be looking into acquiring new markets in other regions. Globality is the game where IT, communications and the Internet are letting smaller enterprises participate on an even-field with the Big Co’s. Another equalizer is definitely outsourcing.
August 6th, 2009 at 11:10 am
Traditional reasons for outsourcing are now no more valid. With an unprecedented downturn facing us and showing no signs of receding, business leaders are faced with a situation not witnessed till now. With huge pressures on running the business more profitably and thus survive this downturn; CEOs are turning to Business Process Outsourcing as a probable method of tiding over this crisis. But outsourcing is a tricky business and should be done in a well thought through manner and with a vision on the future. Outsourcing should not be done merely to save costs, but also to empower the organization to make full use of the outsourcing relationship as and when the economy bounces back.
In this regard, Vijay Rangineni, CEO, Mahindra Satyam BPO has mentioned some important pointers on how to go about outsourcing and how to derive maximum benefits from it during this recession. The white paper can be accessed at http://www.mahindrasatyam.net/about/documents/Benefiting_from_the_recession_through_outsourcing.pdf and is immensely helpful for those who plan to outsource Business Processes outside their organization.