First Quarter 2010 Part 2 of 4: Prospects in Outsourcing

Prospects for outsourcing in the current year seem very bright indeed; this is according to different surveys and market estimates indicated during this first quarter.

On the 6th of January, PriceWaterhouseCoopers released a survey which found that the outsourcing industry is changing due to the emergence of new service providers from all over the world and not just the US or India. As indicated in a previous article, companies have been steadily expanding their businesses by establishing facilities in new locations all over the world such as Africa and Egypt, which shows that outsourcing companies are expecting bigger business ahead and are diversifying their product offering.

IT research and advisory company, Gartner (NYSE:IT), indicated in a survey on the 15th of March that 85% of organizations are anticipating spend on external service providers to increase or stay the same as the economy recovers. The company estimates that Indian BPO market will grow by 19% through 2013, becoming a $1.8 billion market. Previous hesitation on the part of corporations in investing on IT spending will be largely assuaged in the coming months as the recovery continues.

Meanwhile in preparation, different companies have stepped up hiring plans, such as India’s sixth largest software exporter, Patni Computer Systems (NYSE:PTI), who has doubled its hiring target for the current fiscal year. The company plans to hire experienced and fresh graduates to be a part of the organizations software and back office outsourcing units. Another company expecting more hiring is Infosys (NASDAQ:INFY). According to Infosys CEO S Gopalakrishnan, as long as there is growth in the market, then the company will be hiring, and this is not only limited to Infosys, but many other companies as well. Hewitt Associates (NYSE:HEW) in a survey said that salaries are also expected to rise in 2010 on a wave of growth.

In other markets, procurement outsourcing is also expected to rise according to Everest. The company projects that procurement outsourcing will grow by 20 percent in 2010 reach nearly US$1.3 billion in annual contract value. Healthcare outsourcing outlook is also expected to rise with the passage of President Barack Obama’s healthcare reform bill, which will likely push many healthcare and insurance providers to look for alternatives in order to save on cost.

All in all, the market is quite optimistic on the future of outsourcing, at least for the succeeding months. Whether the trend will will translate into better (and more profitable business) is the question.

Author: Audrey B.

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