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Outlook for Outsourcing Spending Brightens

Spending on outsourcing is set to come out of a slump and return to pre-recession levels by the end of the year, bringing a much-needed boon to technology companies in India and elsewhere, says a closely-watched survey of the industry. More than half of companies surveyed that outsource say they expect their spending on technology to come back to levels before they made cutbacks, according to the 2009 edition of the Black Book of Outsourcing.


 

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That could be much-needed news for outsourcers globally. For nearly a year, financial and political fears have kept a damper on companies' tech spending, bringing a halt to the skyrocketing growth outsourcing companies long enjoyed.
The results are from a survey to be published Thursday by Brown & Wilson of Clearwater, Fla., that invited over 300,000 clients to rate outsourcers on their performance and professionalism. The yearly ranking is a bellwether of the state of the industry and ranks its most highly-regarded companies. The survey´s results were provided to WSJ.com in advance of their publication.

India, in particular, fared well. HCL Technologies Ltd., based in Noida outside New Delhi, tops the list this year, among a wave of Indian companies that came out further ahead this year. Nearly 94% of companies surveyed say they would definitely consider India as an outsourcing destination for the right price, second only to the U.S. and significantly higher than other emerging markets like the Philippines and Eastern Europe. A proven track record will be crucial when companies start spending on outsourcing again, the report says.

What makes the pro-India results surprising is that they come in the wake of a massive fraud scandal at the country´s Satyam Computer Services Ltd. The company´s founder B. Ramalinga Raju admitted in January to fudging Satyam´s books to the tune of over $1 billion.

For the first time this year, the survey asked clients to score outsourcers on accountability and trust. Indian companies scored highly, with 81% of clients saying that Indian companies had improved their accountability since the scandal broke.

"Post-Satyam, our expectation was that Indian providers were really going to take it right on the chin," says report co-author Scott Wilson. "But it seems that they used it as an opportunity to go out to their clients and talk to them about their concerns."

Three Indian companies -- HCL, Infosys Technologies Ltd. and Tata Consultancy Services Ltd. -- ranked in the top 10 of outsourcers with the highest accountability, transparency and trust.

India´s edge as an outsourcing destination is pushing out the competition from other developing countries, which have the same low wages as India but don´t have the south Asian country´s reputation. "It´s the fourth year in a row that there´s no Chinese firm," says Doug Brown, the other co-author.


If customers do start putting money back in the pockets of outsourcers by the end of the year, they won´t be diving right in. Instead, they´ll be looking for short-term projects -- less than six months -- and will stay away from the complex pricing deals that were popular before the downturn, according to the report.
 

[Estimated timeframe:Q2 2009-onward]

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Source: WSJ.com
MTT insight URL: http://marketingtrendtracker.com/article.aspx?id=4119



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