An appreciating rupee, increasing labor costs and a higher attrition levels are now weighing heavily on outsourcers with their business in India while India is undisputedly the current top outsourcing destination in the world. The country is already falling behind in terms of call center outsourcing with the emergence of the Philippines at the forefront and how with the release of Infosys quarterly results, it has made these setbacks more evident. The India’s number two software exporter and outsourcing services provider, Infosys released on the 13th of January its third quarter results for FY2011.
The company reported a 14.2 percent rise in net profit which fell behind analyst estimates, coming in at a profit of 17.8 billion rupees below the 18.2 billion estimates in a Reuters poll. The company still raised its dollar sales growth forecast for FY2011. The company reported a 14.2 percent rise in net profit which fell behind analyst estimates, coming in at a profit of 17.8 billion rupees below the 18.2 billion estimates in a reuters poll. It is still raised its dollar sales growth forecasters for FY2011 in the year ending March to 25.7 percent – 26.1 percent from the 24 percent – 25 percent forecast in October.
The major Indian outsourcing companies in the technology sector were expected to show robust growth with the increased demand for their services, with the companies ramping up hiring and raising wages to meet the demand. While the forecasts were optimistic and demand is not warning at least for the short term but as the Infosys result show. The expectations for other fellow outsourcers including Tata Consultancy Services and Wipro will likely be affected as well. The uncertainties related to sustainability of the global economic recovery could create greater currency volatility in the near future.
With the currency gaining strength and costs rising, cost of outsourcing services will expectedly also rise, it does not help matters that competition is increasing among other global outsourcing providers including Accenture and IBM as brought about by the increase in demand and the steady economic recovery. The tide seems to be turning for India on the European front, although the United KIngdom has proven to be a tough market to enter for India, local support in the form of the British council as well as Britains National Health Services Administration just might help Indian outsourcing companies to get their foot in the door and attract more business from the United Kingdom, creating a bigger competition for the other outsourcing companies in the region such as Logica, Atos Origin and Capgemini.While the tide may be turning, it did not help Indian outsourcing company, HCL Technologies to win a $600 million five year outsourcing contract with European steelmaker ArcelorMittal who chose the Virginia based Computer Sciences Corporation over HCL Technologies.
REFERENCE:
http://www.blog.infinit-o.com/infosys-fails-meet-expectations-highlights-indias-setbacks-outsourcing-destination/
