At both end of the competitive spectrum, it established Information Technology outsourcers are getting squeezed. The annual offshore outsourcing survey conducted by Duke University’s Center International Business Education and Research and PwC incumbent India -based and the US Information Technology service providers are under pressure from outsourcing upstarts in the other countries that are stealing market share from them and from existing clients demanding price reductions. The Indian and American Information Technology outsourcing providers are entering new markets with the both low end, commoditized services, it is a highly competitive field with few barriers to the entry and a higher end services where market entry is more challenging say the researchers. It all adds up to a perfect for many large Information Technology outsourcers.
Between 2009 and 2010, the survey of 620 providers from 50 countries revealed that all he providers regardless of the size is decline. The large providers experienced the biggest decrease from an average 23 percent profit in 2009 to 18 percent in 2010. The Indian providers in the particular have been struggling with the profit erosion for a longer period of time. The profit margins dropped from 25 percent in 2007 to 20 percent in 2009 to 17 percent in 2010. To their clients, the study also revealed an uptick nearshoring with the service providers expanding operations to the move closer. The shift away from India, the offshore outsourcing center of the universe is not happening. Less than five percent of the US competitiveness were moving work from India, the another country and the two percent were relocating work from India to the US.
The new Information Technology outsourcing activity in India has slowed, the India is still the major market share. The growth rate of the new commercial deals between the year 2010 and 2011 shrunk by around 60 percent. Shrinking growth could mean a trouble for the Information Technology outsourcers who made a large investment in the country. The US firms may be saddled with the legacy effect of early offshore locations in India before closer Latin American Locations were established. The intensity of the global competition in the outsourcing industry that the latest study revealed. The countries aspiring to the emulate the success of the Indian and are adopting national policies for attracting the business services of the outsourcing industry. The China is one of the example, but the opther countries such as Chile also recognized that the attracting the business services outsourcing industry can be an important new lever of the economic development.
REFERENCE:
http://www.itnews.com/services/37793/it-outsourcing-survey-provider-profits-shrink-growth-slows-india
