Large enterprises remain flat on offshore services for 2009, says a new Computer Economics report. Could financial fraud scandals that plagued companies such as Satyam in India have had any effect?Perhaps more telling than the rise of small and midsize
companies' use of outsourcing is that the levels for large companies remain
essentially the same, says a new report by Computer Economics.
Small and midsize companies' use of offshore outsourcing services grew 10
percent from 2008 to 2009.
"There is a surprisingly sharp increase in the
number of smaller companies using offshore service providers, but little or no
change among larger companies," said John Longwell, director of research
for Computer Economics, in a news release. "As larger customers cut back on
IT spending, offshore service providers appear to be moving down market. They
are doing a better job of connecting with smaller IT organizations."
In 2008, 14 percent of the 200 companies surveyed went offshore; In 2009, that
number has grown to 24 percent. From a news release on findings from the report:
"The bulk of offshore
outsourcing to date has been among large organizations, defined as those with
more than $1 billion in annual revenue, according to the study. These
organizations, however, showed almost no change in the overall percentage of organizations
using offshore service providers. Among large organizations that outsource some
work, about 46% are using offshore service providers this year compared to 48%
the previous year."
The report is titled "IT Outsourcing Statistics 2009/2010: Outsourcing
Trends and Cost Experiences for 11 Key IT Functions" including the largest
area--application development.
"While the frequency of offshore outsourcing may
be rising, this does not mean the actual size of the market for offshore
services is increasing. Along with technology vendors, offshore service
providers are experiencing the effects of the slowdown in IT spending. The most
widely outsourced function, application development, is being particularly
impacted by the slowdown in capital spending by IT organizations, according to
the study," says the report's abstract.
One of the areas that is possibly affecting the lack of offshore growth for
large organizations could be some of the financial fraud scandals that hit some
of the large Indian firms in 2008 and carried over in to 2009, namely the
company Satyam. Earlier this year, The New York Times profiled some of
these issues in its article "Troubles
of Satyam Could Benefit Rivals and 2 U.S. Companies:"
"The $50
billion-a-year offshore outsourcing business was growing at a 29 percent annual
rate until the credit crisis hit last fall, Mr. Bourgeois said. But he now
forecasts growth in 2009 to be about 10 percent.
"The impact on other
Indian outsourcing companies is unclear, but analysts say that, long term, the
fraud could have wide implications. The scandal at Satyam a company listed on
the New York Stock Exchange and audited by an American accounting firm,
PricewaterhouseCoopers raises doubts about other Indian companies.
"'This is a crisis of
trust,' said Frances Karamouzis, an analyst at Gartner. 'Its not really Satyam
at stake; its the India Inc. brand.'
Still, the growth for small and midsize companies in offshore
outsourcing is not to be overshadowed by the scandals. Offshore outsourcing is
not only in India, but
many other countries including China, and
many Eastern European countries. There is also a hybrid market in place that
includes U.S.-based companies that have offshore operations. That trend has
gained a lot of attention from companies such as IBM who had large layoffs in
2009, with much of the work being sent overseas.
| | Reader Comments: Offshore Outsourcing on Rise for Small and Midsize Companies in 2009 | | >>> Post your comment now!
| | The BarriersIt's difficult to keep emotion out of this discussion. There are a lot of passionate opinions on the subject.
In my personal experience, I've... Posted At: 10-08-09 By: Todd | | | | | | @ Chuck"Those who stand for nothing fall for anything." -- Alexander Hamilton Posted At: 10-07-09 By: JR | | | | | | No kidding....Of course nobody here gives a darned, guy...
America wrote the book on greed. Look at the corrupt CEOs of these large corporations. They're... Posted At: 10-06-09 By: Chuck | | | | | | Go away spammerSave your spam for bulk emailing. The Latin American countries are no better than India.... Posted At: 10-06-09 By: No Spam | | | | | | Nobody is paying attentionThis IRKS me to no end. Larger companies have found out that outsourcing safes NOTHING. The unemployment of US citizens seems to be outweighed by the... Posted At: 10-06-09 By: JR | | | | | | Offshore results for small business are mixedI have to agree with the previous post that the small businesses will find the savings are questionable. Many of the customers using our Rural... Posted At: 10-06-09 By: Scott Risdal | | | | | | Your Image is your Help DeskCarlos Armand DuBoise in the south of France writes: for the small companies sending themselves off shore are like the little Dutch Boy with his... Posted At: 10-05-09 By: Carlos Armand DuBoise' | | | | | | >>> Post your comment now! | | | | | |
|
 |