Alsbridge research and other third party sources have indicated that IT outsourcing will increase this year even though some India based companies are reportedly cutting back staff. 

US executives are continuing to evaluate and use outsourcing. (see Alsbridge release dated Feb. 8, 2008)  Outsourcing remains an on the rise strategy that may be getting some new life from a variety of economic forces. 

The first is currency change. The weakening US Dollar rendered rude shocks to the Indian outsourcing industry in 2007. Indian companies were hit as the Rupee appreciated by 11 percent in the last 12 months against the US Dollar. Some reports indicate that a number of Indian companies may be adjusting after rapid hiring over the last few years.  Our sources indicate that there have been layoffs of late at some firms.  This would include a number of India based “pure plays” to include TCS who reportedly handed out 500 pink slips to some of its most recently hired employees. TCS total employment still in excess of 110,000 is reported to be increasing, but may be shifting outside India. Further information reported by TCS indicates that the layoffs were just part of their performance review cycle.

The second driver is the slow down in the US economy that is forcing executives to look for the very best cost to value from their outsourced services. 

 
The third is the increased attractiveness of non-India locations for outsourced work.

The fourth driver is local India wage inflation which has been high in recent years.

The fifth driver is the move by US companies to sell some of their India “captive” operations and move to an outsourced model.

Each of the these drivers have Investors, analysts and the media speculating about the impact of further Rupee appreciation which will shift the balance of outsourcing destinations to a much wider base than even two years ago. Buyers need to be careful in how they view their options and ensure they evaluate tactical contract issues as well as macro economic drivers.  

Alsbridge will release its full results on ITO and offshore trends in early March, 2008.  Preliminary results from this survey demonstrates the growing IT Outsourcing in the chart. VIEW CHART.