IT Outsourcing India

A growing number of firms are trying to relieve businesses of their information technology chores, according to a new study. The report, conducted by market research firm IDC, says a new crop of competitors are challenging computer service giants like IBM and Electronic Data Systems (EDS) with low prices, specialized expertise, and advanced technology.

Up-and-comers in the IT outsourcing market include Dell, which specializes in the desktop management, and Lucent Technologies, which focuses on network maintenance. Although the services of these equipment makers are relatively limited, each has inked big contracts based on their specialized expertise and low prices, IDC said.

Computer services firms in India, including Tata Consultancy Services, Wipro Technologies and Infosys Technologies, are also elbowing into the market with low prices.

Meanwhile, companies like Salesforce.com, which offer off-site, subscription-style software, are providing a new twist on outsourcing by tapping the Internet. As a hosted service, Salesforce.com maintains customer systems remotely.

IDC expects Amazon.com, eBay, Travelocity, Google, AOL and Yahoo, to move deeper into "on-demand" business services as well.

Despite all the new competition, the top three IT outsourcing firms in the world–IBM, EDS, and Computer Sciences Corp. (CSC)–haven?t budged from their positions, the IDC report said. Based on 2004 revenue, IBM occupied the top spot with 15.5 percent of the global market last year, while EDS ranked No. 2 with 11.7 percent, according to IDC figures. Third ranking CDC’s share was 5.5 percent.

Among the world’s 10 biggest firms in the market, Hewlett-Packard services revenue grew the fastest, by 22 percent, last year by IDC calculations. IBM, Capgemini and Northrup Grumman also logged double digit-growth.

IDC based its figures on broad outsourcing contracts for data center management combined with desktop care, help desk support, network operations, applications maintenance or disaster recovery services.

The global market for such services in 2004 hit $84.6 billion, according to IDC. The research firm said it expects the market to grow nearly 6 percent annually through the end of the decade, reaching $112.5 billion in 2009. The $33.8 billion U.S. market will grow at 4.2 percent, IDC predicted.

The moderate rate of growth combined with the increasing competition means more mergers are on the way, IDC analyst David Tapper said. "It’s a stable set of players, but there is going to have to be consolidation," he said.

 Source : http://news.cnet.com/

Now China’s cost advantage is being eroded by soaring oil prices, rising wages and an appreciating currency. Canadian companies that outsource their manufacturing to China are already feeling the pinch and some are even bringing production closer to home.

Could globalization be reversed in an era of high oil? What would that mean for Canadian companies that have come to depend on the China Price?

Levon Afeyan flew to China this week to find out the answer to these questions for his mid-size Montreal company. He’s the president of Seatply Products Inc., a manufacturer of molded plywood for use in commercial seating.

About half of Seatply’s products originate in China and Malaysia and he’s becoming increasingly uneasy about soaring freight costs that have seen the price of a shipping a standard container from China hit as much as $6,000 from $4,000 a year ago.

"People are taking a second look at everything because the costs are becoming prohibitive," said Afeyan, whose company’s efforts to cut costs through lean manufacturing techniques were featured in The Gazette in 2006. "It goes right to the bottom line."

On his trip, Afeyan will try to get price concessions from his Asian suppliers to help cover his rocketing freight costs. But he’s not expecting an easy time because his suppliers have their own problems and want to raise prices.

Inflation has already risen 8 per cent this year in China and the government just lowered subsidies on gasoline, resulting in an increase of roughly 20 per cent at the pump. Meanwhile, the Chinese currency has jumped about 17 per cent against the U.S. dollar, making exports more expensive.

And wages are rising fast. Depending on the industry and skill-level, wages are up by 10 to 25 per cent a year and labour shortages have developed in some regions.

CIBC World Markets economists, who predict oil is heading to $200 U.S. a barrel, believe the cost of maintaining a supply chain that reaches to the other side of the world is outstripping the benefits for many North American sectors.

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Fewer global delivery centers were opened in India by the United Kingdom’s 20 largest IT services suppliers than in each of the three countries over the last year.

The competitive Indian labor market is driving companies to alternative destinations, say Pierre Audoin Consultants (PAC) in its report.

The 20 largest U.K. companies analyzed in the report included Accenture, BT Global Services, Capgemini, Capita, CSC, EDS, Fujitsu, HP, IBM and Logica.

Of the 21 centers opened since January 2007 by the big 20, only two were in India, while four were in China, with three were Eastern Europe and Morocco respectively.

Nick Mayes, senior consultant at PAC, said there is no "serious threat" to India’s outsourcing dominance in the short term but companies are looking to reduce their reliance on "India’s heated labor market".

China’s emergence as a global sourcing hub has traditionally been slow but the report found that BT Global Services, EDS, IBM and Tata Consultancy Services (TCS) have all opened sourcing facilities in the country in the last 18 months.

The two facilities launched in India were both outside the traditional hotspots of Bangalore and Mumbai—IBM’s new center in Noida and TCS’s expansion site in Hyderabad.

Source : http://www.businessweek.com/