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Offshore outsourcing: what role will recession play?

Arpit Kaushik | Oct. 6, 2008
It is the end of the golden age of offshore outsourcing, but it also heralds a new dawn-the age of truth and rationality.

It's also difficult to accurately quantify the business value of offshore outsourcing. At a theoretical level, it does make sense. At a headcount level, it also makes sense. But at a business outcome level, the real and hidden costs are often ignored and many companies are left thinking "hey wait a minute, I offshored hundreds of my staff...why isn't my profitability increasing?" And despite share of offshoring rising, why haven't we ever seen a reduction in IT spend? That's because offshore outsourcing has so far focused on headcount as the currency, not the business value generated. That is about to, thankfully, come to an end.

The more I think about the full value chain, the more intrigued, and sometimes scared, I get about the full impact. TCS has reduced its annual hiring estimate by about 30 percent, Wipro already reduced headcount in IT services last quarter, Polaris has resorted to just-in-time hiring, Infosys is visiting fewer campuses...what does it mean for the employment market in offshore outsourcing countries? Will wage inflations ease off? Will attritions finally come to manageable levels? Will being skilled come back in fashion compared to just having an IT diploma/degree? We'll have to wait and see...

It is the end of the golden age of offshore outsourcing, but it also heralds a new dawn-the age of truth and rationality. Where offshore outsourcing delivers real, tangible business value, and service providers are focused on making things work for customers in unique and innovative ways.

Here's to the new age...cheers!

Arpit Kaushik runs a business redesign company in London, Crystals, that helps technology-centric companies get unstuck.



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