U.S. companies are the biggest customers of Indian outsourcing providers like Infosys and Wipro. So how worried are those firms now that the some U.S. economic indicators show signs of slowing down?
A recent article in The Hindu implies that India's export business in items like precious metals and jewelry, rather than its outsourcing industry, is more likely to suffer from any possible downturn in the U.S. economy. In fact, an Indian economist interviewed in the article predicts that U.S. economic woes could put more pressure on American companies to improve operating margins -- an imperative that could result in more offshoring to India.
Economic problems in America thus far appear to be largely confined to specific sectors such as housing, notes the economist, which helps insulate global trading partners like India from fallout. A bigger problem is the prospect of interest rate hikes, which tend to dampen business investments. (A hike looks less than likely in the near term, thanks to the recent record-breaking performance of the Dow Jones Industrial Average.)
Still, companies like Wipro and Infosys are hedging their bets. Inspired, no doubt, by increases in spending on outsourcing in Asia and Europe, Indian firms are boosting their presence in those markets. Tata Consultancy, for instance, is involved in a Chinese joint outsourcing venture with Microsoft.
Indian providers are also turning their attention to a market they have long ignored -- India. Though they have tended to let local contracts go to multinational companies like IBM and Accenture, now Indian vendors are aggressively going after such deals, reports Moneycontrol.com.
"We cannot afford to ignore allowing MNCs to take our own backyard," says a Satyam executive in the article. In some cases, Satyam partners with the multinational providers in an effort to get at least a piece of the domestic business.
The Indian IT market grew more than 26 percent in 2005, making India the world's 18th-largest spender on IT. Experts expect India to move into the number 13 spot by 2010.