U.S. Economy's Impact on Indian Outsourcers Is Still Uncertain

Ann All

I managed to somehow miss a pretty significant outsourcing story from last week. India's Wipro, which last summer announced plans to employ up to 1,000 U.S. workers at a development center near Atlanta and to open three additional U.S. centers, has put those plans on hold.

 

Back in July, I called the movement of Indian outsourcing providers like Wipro and Tata Consultancy Services to establish U.S. outposts a "trend with real staying power." But that was before a tanking economy led some companies to scale back on outsourcing activities, resulting in the softest third quarter in recent memory for services providers.

 

Wipro shares dropped 5.2 percent yesterday on concerns about sweeping global job cuts by financial institutions, which are among the company's biggest customers, reports Reuters. Somewhat ironically, Wipro is reportedly a front runner to purchase Citigroup's India-based IT outsourcing business for $150 million, an operation Citi is shedding as part of a huge global cost-cutting effort, according to Bank Technology News. Citi sold its Indian BPO operation to Tata Consultancy Services last month.

 

Yet some Indian outsourcing providers still think the U.S. downturn could bode well for their business next year. Infosys CEO Kris Gopalakrishnan says a recent survey of his company's top 100 clients indicates that some of them may step up their outsourcing activities, reports Bloomberg. Says Gopalakrishnan:

What I have found in my interactions is that some companies would increase their offshore outsourcing. Typically when there is a slowdown the stronger companies will continue to invest.

Infosys last month revised its earnings estimate for 2008 to $4.72 billion to $4.81 billion, less than the previously projected $4.97 billion to $5.05 billion.



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