U.S. No Longer Giddy as a Schoolgirl About Offshoring

Ann All

TPI's latest report shows a whopping 70 percent drop in value in outsourcing contracts signed by U.S. companies in 2007's first quarter.


While TPI's managing director attributes the decline to a softening of the global outsourcing market, more than anything it appears to be an effect of a highly mature U.S. market. During the same period, outsourcing activity showed healthy growth elsewhere -- a 75 percent increase in Europe and 30 percent in Asia-Pacific.


Because the U.S. has traditionally accounted for such a big chunk of the global outsourcing market, TPI is predicting a growth rate of just 4 percent in terms of total contracts signed in 2007. That will likely rise, however, with continued growth in non-U.S. markets.


It's certainly no coincidence that Indian outsourcing providers have been beefing up their presence in varied geographies like Eastern Europe, China and Japan. Many companies prefer to keep outsourcing initiatives closer to home -- wherever home is. Thus, Western European companies are more likely to feel comfortable sending work to Bulgaria than Bangalore, while Asian companies feel more cultural affinity with China or Malaysia.

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Apr 23, 2007 6:01 AM Mohan Mohan  says:
Interesting analysis....although I find a bit hard to connect the dots. The TPI report seems to focus on the outsourcing market, let's call this the 'big pie,' out of which Offshore outsourcing, offshoring is a 'slice of the pie'... well the pie shrinking may / may-not correlate to a shrikning slice-of-pie; right? Reply
Apr 30, 2007 5:53 AM Peter Allen Peter Allen  says:
Mohan is more right than Ann on this one!The TPI Index reported a softening in the aggregate dollar value awarded through larger commercial outsouricng deals in Q1 - in the Americas. Beneath the covers, we sense an accelerating US appetite for OFFSHORING through smaller deals (part of an overall multi-sourced strategy). The effect is measured at the macro level by smaller deal values, in total, for the multi-national providers.One of Ann's observations is right on, however. Many western corporations are looking for service models that are multi-regional - largely for timezone-sensitive processes and language diversity. So, many of the India-based providers are expanding their operations to new destinations. Indeed, they are becoming the next generation of Multi-National Providers!Peter Reply
Oct 22, 2007 5:37 AM Manik Manik  says:
The overall pie might be shrinking due to low cost destinations as well. If the pie is shrinking, it may be due to the fact that the clients are getting cheaper vendors - thus, reducing the $ value of the total outsourcing. Thus, something that was being given to a 100$/hr consultant here is now being done at 20$/hr in India - this reduces $ value of the overall market. However, it doesn't reduce the headcount ! Reply

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