Offshore outsourcing providers gain strength

Indian firms are benefitting from IT chiefs' budget tightening off shore moves

Rosalie Marshall, IT Week 22 Apr 2008

The appeal of offshore outsourcing as IT budgets tighten was further highlighted this week with Indian service group Satyam and Tata Consultancy Services (TCS) both posting strong financial results.

TCS posted full-year profits for the year ending 31 March 2008 of $1.3bn on revenues of $5.7bn. Revenues rose 33 per cent year-on-year, while profits were 32 per cent higher.

Meanwhile Satyam saw its revenues grow by 46 per cent year-on-year, to $2.1bn for the year to 31 March 2008; profits were 40 per cent higher at $417m.

"Because of economic challenges in major markets, we are increasing our focus on ways the organisation can sustain continued growth," said Satyam chairman and founder, B. Ramalinga Raju.

The results follow an earnings report from Infosys Technologies Ltd last week reporting 35 per cent increase in annual revenues.

IT services advisory firm TPI argued in a new report that more companies are turning to outsourcing to deliver lower costs as they enter into a tougher economic climate. But TPI also notes that outsourcing in the financial sectors has decreased for a short period of time because the banking sector has frozen decision-making while it tries to quantify the scale of the economic problem.

Although financial services is normally the leading sector for outsourcing, it now fails to rank in the top thee sectors by total contract value awarded, said TPI.

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