Computerworld has a new article on offshoring and recession. The results from the survey the author did were quite surprising – the offshore outsourcing held pretty well.
Global outsourcing companies experienced slight contraction of revenue but this was compensated by higher margins:
IBM’s strategic outsourcing business saw a 3% decline in revenue but an improvement in margins. On a like-to-like basis, HP’s services revenue declined 15%, but like IBM, it did see an increase in margins. HP saw a significant decline in its application services business as discretionary project work fell away. CSC also saw its outsourcing revenue decline by 13%, attributed to client delays and pullback of discretionary projects. Outsourcing bookings during the quarter were also down 50%, but like the others, CSC did improve its profitability.
What’s ahead for offshore outsourcing?
Special mention must be made of the increased use of offshoring by global and European outsourcers, and the emphasis on productivity and delivering value by select Indian players. We will see an increased use of offshoring, no doubt, but in a rational, rather than blind, way. It’s fair to say that the recession is wiping away the inefficiencies of the system. Those who recognize and adapt will be the real winners.