A large amount of newsprint has been utilized to keep us abreast on the economic downturn in the United States, its impact on India and Indians and our export of software professionals to that country, and how they are being forced to return home. Also, we are said to be slipping against traditional rivals China, that master of mass production. There are reports on how since they have beaten us hollow in producing and selling toys, they will also manage to do the same in software and services outsourcing. All in all, the situation reeks of one where the entire intelligentsia is anxious and at a loss for what to do, waiting for the inevitable to happen...

In a nutshell, we in India seem to have a problem in handling sudden failures. In a world that is changing ever so rapidly, failure is nothing but delayed success. Success teaches us nothing, and all insight comes from what does not work…and on our own ability to move forward. But how do we move forward? What has changed is the mix of onsite-offshore work. What has also changed is that in the e-business era, technology and business have become integral parts of the same coin.

The growing footprint

IBM, EDS and CSC are the big three of global outsourcing, and all of them are increasing their footprint in India. IBM has announced plans to hire more software professionals. According to IBM India officials, the company will add 1,700 new professionals to its existing base of 2,800. Also, there are plans to increase the total headcount to 10,000 over the next couple of years.

EDS has bucked the downturn with strong Q1 results. According to EDS chairman Richard Brown, "We have seen no slowdown in our overall market. Companies around the world are continuing to invest in the IT segments we serve to boost their productivity." EDS has won some major outsourcing deals on the basis of its brand-name recognition and experience in specific vertical industries. And in order to serve it’s customers better, it is opening offshore centres in India.

The same has been the case with CSC, which is increasing its Asia-Pacific footprint. But why is offshore outsourcing so hot? Last year, Infosys’ billing rates for offshore work was $32.3 per hour. For onsite work, it was $68.7 per hour. For HCL Technologies, the corresponding rates were $36 and $67.3. American and other customers can buy more for less from offshore centres. Also, profit margins will be higher for Indian companies, as operating costs are lower. Thus, offshore outsourcing should see increased profit margins at most software companies, even as overall revenues decrease.

The focus areas

The areas seeing most increase in activity in outsourcing contracts are applications maintenance, B2B infrastructure, wireless and broadband networks, CRM solutions, call and contact centers and enterprise systems integration. Vertical markets on a roll are manufacturing, telecommunication service providers, retail, insurance and technology. For instance, Reliance Industries has begun to target the call centre-back office outsourcing market, while other Big Daddy Bharti Group plans to invest $12 million in the call centre area by 2003-04.

In the past two years, there has been significant growth in the service market for deploying e-procurement solutions. e-procurement software vendors like Ariba, Commerce One, PSDI, Intelisys, Netscape and Harbinger have made alliances with major management consultancy firms and system integrators to deliver consulting, implementation and operations management services in deploying and managing e-procurement solutions.

For their part, the integrators realize that customers—enterprises in most cases—need not only consulting, implementation and operation management services, but also transaction security, payment processing, catalogue content management, order aggregation, supplier management and procurement industry expertise. Thanks to the non-strategic nature of indirect goods and significant savings and fast realization therefrom, organizations are becoming more prone to outsourcing procurement business functions to a third provider, one that is better able to manage the process.

A new group of independent e-procurement ventures is emerging in the market. Companies that have a proven expertise in the procurement industry, process re-engineering, information technology and financial processing form these ventures—they then go on to offer the whole outsourcing basket of procurement processes.

The new entrepreneurs<