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Indian companies slow in outsourcing

Tech giants haven't had much headway with firms in their own backyard, says a recent Nasscom-commissioned study.
None | By Press Trust of India, New Delhi
UPDATED ON MAR 23, 2006 03:24 AM IST

While Indian technology giants have been successful in getting global corporations to outsource work, they haven't had much headway with companies in their own backyard, with over 50 per cent of them spending their IT budgets in-house, says a study.

"It is estimated that in-house spending on IT services (including training costs, salaries of in-house IT staff and associated overheads) still accounts for more than half of the corporate IT spend in India. Just 45 per cent of the budgets were outsourced," the study by IT industry body Nasscom and IDC has said.

Another key highlight of the study is that domestic ITES-BPO market is expected to cross Rs 6,600 crore in 2006.

Nasscom said it had commissioned the study against the backdrop of the increased interest in the domestic IT services market by major IT vendors that has been fuelled by high value deals like SBI-TCS, Bharti-IBM, Bank of Baroda-HP and Dabur-Accenture.

The study found that though IT services form 27 per cent of the total domestic IT spending, its share is significantly higher in segments like banking, financial services, insurance, telecom, automotive and manufacturing.

In terms of split by industry vertical spending, BFSI, manufacturing and communications accounted for 77 per cent of the overall spend on IT services in 2004.

The top three concerns of the corporations surveyed for the study are price, quality of service and lack of people with suitable skill set.

"While price was the topmost concern, from a base of 394 respondents, 44.7 per cent felt that though prices are high, but they justify the services being offered," Nasscom said.

"The liberalisation of Indian economic policy, competition in key sectors and progressive moves towards further integrating India with the global economy will be key drivers of greater IT adoption in the country.

"We believe high maturity IT user segments like Banking, Insurance, Telecom, Automobile will increase spending on IT services to integrate businesses with IT," Nasscom President Kiran Karnik said.

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