IT outsourcing is far from over
A few hours after software leader Infosys reported its quarterly results last week, a colleague walked in and asked in his cynical, baritone voice: “So, is this the end of outsourcing?” I smiled and said, “No.” And I am reminded of Mark Twain’s famous saying: ‘The reports of my death are greatly exaggerated.’india Updated: Apr 19, 2009 22:13 IST
A few hours after software leader Infosys reported its quarterly results last week, a colleague walked in and asked in his cynical, baritone voice: “So, is this the end of outsourcing?” I smiled and said, “No.” And I am reminded of Mark Twain’s famous saying: ‘The reports of my death are greatly exaggerated.’
True, Infosys forecast a dip in total revenues for the new fiscal year that started this month. This was obviously triggered by difficult conditions in both US and Europe, where the bulk of Indian IT exporters’ clients are located. True, there is political opposition to outsourcing of IT services to India by those who fear job losses.
But there is much more to all this than meets the eye.
First, outsourcing of IT is not just a matter of lowering costs, but also an acknowledgement of the growing specialisation that IT demands. Just as companies increasingly use security guards from companies like Group 4 Securitas, IT services are also a matter of partnership based on specialised skills than a simple form of cutting costs with cheap labour.
In this game Indians are cost effective and high-value, irrespective of whether they work for IBM, Accenture, Tata Consultancy Services, HCL or Infosys.
Second, business cycles are a part of market economies, and a short-term demand shortage cannot be seen as the end of a new wave. IT is still a new wave for sure.
Large mainframe computers gave way to mini computers, personal computers, local area networks, wide area networks, and the Internet. Each marked a new sub-wave. Mobile computing and social media are only just taking off. Every new sub-wave ushers in a new round of efficiency and innovation. Clients want it and companies like Infosys deliver it.
Third, IT services are not a product business like a car or a toothpaste, and more like a service business, such as a hotel or an airline. In services, customer relationships are critical and need constant nurturing.
Standing by clients in difficult times and offering discounts in the down periods enables a company to retain customers, and more important, tweak up the rates when the markets bounce back. Infosys seems to be thinking on those lines.
While I do see a lot of uncertainty, I also notice that Infosys is honouring its commitment to as many as 18,000 people who were given appointment letters in the last fiscal year. As I see it, Infosys only has its foot on the brake. The engine is whirring, and the car is just veering for control.