Outsourcing and the recession

By Jason Creighton

Source: Sourcingmag

The body of evidence and industry pundits all seem to point that the world is heading towards a recession. The majority of industries know what to expect; manufacturing will slow down, consumer spending and retail will reduce significantly, whereas basic goods and services will generally weather the storm. Where does that leave the Outsourcing industry?

Given the explosion of the industry since the year 2000 there is no historic data to draw comparisons. Although people have been outsourcing since the 1960s the massive growth has meant that some countries are staking millions of jobs on the continued growth of this industry. The news is full of countries wanting to jump on the outsource bandwagon. Is this the right time, perhaps it is the best time. In this article “TCS, the market leader [outsource software provider in India], said that it was “cautiously confident” because it believed that Western clients would outsource more business overseas to cut costs.” In a time of recession that is at the forefront of everyone’s mind.

In this article Satyam (India’s 4^th biggest software exporter) sees no slowdown,. In fact they report a 29 percent increase in profits due to new clients. This would seem to point to the fact that more companies are striving to achieve the benefits of outsource to maintain growth through recession. It might be too early in the recession to really judge. But these massive players in BPO outsourcing seem to think that the recession will pass them by. In this article Exl, a US based outsource company thinks that the recession will not damage their turnover but it will actually increase.

The last article I would like to cite says that the majority of CIOs who are currently not outsourcing are not planning to outsource in the next year. CIOs that are already outsourcing will increase but only slightly. This indicates a slow down but no decline in overall outsourcing.

There are many ways to analyse the data and everyone has an opinion. Frankly it is too early to tell what will actually happen a lot of the news that comes directly from companies is obviously directed towards investors and perhaps paints a rosy picture. The world will continue to outsource because owners and shareholders demand more profitability and a recognised way to do that is to outsource. In the end, only time will tell. outsourcing is such a broad industry that the more likely scenario is that some sectors will continue to thrive while others will have to consolidate to survive.