Study Shows Companies Feel Demand for Global Outsourcing Would Remain Strong in Wake of US Recession
May 23, 2007
The global outsourcing industry is one that holds great fascination for many companies as many of them rely heavily on this channel in order to run a successful business. Those organizations running contact centers especially look to outsourcing as a way to ensure quality at a lower cost. And, as controversial as offshore outsourcing is, companies continue to find it be an economical choice.
Syntel, Inc., a global information technology services and Business Process Outsourcing (BPO) firm, sought to gain the views of 373 Fortune 1000 IT executives of global companies on the global outsourcing industry. The company asked these companies what they felt the impact on the global outsourcing in industry would be in the wake of a possible recession in the U.S.
In response to this question, 60 percent of companies responded that global demand would remain strong, while 25 percent felt that demand would be mildly impacted. Only 15 percent of respondents reported that they felt a potential recession would have a negative impact on the global industry.
In response to these results, Syntel had its own view. In regards to demand remaining strong, the company highlighted that global sourcing has been a strong hedge in challenging economic periods mainly due to cost reduction benefits and improved efficiency.
Many companies have ventured into global sourcing to gain the anticipated cost benefits and stayed with it due to the quality improvements. A 2006 TrendScan poll found that quality improvement was cited as the biggest benefit to global sourcing, scoring higher than cost reduction for the first time.
Global IP
outsourcing as a segment is expected to grow between 27 and 30 percent, according to a NASSCOM/McKinsey study in March 2007. If a recession were to occur, global sourcing demand could grow at an even faster rate, as corporations attempt to stretch their budget dollars even further.
Syntel also takes the viewpoint that a serious downturn would be required to have an affect on global outsourcing significantly. It is also safe to assume that there could be a minimal impact as all corporate departments, including IT, would likely see some belt-tightening during a recession.
In regards to the respondents that feel that a recession would have a negative impact on the global industry, Sytnel notes the difficulty of envisioning a recession scenario that would result in a major decline in demand for global delivery of IT solutions.
“Today businesses understand that global sourcing provides a very strong management tool to manage through economic change,” said Bharat Desai, Syntel Chairman and Chief Executive Officer, in a statement. “As I meet with CEO’s and CIO’s of major corporations, it is evident that global sourcing has become a key strategic tool for driving innovation and creating significant operational efficiency within their environments.”
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