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March 2009 Quick Hits - News, Trends & Analysis

Outsourcing Destination Focus: Romania
In the past decade, India has dominated the offshoring market for IT and business process outsourcing. Today, strong emerging markets are rising through the ranks of preferred offshoring destinations. Romania is a good example of an emerging outsourcing destination. The former communist state joined the EU with Bulgaria in 2007, so it has clear advantages from a political, legal, and economical perspective. They have invested heavily in IT infrastructure to usher in more business. Constin Linau, general director for export promotion at the Romanian Ministry of Economy and Commerce, recently remarked in Offshoring times "A significant advantage of Romania is its cheap labour force. The average annual income for software developers in Romania is about $6,000, almost double the $3,300 average per-capita income". He goes on to say that the "...multilingual workforce Romania has is of significant advantage to any company looking for an Offshoring destination. Most Romanian IT professionals speak English and many are bilingual speaking French, German, Swedish, Finnish, Greek, Danish etc. With its Engineering skills, low cost, multilingual capability, developing infrastructure, Romania could very well be called the next India".  
   
Flexible Pricing for Outsourced Services
IT departments the world over are looking for ways to reduce costs to manage the difficult times ahead. Many IT Directors are considering offshoring, process improvements that result in efficiency gains, and adopting new delivery models to help bring down costs. Software as a service and utility-based models take much of the up-front and fixed cost out of IT spend, freeing up cash in the near-term, and allowing companies to ramp usage up and down if necessary. For example, a client gets charged on the number of calls made to a service desk, or on the number of transactions processed by a financial system. The key is finding capable suppliers that offer flexible pricing and service models. Several providers have been offering on-demand services for some time, and many more are getting into the game. In an economy where investment dollars are scarcer than sunny days in London, companies must leverage flexible delivery and pricing models to obtain (and maintain) services without breaking the bank.  
   
India Surprised To See Japan Knocking On The Door
Historically, Japan has done most of her outsourcing to local companies, and some project based work has gone to China and South Korea for cost savings. Unfortunately neither destination has the scale that India can offer. Sony, Toyota and several other big Japanese giants are looking to India to save cash. Toyota reported its first ever loss after 70 years, which may explain their sudden focus on India. It is reported in offshoring times that TCS and Infosys are competing to win a potential $100MM deal at Sony. The conservative nature of Japanese companies, which prefer to have control over their operational activities, is likely to limit the growth of Indian Providers. Therefore, service providers who make a serious investment in suiting local culture, demands and delivery models will find themselves in a unique position to capitalise on Japanese offshoring.  
 

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