Home Page > Publications > October 2008 Quick Hits - News, Trends & Analysis

UK Vendor Slow to Embrace Offshore Delivery Model
Considering that offshoring began in the 1990's and really took off in the past 5 years, I am surprised to see a large UK outsourcer with only 10% of its workforce in India. I recently read that Logica is now building a new facility in Chennai, and I guess they decided not to enlarge their current 3000 person facility in Bangalore due to escalating property & people costs. I am just perplexed at how a UK outsourcer could have survived in the business climate competing against outsourcers with large proportions of their organisations offshore. I understand how some other providers of course charge the same rates as if their resources were in the UK, but behind closed doors got most of the work done offshore. I have never been the quickest of cats, but what a profit harvest a lot of these providers must have had. In these difficult times outsourcers without offshore delivery capabilities will soon see their competitiveness disappear, so good luck to Logica for joining the offshore party late, but as they say, better late than never.  
Acquisition Spree From East to West
Indian GDP has been growing at nearly 9% in the past few years and most of that growth has been coming from its booming IT industry, but no country is immune from the global credit crunch, and even some of the larger Indian powerhouses have been starting lay-offs to ready themselves for leaner times. The other trend we have seen emerge from India is a large scale consolidation and M&A activity... the larger players buying small niche players. Infosys recently bought Axon Plc, a UK SAP implementation consultancy, for $753MM. In recent months we saw Wipro buying Infocrossing for $600MM to further strengthen technology capabilities & support for US clients. What we are witnessing here is 10 years of massive flow of capital from Fortune 500 clients into Indian IT services providers, and the trend is now reversing as these Indian giants have started to buy businesses in the West. It will be interesting to see who will be the first Indian tier 1 vendor to compete with an IBM... who will they need to buy to be a global outsourcing solutions provider.  
Will the Nationalisation of Banks Put a Stop to Offshoring Initiatives?
Since Thatcher started deregulating UK industry in the 1980's, we have seen many large national companies like BT and British Gas privatised. The privatisation was a symbol of capitalism at work, as organisations started to focus on maximising profits and reducing costs. Capitalism embraces offshoring as it reduces costs for organisations, now in the heat of the credit crunch we are seeing many banks being nationalised so in fact undoing Thatcher's work. As more capitalistic banks get nationalised in the coming years will tax payers & government officials want to protect more local jobs and put a stop to offshoring. I just read that the union that represents most of the staff at Lloyds TSB wants the government to put an end to offshoring jobs, as a condition of the massive cash injection the bank has received, but the reality is that in order to survive in this cut throat environment more jobs should go offshore to protect the remaining organisation.  

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