The Hindu Business Line : Uptake for offshoring sector around the corner: Everest

Bangalore, March 2 Though many industry stakeholders have predicted a long winter for the Indian offshoring industry, research firm Everest Group believes an uptake is around the corner.

The pressing need to cut costs would force companies to take decisions and renew offshoring efforts much earlier than anticipated while growth would be more in nature of transformational kind of work albeit at a slower pace.

“I suspect we are going to come out of this much quicker. A bounce-back may be seen in the next couple of months,” said Mr Peter Bendor Samuel, Founder and Chief Executive Officer, Everest Group. “The subtlety here is that the underlying trends are changing,” he added.

The psychology of the market is that ‘I have to take costs out’ and the global services model is by far the most efficient model to do so. “We are seeing a lot of activity in people,” Mr Samuel told Business Line in a recent interview.

The huge crunch due to the meltdown had caused significant indecision among the customers, which affected their offshoring plans. This is turn has impacted the Indian outsourcers creating uncertainty over their business outlook as these vendors earn about 90 per cent of their revenues from markets in the US and Europe.

Pent-up demand

“We will come out of this indecision quicker than we think, and there is going to be acceleration of pent-up demand,” said Mr Samuel. He expects the industry to grow in the second half of the year.

Mr Samuel expects the bounce-back to be broad-based and in verticals such as insurance, healthcare among others. However, in the financial sector the damage has been profound and several companies have vanished. This sector could take some time to recover, he added.

Transformational work

However, the secular trend is that the kind of work is shifting, and this requires the Indian companies to change their engagement models. Clients would be looking for transformational kind of services and more collaboration, expecting the vendors to focus on the total business rather than on just cost savings.

Mr Samuel said the large Indian vendors are at an advantage compared with the smaller ones, who might lose contracts to the likes of Infosys and TCS. Given the economic circumstances, there would be a flight to quality and brand as companies would like to do business with trusted partners, and hence the smaller firms would be under pressure.

He said the growth rate for the industry would come down, and could permanently settle in the late teens. This correction has exposed that fundamental growth is coming down faster.

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