Friday, July 24, 2009

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India's Outsourcers using the Slump to Get Bigger: BusinessWeek

In a bid to become global, Bangalore's info tech companies are preparing for the next upturn by rethinking strategy and hiring more workers

Take a walk through the sprawling Infosys Technologies (INFY) campus on the far edge of Bangalore, and you'd never think the outsourcing industry is in a funk. At all hours, buses disgorge hundreds of software engineers too young to buy a beer, the sidewalks are filled with twentysomethings carrying backpacks bulging with laptops, and the 24-hour cafés are jammed.

Yet there's no shortage of bad news in Bangalore. The value of new outsourcing contracts fell 22% globally in the first half, to about $19 billion—the lowest level since 2001—and the second half looks grim, too, according to TPI, an advisory firm in Houston that tracks deals. That means many of India's 2,000 smaller info tech companies may shut down, while the industry's giants expect sales barely to budge this year. "We have to prepare ourselves for unknowns," says Infosys CEO Kris Gopalkrishnan.

Some companies, though, see the hard times as an opportunity to boost productivity and prepare for the next big uptick in the $800 billion global IT business. Top players such as Tata Consultancy Services, Infosys, Wipro (WIT), and HCL Technologies remain profitable and are loaded with cash; Infosys has $2.2 billion, and the others have $1 billion-plus.

So even as the industry suffered, the five biggest companies added a total of some 80,000 employees in the 12 months through March—a third less than the previous year but still sizable. And the outsourcers are all cozying up to customers, reinventing how they price and sell their services, and investing millions in training and research to help them take on more complex jobs. "I believe the industry will emerge much stronger," predicts Wipro Chairman Azim Premji. "We certainly will as a company."
Source: BusinessWeek

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