Rates down amidst offshoring growth

Two of the recent reports in Economic Times is worthy of noting. One report says that JP Mogran Chase would be increasing its India outsourcing by 25% this year to nearly $400m. JPMorgan to up outsourcing to India by 25%

The other report states that customers are negotiating down the rates by 15% to 20% with the Indian service providers. IT majors sign new deals at a discount

This is an indication of the general trend. Indian IT offshoring is stable and growing even in the tough economic condition. However, the customers are pushing the service providers hard for lower rates and higher productivity levels. This market trend will make the service providers restore to cost optimization measures to retain the profit margins. Many Indian IT providers have already taken up several cost optimization measure including:

  • Pruning the staff
  • Moving onsite staff to offshore
  • Reducing the salary and perks
  • Defering joining dates for new hires
  • Improving the utilization levels
  • Cutting down travel related expenses
  • Defering CapEx related expenses

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© Dhandapani Ammasai, 2011. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given with appropriate and specific direction to the original content.

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