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Outsourcing can save IT sectornews
Our Convergence Bureau
05 November 2001

Mumbai: Outsourcing of IT-related services could bring back glory to the Indian IT sector, which is currently going through a major slowdown phase on account of cuts in IT spends globally.

According to the National Association of Software and Service Companies (Nasscom), traditionally global corporations used to outsource 70 to 80 man-year projects, which have now increased to 300 to 400 man-year projects. Nasscom has also pointed out that the slowdown has been largely felt in the telecom sector whereas the hitherto high-growth areas such as finance and banking segments have largely remained unaffected.

Global research and advisory body Gartner also share Nasscoms belief. It says the US slowdown, which accounts for almost 70 per cent of the global IT market, will allow software companies to seek new opportunities in other parts of the world. It will force companies to tap new markets and attract more outsourcing work.

Nasscom has cited three major for greater outsourcing opportunities by Indian companies:

  1. Cheap Indian labour
  2. Higher knowledge and expertise among Indian engineers
  3. Propensity to keep fixed costs low by foreign companies and instead execute projects on outsourcing basis.

In the last one-and-a-half years, the market capitalisation of software companies has eroded to the extent of 90 per cent, largely due to a fall in Nasdaq, the Mecca of tech companies. For example, against an all-time high of Rs 2,22,000 crore, the market capitalisation of Wipro currently stands at Rs 26,500 crore. Infosys market capitalisation has fallen to Rs 20,000 crore from its peak of Rs 90,000 crore.

Similarly, that of Satyam Computer Services market capitalisation currently stands at Rs 3,450 crore from its all-time high of Rs 40,000 crore and that of HCL Technologies at Rs 4,070 crore as against Rs 42,000 crore in February 2000.


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Outsourcing can save IT sector