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14 January 2009

New Hopes for Outsourcing and Co-Sourcing - Thumbs up

Satyam fiasco has taken unimaginable proposition and sharp reaction is coming from developed countries (people from developed countries) such as US. Given the current economic crunch and the fact that it does not show any signs of recovery in near future, so many people are fearing that they will be out of their jobs in those countries. Many has already lost their jobs. It is very bad situation for those people who want to retire but ended up working few more years as their retirement fund has eroded. Since the recession is much deep rooted, there is fear that there will be few more rounds of layoffs before showing some hopes of recovery. I would like to give my views on global economy and how it is positioned to go to next level by banking on the growth/consumption of developing countries.

With this backdrop, Satyam's melt down has imposed serious implications about the credibility of its Indian peers. The people, who question outsourcing and its effectiveness, wanted to make use of this opportunity to advocate more against outsourcing. Some of them argue that outsourcing does not offer value. However, I would like ask a simple question, "Without any value or advantage, why many jobs are outsourced for more than 20+ years and to continue to outsource or co-source". The companies will have their own strategies for outsourcing. That being said, the emerging markets are not only focused on creating more jobs by outsourcing, they are going to be biggest consumers going forward. As a matter of fact, many, including UN say that the world is tilted towards emerging markets. Refer the article. So when the growth in emerging markets, it is worth investing in the emerging markets.

I strongly believe that the people who are reacting sharply during this downturn and more sharply after Satyam's accident will turn the other way. Once the current unemployment pressure cools down, these voices will be come down. At the same time, the big players of Indian IT should continuously innovate in their business models and to make sure that there is high accountability in the delivery moving towards risk driven or accountability driven business models and output/productivity is predictable and reasonable. They should stop being another shop or backyard to any developed countries but to deliver high values their customers. Indian IT companies should continuously keep their cards open for moving beyond outsourcing to matured partnerships.

Also, all the corporates in developed countries would like to do business in emerging countries where the population is huge as the consumption will be more. When you want to market your products in emerging countries, it makes sense to set up office and employ local talent for operational efficiency (low cost) and high skill (local talent have knowledge of the culture and marketing strategies). From my point of view, Outsourcing and Globalization are two sides of a coin and one cannot exist without the other. As long as outsourcing is stopped (at policy level), the outsourcing is going to continue. However there could be margin pressures (from my viewpoint, this is more a sort of operational challenge) which matured Indian IT will be able to handle in a better way.

More than outsourcing, the need of the hour is ability to absorb and take part in the growth of emerging economies. Surely, the emerging markets have potential to take the global economy to next level provided it is used in proper way. As an Indian and an Engineer from IT industry, I strongly feel that the growth of Indian industry and particularly IT space is promising. You will see more and excessive jobs getting created in India after this economic downturn (which is likely to recover in another six months flat). To sum up,

1. Please do not generalize things unless you see a trend especially if it is bad.
2. When US/European economy recovers, more jobs will be created in US/Europe and then more jobs will be outsourced.
3. The emerging markets are going to lead the next phase of the growth of global economy and this will also create substantial jobs in emerging economies.
4. When more jobs are created, the consumption will shoot up and this will take our planet to prosperity.

2 comments:

Jegz.... said...

Lakshmi.. you have mentioned "likely to recover in another 6 months flat". May I know on what basis you are able to arrive at this number :-) ?

Lakshmi Narayanan N said...

See, I was little optimistic. If it is six months, it is two quarters. If you look at the current economic crisis, all the bad news are out starting from lay-offs to closing of companies to scams. The world could not have more bad news.

I don't think, the closing of companies is going to continue as Governments are taking steps to stop a long or "L" shaped recession.

If you look at the results of IBM, it is upbeat on technology spending. So, moving forward, more and more investments are likely to occur as the companies will have a clear vision about future.

Also, the emerging markets are getting a high visibility due its consumption power. We will see some solid growth in emerging markets. The job market in these regions is likely to outperform the job markets in developed countries.

Also, people believe that the economy will recover 6 months after the financial markets bottom out. They also predict that the market will bottom out in March' 09. So, before 2009, we will see the recovery