Uncertainty In Us Outsourcing Highlights Need To Shift Direction

Recent moves by the US government have made some outsourcers unsure of the future

in outsourcing to the US, notably, outsourcing company Infosys, has been vocal about the Ohio outsourcing ban.

A few days ago on the 13th of September, Infosys (NASDAQ:INFY) CEO S. Gopalakrishnan said that, given the recent European downturn, the company had become quite reliant on the US to support its income, which he estimated to be at about 65% now compared to 40% before. It is a figure that the company will now seek to alter, by shifting business from the US from 65% back to 40%.

It is ultimately a wise choice considering that the US companies are now becoming even more cautious in entering into deals with offshore outsourcing companies in light of both the Ohio outsourcing ban and the upcoming US elections in November.

Movement, meanwhile, has been geared more towards the European market, where an estimated 40% of companies have been projected to increase outsourcing this year. This is according to recent survey conducted by Gartner Inc (NYSE:IT).

According to Gartner Vice President Claudio Da Rold, Organizations in Europe are expecting or are in need of growth, but they are also still highly cautious. Although we conducted this survey in the first quarter of 2010, before the start of the Greek financial crisis, we believe that the cautious expectation of growth will continue in Europe beyond 2010.

And while companies such as Infosys and Wipro (NYSE:WIT) have observed the cautious spending in IT outsourcing, these companies are pinning their hopes on Europe. Infosys has stated that they will be seeking to balance overall revenue by shifting 40% of business to the US and 40% to Europe.

This is amid fears of a double dip recession in the US, higher fees for skilled worker visas and more states following suit to Ohios ban.

Companies looking to shift gears and change direction towards other emerging markets will likely find it difficult especially among companies such as Infosys who have banked more than fifty percent of their business to the US. And while Europe, particularly the UK, remains cautious on deals, it might well prove to be beneficial to shift some focus on other areas, such as Asia and Latin America.

by: AudreyB

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