Monday, June 8, 2009

Challenges for Outsourcing Sector of India in 2009

2009 is perhaps a very challenging year for the global economy. The only good thing is that the price of oil is very low. The bad thing is that we are in the midst of economic recession. Satyam Scandal has come at a time when in the USA, a president who has talked a lot against outsourcing jobs to India has taken oath. Some other countries like Philippines, China and Russia are determined to take larger pies from the outsourcing revenue. Here, in this entry, I have analyzed some about the challenges that the Indian outsourcing industry may face in 2009.

Economic Recession

Indian outsourcing industry is almost solely dependent on American market and American companies. As you know, the condition of American economy at this moment is not good at all because of the ongoing economic recession. So, there is a lot of worry among Indian technology companies about the possible impact or negative impact on the outsourcing sector of the recession. I thing that it is a very big challenge but economic recession in America can have a positive impact too. Now, American companies feel the need of cutting cost more than ever before and what can be a better way to cut costs than outsourcing the jobs to India?

Satyam Scandal and Corporate Governance

It has been almost three weeks since Satyam Scandal then to the media and that people could know about it. Still, it seems that there is no end to the media coverage of this scandal. Every day, we can find new news items and reports about it and this has seriously put some questions about the level and quality of corporate governance in India. Today, “Nasscom requests members not to poach Satyam staff”.

Nasscom President Som Mittal said in an interview:

“It was decided in our executive committee meeting that other companies should not try to take over Satyam’s staff and clients, as this would affect the business continuity of the company. The employees of the company are working on different projects and it’s necessary to complete all these projects, …… “The association had put in a request to all our members, and the companies are maintaining a self-imposed restraint,”

The employees of Satyam a tough raid and frustrated and are desperate to go to other companies because they feel that they have a bleak prospect in Satyam.


You may think that there can be no comparison between Philippines and India in outsourcing as Philippines is a poor country with all the political instability. Well, the decision makers in the country have realized the potential of outsourcing and that is why, they are doing everything they can to get more American companies outsource to the Philippines. According to a research of Everest Research Institute, Philippines expected to emerge as premier non-voice outsourcing hub. If there are few more stories like Satyam Scandal in 2009 then in 2010, we may find a significant shift in outsourcing projects to Philippines from India.

China, Nigeria and East Europe?

Eastern Europe countries and Russia have already started to compete with Indian companies in this field. Just take a look at Odesk and you will find that a large number of service providers are from Russia and they are ready to work at a competitive rate. You can find detailed information here:

2008 oDesk Russia Offshore Outsourcing Statistics Data Report

China has been trying a lot to emerge as the market leader in this field and is now in second position after India. Well, China surely has some good sides but the main problem is still the lack of large pool of workers skilled in English language. Chinese government is serious to fill up this gap and I have a feeling that China may have some big success stories in the next few years.

What about Nigeria? Nigeria is famous for online scams of sending all kinds of emails. Did you ever think that why Nigerians are related to online scams in such a large scale? Well, the reason is very simple: Nigeria has a large population with good skill of English language and some skill of Internet and then they are poor and unemployed. They are ready to work hard if they can get the taste of earning American dollar or British Pound by the outsourcing sector. I like to think that Nigeria can be a very big challenge for India in the next one decade provided that Nigerian decision makers have the same attitude and wisdom like the decision makers of the Philippines.

Read more: ‘Nigeria has great potential in outsourcing’

Obama and American Public Opinion

Just a week ago, Barack Obama took oath as the new president of United States of America. During his campaign for presidency, Obama several times said that he was not happy with outsourcing of American jobs and he would try his best to support those American companies who keep the jobs inside USA. In the last one week, I have not seen similar rhetoric from him but I think that it will be difficult for him to do a u-turn to his campaign against outsourcing. There is another factor that he has to take into account. In 2008, 2.6 million American people lost jobs and now, they hope that Obama will really do something about outsourcing and ensure that more jobs do not go out of the US. If the condition of US economy does not witness a significant improvement in the next few months then there will be more pressure on Obama to keep his promise about working against outsourcing jobs to India.

Indian Politics and Election and Uncertainty

2009 is the year of general election in India. The election is supposed to take place in the month of May. So, it is obvious that until May, everyone will be busy with the election. Outsourcing will not be a priority for the government in the next few months. Well, my suggestion for the Indian government is that they should try to work with NASSCOM more closely. They should ask NASSCOM to help the government with intensive monitoring of the global condition and especially at times like Satyam Scandal.

For many years, India followed closed economic system. In the last two decades, India opened up its economy and IT outsourcing sector witnessed impressive growth. 2009 can be a challenging year for outsourcing sector.

What do you think?

(This entry was first published in January 2009. Because of a technical problem, the entry had to be deleted and I am reposting again now.)


  1. good piece of research....i do agree that its high time for indian IT industry to wake up and take account of these challenges. not only this i feel that we are relying heavily on north american countries for outsourced work. We should look for newer avenues and try to change our business models accordingly to stand steadily in these trubulent times.

  2. i am looking for sectors of economy which are more outsourcing in the overall for my assignment.

  3. It is justified for Obama to saythat "he was not happy with outsourcing of American jobs and he would try his best to support those American companies who keep the jobs inside USA".But can he take up the chllenge of finding suitable candidates in US who can man the same jobs for the same salaries and other conditions what outsourcing fetche? if this can be achieved the problem can be solved in simple manner. If he cannot accomplish this he will have to make his industries uncompetetive by thrusting on them "costly" employees. In that case perhaps it is very imperative to find out what are the economical and social forces which are acting in the direction of making American labor costly.