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1. How are the Outsourcing Companies Surviving the Recession?

   Kabila on September 21st, 2009

   Tags: India's outsourcing giants, outsourcing, outsourcing service providers, surviving the recession

   For hundreds of businesses outsourcing work has traditionally been the panacea for the problem of rising overheads; since their business has always been to save on costs for clients, the outsourcing industry have believed themselves recession-proof. But corporations that specialize in accepting outsourced work have seen business fade nevertheless, and are beginning to uncover a few flaws in their belief system. When businesses overseas are faced with unpredictable changes in the economic climate, the knee-jerk response is to quickly shut down a lot of expenses and downsize the workforce before these can affect the bottom line; companies try to focus on efficiency, on getting the most done with less.

   The traditional belief that expects outsourcing companies to thrive in a downturn only makes sense for the final stages, when an uptick is widely foreseen. India’s outsourcing giants do not expect these effects to become visible for a few months yet. As it stands today, there is such competition for what little business there is to go around that even customers with one-off jobs are fought over with concessions. The larger accounts find that they suddenly have much more leverage.

   An example of the kind of concessions expected of outsourcing service providers is the demand seen for more cost-effective billing methods. Outsourcing projects have traditionally been billed by the job and not by the hour. If an outsourcing firm found a way to deliver results in half the time it still got paid as much as it originally asked for. Outcome-based payment is in favor in today’s recessive environment. This is when companies pay for billable hours, and not for the job itself. While this may not actually save much over the routine month, it gives the buying company more control in an unpredictable environment; if their business happens to plummet from the recession, they will not find themselves locked into paying the outsourcing company overseas a bill for work they no longer need.

   While business has picked up for India’s largest outsourcing providers like IBM and Infosys, revenues are not expected to return to former levels soon. The outsourcing economy is seen to be a bellwether for the economy in general. When this picks up everything else will too.

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