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The outsourcing growth in the US has halved over the past year from 60 percent to 30 percent. The US market appears reaching a saturation point when it comes to outsourcing.
According to Pradeep Udhas, Global Partner sourcing advisory, KPMG "The economies in Europe and Asia are growing at 70 percent and 35 percent respectively, the pace of growth in the US is slowing down,"
According to Nasscoms IT industry analysis, the revenue accounted for the year 2006-07 from US is two percent less at 67.18 percent to what it was in the year 2002-03 when it accounted for 69.10 per cent.
There has been a marginal growth in revenues from Europe. From 22.20 per cent in FY 2003, the revenues from Europe increased to 25.13 per cent in FY 2007. However, revenues from markets in the rest of the world have been on the slide. From 8.70 percent in FY 2007, the revenues from rest of the world decreased to 7.69 percent in FY 2007.
Industry experts says that "Indian companies, hence, need to increase their investments in emerging markets to keep the outsourcing growth. Japan for instance is the second-largest IT market after the US, which is still untapped by India IT firms. There is a huge interest in outsourcing to India in Japan "say Pradeep Udhas". Among India companies to register highest revenue from Japan is Patni Computers. It ventured into the Japanese market in the year 2005.
Japan contributes to five per cent of overall revenues "say Deepak Khosla, senior vice-president, Patni. The rich dividends of investing in emerging markets is evident.
Investments in emerging markets constitute 40 percent of our overall expenses, said Ganesh Natarajan, deputy chairman and CEO, Zensar, adding, "The growth rate in emerging markets is over 30 percent which is above industry standards. Revenues from emerging markets contribute to 23 percent of our overall revenues, which is higher than industry standards of 7 percent to 10 percent." Zensar is present in South Africa, China, Australia, Japan, and Poland.
Hexaware has identified the regional language speaking markets in Europe like Germany, Scandanvia and France as high potential markets. It has its European headquarters in the UK and a delivery centre in Germany. "We plan to add one new market a year," said Sunil Surya, head, operations for Europe, Hexaware.
Indian companies are also setting up nearshore centres in China, Eastern Europe and Latin America and onshore development centres to tap emerging markets.
But "these investments are not enough," notes Udhas pointing to global successes like IBM and Accenture. He adds, "India firms need to take a cue from multinationals like Microsoft and IBM who have committed significant investments in local markets".
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