Generally speaking the environment is more risky and the attitude is wait and watch for outsourcing and offshoring, agrees Ashok Bardhan, Ph.D. and senior research associate at the UC Berkeley Haas School of Business.
Bardhan, co-author of a Berkeley research report, "The New Wave of Outsourcing," which was published in 2003, says that while in the aftermath of the 2000-2001 dot-com bust, offshoring got a boost from companies needing to cut costs, the severity of this recession means that there is simply less IT work to do. "Existing offshoring arrangements have seen some cutbacks as a result of downsizing in parent operations," he says. "This time around, the fact that there is major restructuring in addition to retrenchment means the picture is more complicated."
Ultimately, though, offshoring still offers an enticing cost-benefits scenario that cash-strapped CIOs will need to consider for project work in 2009 and 2010. "You can save at least 50% on something like application development," remarks Umair Memon, an Indian national who has been in the United States for 13 months, and works in operations at IT staffing firm Catalyst Systems, in Princeton, New Jersey. And, companies that can leverage relationships and volume are getting even better deals, from providers around the globe. "We are now seeing 5 to 20 percent discounting on IT offshoring," says Bendor-Samuel, who notes that cheaper unit costs does not usually mean lower quality today, because of high unemployment. The Economic Times also reported that top Indian tech firms such as TCS, Infosys, Wipro, and HCL are discounting by up to 20 percent on offshoring.
Those services that have the best potential for growth include continuous projects such as application maintenance, which deliver a significant cost advantage through offshoring, according to Bendor-Samuel. Indian companies have a large pipeline for such work now, he says, and are merely waiting for US executives to pull the trigger.