February 15, 2012: Even though the Information Technology budgets for 2012 may be flat or even decline, there is enough space for the Indian IT service providers for breath as the share of off shoring in the overall budget is increasing.
The amount of work off shored is of great importance for the outsourcing service providers in India as it determines the quantum of outsourcing work that contributes to the revenue of the Indian service provider. Sources from the industry and analysts say that share of off shoring in the IT budget of most of the international clients has been on the rise for the last five years or so.
V Balakrishnan, Chief Financial Officer and Board of Member of Infosys, is of the opinion that the clients have not finalized their budgets and that they might be flat or even decline. He added that Infosys considers the component of off shoring in the budget as important rather than allocating a total budget for off shoring. Balakrishnan observes that the long term relation with the clients will help them in understanding the amount that the clients are going to spend and the share of off shoring in the budget.
The customers across the globe make use of services provided by either the local service providers or the offshore service providers for various functions associated with Information Technology. In addition to this, they also perform part of their IT/BPO works with the help of captive centers located in the same country or in offshore locations.
Most of the estimates made by different organizations show that the budget for the current year of majority of the organizations across the world will be flat or even decline. Most of the leading Information Technology service providers in India had said that they do not expect much of revenue growth in 2012. This was as a result of the negative sentiments from the part of the clients.
Gartner which has announced the projection made on the IT spending in 2012, has lowered the percentage growth in the spending that it had projected to 3.7%. The projection made in the beginning was 4.6 per cent.
It is widely accepted that the increase or decrease in the IT budget will not affect the Indian IT and BPO industry as more work will be off shored by the clients in an attempt to cut cost during economic uncertainties and thus improve efficiency. And since India holds 60 per cent share in the global IT and BPO industry across the globe, the present condition is expected to benefit the Indian IT/BPO service providers.