Profit on decline for BPO and IT Players: CIBER and PwC Survey 2011

October 12, 2011: Indian service providers are under stress. 

The survey report by Duke University Center for International Business Education and Research and PwC has come up with some key findings, according to which the Indian based and US IT  service providers has to be more conscious. The survey was conducted between 620 service provides. Total 50 countries were selected and service providers in each country which deals with clients across the globe were selected for the survey.

One of the major findings by the CIBER survey was the profit margin of almost every service providers included in the survey is in a declining stage. It is in the 2009 and 2010 financial year the companies had to face such crisis. The report stated that the average profit has declined to 18 % in the year 2010, which was around 23 % in the very previous year.

According to the survey the profit margin of Indian service provider has been influenced my many factors directly and indirectly. One of the major factor was that sue to economic downtrend any many domestic issues some of the US based clients shifted from India to the nearshore which is calculated to be 5 % only. Moreover around 2 present shifted back to US from India. This trend ended up in more Indian service providers to shift their operations from offshore to nearshore outsourcing market, which ultimately has affected the overall IT outsourcing activities in India. It is calculated that in the year 2010 to 2011, the new contracts in the IT sector has been decreased to around 60 %.  

This down trend is obviously considered as a threat for the Indian Business process outsourcing sector. Moreover emerging near shore companies is ready to tap this opportunity. According to the response of various respondents participated in the survey, the major factor which should be given emphasis by the service providers is to enhance workforce skills and trainings and also enhance customer service. Moreover the service providers should also increase the depth of industry knowledge so that they could attract more clients and customers towards them.

The report ended up with the suggestion that Indian service providers must take more steps to enhance the business. It is high time that vendors should come out of the frame work of cost effective service providers and get into value added relationship with the clients. There is still a huge scope available in the outsourcing market and Indian service providers have the potential to utilize the scope.   

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