Now,US SMEs to fuel Indian outsourcing
April 14th, 2008A recession in the US may now be real and official. But irrespective of the downturn,Indian tech enterprises have some reasons to smile. A new breed of outsourcers are emerging in the US, who could help Indian providers to offset some of the impact of the recession on their businesses.
These are the thousands of small and medium enterprises that are increasingly waking up to cash in on the outsourcing wave, market opportunity explored by their big daddies for a couple of decades now.
SMEs in the US are under severe pressure to increase profitability and business margins. This will force them to outsource and even have M&A arrangements with Indian firms. India is going to be a great beneficiary of this trend.This will substantially offset or minmise the impact of the US recession on Indian industry, said Adam Larkely, partner at Wolet Capital Corporation, A New York based investment banking firm.
By March 2008, India had received SME outsourcing deals worth $7billions from the US as against $6.2 billion in the previous year. This is expected to be $8 billion by March 2009 and $11 by March 2010. The total outsourcing from the US by that time would be $54 billion.”
Almost every Fortune 500 firm and other major companies already outsource major companies already outsource by India. By mid this year,hundereds of small US firms are expected to evince snterest in outsourcing engagements with Indian partners. It will gain momentum during 2009 while a expected from 2010 onwards, said Avinash Vashishtha, managing director, Tholons, an investment, advisory and research firm.
SMEs account for 80% of the US industry in terms of volume. The US Currently has around 20,000 small and medium firms in the revenue bracket of $2 million to $500 mn; 6,000 companies in the %500 mn to $2 billion and another 3,000 in the $2 bn to $5 bn category. The country has around 2,000 firms with revenues of %5,billion and another 1,400 companies in the $5 billion to $10 billion bracket.
Outsourcing by a large army of these companies will definitely reduce the impact of the US recession in Indian players, In fact, this additional flow of outsourcing will give a cushioning effect to the domestic industry. said S sabyasachi, senior director, neoIT, an offshore advisory firm.
