Indian trade group forecasts outsourcing services recovery

IDG News Service - India's provision of outsourcing services to other countries will grow by 12% to 14% in the fiscal year starting April 1, a trade body predicted Tuesday.

Demand for outsourcing services has been slowly picking up, according to analysts. Top Indian outsourcing companies including Tata Consultancy Services and Infosys reported better revenue and profit growth in the fourth calendar quarter of last year.

The National Association of Software and Services Companies (Nasscom) now forecasts that India's exports of software and services will be between $84 billion to $87 billion in the Indian fiscal year from April 2013 to March 2014.

Exports are expected to reach $75.8 billion in the current fiscal year, a year-on-year growth rate of 10.2 per cent, Nasscom said.

Analysts have forecast an improvement in India's outsourcing industry, which was hit for many quarters by shrinking budgets and a slowdown in decision making by customers in the U.S. and Europe.

The offshore market for outsourced services is expected to grow by 12% to 15% this year, as more customers are expected to increase IT spending, according to research firm Offshore Insights.

But to bag the new business, companies will have to move from a revenue model that is largely dependent on the number of people working on a project to one that is based on intellectual property and replicable processes, outsourcing executives said.

Customers also prefer that their suppliers are located close to their operations in key markets in the U.S. and Europe, which will require larger expenditure on setting up facilities and local hires in these countries, said Ashok Vemuri, head of Americas at Infosys, during a recent interview.

John Ribeiro covers outsourcing and general technology breaking news from India for The IDG News Service. Follow John on Twitter at @Johnribeiro. John's e-mail address is john_ribeiro@idg.com