Thursday, September 08, 2005

Market resarch getting outsourced

Someone sent me a news story that highlighted a report by New York-based Katzenbach Partners. Report said that India-based IT outsourcing companies are much better positioned to serve clients than their US counterparts. The researchers added that Indian outsourcers could one day unseat US giants such as EDS, UIS and ACN.

I don't know how detailed the report is and what kind of primary research these guys have conducted. But any one with basic economic knowledge could have figured out the conclusion. You have a basic differences in cost which US giants can not compensate for even with setting up shops in lower-wage countries, like India, China, or Philippines, as their high-margin overhead remains in US dollars. I believe the differentiation is in the level of service, or perceived service, which continues to narrow.

The research also throws up some interesting facts. Eighty percent of all outsourcing deals fail in the end. Once the initial excitement of the first two years wears off, the performance of the contract in the third and fourth years becomes crucial. The researchers say that while IT companies pull their best staff off a contract in the third and fourth years and re-assign them, Indian companies are better positioned to handle the transformation and train the new team of workers. Where is Ross Perot when you need him?

It's also feasible that one day research like this will be outsourced, did they mention that in the report?


Blogger RichL said...

UIS had poor 2Q results. My impression was that the buyers of services have seen prices come down due to outsourcing done by all of the domestic competitors, but held off buying due to uncertainty as to what the correct, or ultimate, prices will be. Outsourcing is already being done by the US based companies. There is a value to having a locally based contact person that is aware of the customer's culture and business.

If not, that raises the question- Will all financial blogs eventually be outsourced?

5:48 PM  
Blogger Slash said...

Perhaps all financial blogs will be outsourced-- but I really doubt it since we dont write for money. There is no economic loss by keeping us "in house".

9:09 PM  

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