Top Indian Outsourcers Drop Prices, Welcome Japan - InformationWeek
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3/6/2009
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Bob Evans
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Top Indian Outsourcers Drop Prices, Welcome Japan

India's largest outsourcers are dropping prices by up to 20% as financially challenged global customers "renegotiate existing contracts and award new projects at much lower rates," says the Economic Times. Tata, Infosys, Wipro, and HCL have been or are discussing such rate adjustments with high-profile corporations in financial, retail, automotive, and telecom markets -- read on for some of the names.

India's largest outsourcers are dropping prices by up to 20% as financially challenged global customers "renegotiate existing contracts and award new projects at much lower rates," says the Economic Times. Tata, Infosys, Wipro, and HCL have been or are discussing such rate adjustments with high-profile corporations in financial, retail, automotive, and telecom markets -- read on for some of the names.British Telecom, Bank of America, Citibank, Visa, Best Buy, Applied Materials, and Nissan are among many companies looking for cost savings from their India-based IT services partners as the global recession is forcing CIOs to pursue brutal cost-cutting campaigns across their organizations. As the Economic Times notes:

"The biggest fall has happened for high-end services such as consulting, from over $60 per hour earlier to around $40-45 on an average," said Sabyasachi S Sathyaparasad of Mindplex Consulting, an outsourcing advisory firm. "The rates could fall by up to 20% in the coming few months, but should get stabilized after that," he added.

The article claimed that in the past six months, India's top five outsourcing companies have lowered prices by about 15% on various deals with a combined value of about $1.5 billion. However, the article didn't substantiate that claim or identify the source for those figures.

At the same time, the Indian outsourcing market could stand to benefit from another repercussion of the global recession as a number of Japanese companies, which traditionally have not done much work with Indian IT services companies, are turning to those providers as relentless financial pressures force the Japanese firms to find lower-cost alternatives for parts of their IT operations.

A separate Economic Times article described the unfolding interconnections between Japan and India:

Troubled automakers Toyota and Nissan are putting out outsourcing deals worth $100 to $200 million each, while Japanese electronics majors are augmenting their existing contracts as they look for more cost-effective ways to maintain and support their global IT systems... .

"Most of the Japanese companies have been doing smaller, project-based outsourcing to China and elsewhere. If they want to lower their costs by $100 to $200 million over the next few years, they will have to look at India," says a Japan-based outsourcing consultant, who did not wish to be named as he advises Japanese firms on outsourcing decisions.

In addition to Nissan and Toyota, Toshiba and Sony are other Japanese companies said to be looking to negotiating IT services deals with Indian firms. This development offers one more indication of how the recession is forcing companies to seek out unprecedented new approaches to where they do business, with whom they do business, and how they look to optimize global resources for maximum returns.

And because these new and perhaps unexpected alliances forged in fairly desperate times are likely to remain in place when better economic times return, global CIOs would be wise to keep very open minds about innovative types of partnerships that might very well provide new sources of value in not only the short but also long term.

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