Recession-hit Uk Spurs European Companies Into Offshore Outsourcing It Development
Plunging into its first double dip recession since the 1970s and what is being touted
as the 'biggest fiscal squeeze' since World War II, the UK seems to be staring down a deep, grim economic abyss. With the GDP shrinking by 0.2% in the first quarter of 2012 itself, UK's double dip recession will definitely impact economies across the world, and in Europe in particular. Can offshore outsourcing (as opposed to nearshore outsourcing) be a great bailing out option for everyone concerned?Recent figures indicate the direction in which the wind is blowing, almost as though it had a premonition of the things to come. Outsourcing activity picked up speed in the private sector in the UK, with 15 percent more contracts being signed in the last three months of 2011 alone than in entire 2010. Obviously, larger volumes of work were being outsourced since the total value of these contracts was 40 percent higher than the preceding year.
Similarly, Europe seems to have taken to outsourcing in a big way, if recent figures are anything to go by. Latest figures on the Information Services Groups (ISG) TPI index showed an interesting trend. Europe spent a whopping 27 percent more on IT and BPO outsourcing in 2011 than what it did even in 2010. On the whole, European outsourcing contracts crossed 44bn in 2011, out of which BPO and IT contracts alone were estimated to be over 20m. What's more, the year 2011 also saw Europe grabbing 60 percent of the total global outsourcing contract value, with as many as 8 out of 10 mega contracts valued at over 800m in Europe alone.
With the UK hit by a double dip recession again, European countries are now viewing outsourcing with more and more favourable eyes. And nearshore destinations are now increasingly giving way to remote offshore destinations like India for software development projects. Incidentally, the Americas and Europe are the largest customers of the Indian outsourcing industry and account for 60 percent and 31 percent, respectively, of IT and BPO exports, with the latter figures on the rise.
The trend in Europe is now moving away from nearshore destinations to remote offshore destinations like India, China and the Philippines.
Here's a look at how outsourcing has impacted European countries in the past two years.
Austria
There has been a growing demand for IT outsourcing from niche segments like mobile computing and the digital media.
Denmark
IT-centric start-ups and the burgeoning SME sector as well as other industry segments such as finance and construction have also made their forays into outsourcing. In fact, several Danish businesses fell back upon outsourcing to help them tide over the earlier recession of 2008. However, so satisfying was the experience of saving on operational costs while enhancing business productivity at the same time that they haven't stopped outsourcing since.
Finland
Most Finnish companies that outsource do so in the fields of IT development to reduce their operational costs, with most of them enjoying savings ranging between 15-40 percent on their operational costs.
These countries were primarily outsourcing to nearshore destinations but of late have started exploring far off offshore destinations such as India and the Philippines. More and more projects involving software development, ecommerce designs and SEO are being outsourced to popular Asian destinations like India, the leader in IT outsourcing and likely to dominate the market for the next ten years as well, as per analysts' research findings.
India has been universally acknowledged as the hub for IT outsourcing, thanks to possessing the world's largest technical talent pool of qualified, English-speaking professionals. Besides boasting excellent infrastructure that is constantly being developed and honed, the IT outsourcing industry in India enjoys a strong government support. Finally, India has one of the stablest democracies and one of the fastest growing economies in the world, making it the safest destination for offshore outsourcing. So, more and more European countries are outsourcing software development, programming, web development and other IT-centric projects to India and following the trend set by their American counterparts.
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