Offshore Outsourcing and its Relative Value to growthThursday, January 19, 2006
When we read reports of various consulting firms of Offshore Outsourcing, we normally think on which terms and factors do these reports analyze and how the strengths and capabilities are interpreted. But eventually if one has to start the Overseas process as one of the business, these reports help them to begin their never-ending journey. Readers have interpreted the study that IT India Software and BPO sectors of India are soon going to overtake in Offshore Outsourcing fields when compared to the counterparts of Western Countries. The research reports have understood and studied the gap between the opinion and the intention of their study.
When the consulting firm released a report describing the metrics called the Relative Value of Growth to Offshore Outsourcing, various readers reported with their own understanding and views on the reports as to how they understand and interpret the report. Readers were of the renowned business firm who are intended to grow in Offshore Outsourcing business.
The findings found that the applications of the software competitive positions of the Indian IT and other Outsourcing companies and overseas ones are not predicting one of the winning and losing situation to the Western Countries but it is a basic metric that reflects the way the markets perceive. These software outsourcing companies are driven to growth and margin-driven.
Wipro being in the list of Top Software Companies in India have a strong potential to grow profitability. They still have to execute and have to face some real challenges like in terms of consulting capabilities. Whereas the Texas based company that provides business process and information technology outsourcing is concluded to be a better performer when compared to other Offshore Outsourcing. So India Software still needs to improve and go smart way to become potential winners in the space.
The Relative Value of Growth at Offshore Outsourcing speaks about the fundamentality that does take a current company’s market value as a starting point. The growth rate of the Outsourcing companies is built in the stock-price and using this as a point of departure, measurement of additional shareholder value versus a point of margin. This is a very big task for many Indian companies and this can only show that the market is seeing high growth rates. Now the calculation comes to that of the embedded growth is not nearly as high as the recent growth rates because of the long-term growth rate. There is a composite assessment when looking at the market capabilities, about the product, their customer relationship and strong incentives given to the workers to motivate them and smart things to reinvest in their own firms as well as being a minimal-cost supplier for the customer segments that value.
Offshore Outsourcing companies should have the ratio of capital expenditure to labor expenditure that tends to get reversed when compared to Western corporations. IBM lives on its labor expenditure because of its wage structure whereas the Infosys, one of the Top Software Companies in India has cost of capital in some ways not cheap. Which is why India Software Company has to rely on equity markets and their performance is so important.
The second aspect of Offshore Outsourcing companies is the fiber optics and access to high-intensity capital terms is not cheap in India. A control on capital will help the India Software and other Offshore Outsourcing firms will help them from being handicapped.
Software Company based in the US, seems to have some shift. They don’t think as they are originated as Indian companies, whereas they think and act in terms of globally now. So it’s not just US companies who have taken to arbitrage but Indian firms small and big in the Western Countries are starting to think on the similar strategies. So the labor arbitrage will be strong enough to override the capital component.
One of the study by researchers have shown the fact that India Software Companies have a challenge to understand what their value added is as other companies start to see the value of moving their costs down. At that point, Offshore Outsourcing needs to think differently about their own business models and business capabilities. At this point India Software has to reassess the capital spent.