'Indian mkt counterbalancing global dismal mood'

Suddenly, there are new regions on the world map shining as the next destination of delivery and business.

Suddenly, the oft-used regime of multi-billion dollar deals or multi-sourcing deals have come under a re-look. And suddenly, Indian CIOs find themselves rubbing shoulders with foreign names, as they pick their lessons and strategies amidst a recession-battered economy.

Anupam Govil, CEO, Global Equations, a global sourcing advisory firm that advises buyers on vendor-wise or region-wise on-sourcing strategies on one hand and service providers on M&A, or market entry strategies on the other, shares some of the recent crumbs of market trends and future direction in this chat with Pratima H.

Has slowdown swept the old-world order completely for a new one?

It is, in fact, very interesting to see how downturn has played out and impacted different stakeholders of outsourcing. Governments specially are in a paradox, for they cannot ship jobs abroad amidst all the massive job layoffs, and at the same time, cannot afford to be seen as anti-globalization. For companies, it’s important to take a long-term approach at this point, and also make sure not to be seen as actively outsourcing.

How has the game changed on the providers’ side?

The growth rates have come down sharply. They had to tighten their belts and reduce bench strengths. But counteracting that has been the erstwhile factors of cost of hiring, retention headaches etc that, in a way, has restored balance between supply and demand.

Other countries and regions are seeing this as a good time to establish a foothold in the outsourcing ecosystem. Also, companies are feeling more comfortable in keeping their processes closer to home and that has resulted in heightened awareness in regions like Caribbean, South and North America.

Similarly in the Middle East (ME), which has been a little countercyclical to slowdown, the impact of downturn has not been that hard and yet the market is opening up like never before.

It’s a dual play field now, especially for Indian IT vendors, as they can explore it both as a market and as a provider space. We can see the ME as the next global frontier for both providers and outsourcers. It’s still at an early stage though and some hand-holding before they hit the next stage, would not be bad.

So we are witnessing new regional dynamics next?

Now would be the time for slowly transforming into a location-independent service provider in a fresh global scenario, as a true global company. Regions like Caribbean, Jamaica of course are emerging too.

Are Indian companies taking the right path with all the change around?

Indian firms have been more aggressive, more intent but when it comes to execution, they are still shying away from large deals.

What’s your view on Indian CIOs, their strategic maturity and their appetite?

Indian market is counterbalancing the global dismal mood. We see firms ready to outsource entire functions like HR, F&A and even ready to virtualize as they digest higher growth. In fact many international outsourcing firms are now looking inwards for this market. Yet, most enterprises prefer niche, smaller deals with a wait-and-watch attitude that is dominant. We have started to see a pick-up though and hope that Indian firms would get more aggressive.

Would multi-sourcing or big-ticket deals go the obit route now?

TPI has clearly hinted a downtrend in large-deals. Yet multi-sourcing will continue as companies will now be more alert to risks and would opt for bigger diversifications. Managed services are a high growth area.

How would captives be affected in all this re-shuffle?

The whole concept is under a question mark. We have seen big banks exiting their captive operations. With the recent changes in tax implications for captive operations there would be an accentuated attention. But there would also be a possible IP view.

Is the M&A action, resulting from the changed order, adequate and timely?

Because of dip in valuations, it is an opportune time. Decision making and organic growth has slowed so achieving growth targets and building key competency gains would call for more deals. Those not so cash-rich will exit while mid-sized firms will grow through acquisitions. M&A would be for geographical expansion, for topline growth and for getting niche capabilities.