Offshoring on the increase: TPI survey

BANGALORE: Offshoring is on the rise, reveals Sourcing Advisory firm, Technology Partners International (TPI) index for the Q2 2005. Around 45 per cent of all the TPI advised contracts this year are for offshore projects.

However, Siddharth Pai, partner and MD, TPI Advisory Services India, said that among BPO contracts, there is an uptake in companies setting up captives in an offshore location.” They are offshoring but not necessarily outsourcing to a third party provider.”

HR outsourcing emerged as the leading segment in BPO during the first half of 2005, the survey said.

This quarter saw around 54 signed contracts valued at around $15billion. In H1 2005, deals worth $28.5 billion were signed - a 13 per cent decrease from $32.9 billion recorded in the same period last year. However Pai is confident that the number of deals would go up subsequently.

The index reports a slump also in the mega deals (deals worth over a $1 billion) space. Contrary to market sources, which say that customers prefer best of breed service providers rather than a single source for all projects, Pai said that mega deals were not dead yet.

“This year, we have advised on seven mega deals with total value of $13 billion, so far compared to around 14 mega deals in 2004,” he said.

The broader market is growing slower than before this year owing to a lot of restructuring around existing contracts. “Most of the contracts that were signed are older than offshoring itself. There is a lot of global service delivery which is going on which is why the new contract volume is not very large,” said Pai.

Pai also said that MNCs, which are bullish on offshoring, are focused on expanding their activities not just in India but also in new geographies. He is confident that Indian service providers will see an increase in greater value deals in the coming quarters.