Offshoring Slowdowns Are Heating Up

The United States is not the only country affected by economic slowdown and chaos in its credit markets. Countries around the world are feeling the domino effect, particularly India and other nations highly reliant on outsourcing as an industry. At CPS, we've noticed a significant slowdown in the use of offshore IT talent.

Because the Indian rupee has recently been much stronger against the weak dollar, the resulting savings from hiring an Indian programmer is not as great as it was even a year ago. In turn, U.S. firms are closely monitoring the convenience and ability to oversee IT projects with outsourcers; some are deciding that outsourcing simply doesn't provide the same benefit that it used to and are turning back to domestic IT talent.

Even for those organizations that still use outsourcing, budgets are being reduced. That pinch hits Indian outsourcers at the top line of income, and the lower billing rates that many U.S. firms are demanding are squeezing even more profit out of the bottom line.

Thus, the outlook for the Indian technology sector is relatively uncertain. Although use of offshore talent does continue, several major Indian IT organizations are reporting lower-than-expected earnings and are warning investors of a cautious outlook for the near future. Even some of India's top software companies, including the ones who are reporting increased earnings, are remaining cautious; the market looks to the future, and the news from the U.S. financial and housing markets isn't expected to improve for some time.

Ultimately, such changes could spell improvement for domestic employees. With more work being kept in-house to contain costs and maintain control, U.S. workers are less likely to lose their jobs to foreign outsourcing firms.