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Indian players and global multinationals, which have outsourced their information technology (IT) businesses, are opting for short-term negotiations
Indian players and global multinationals, which have outsourced their information technology (IT) businesses, are opting for short-term negotiations with vendors rather than going for rebidding since the change costs are prohibitively high.
In the US alone, there has also been a 60 per cent year-on-year (Y-o-Y) drop -- from $24.1 billion in 2006 to $9.7 billion in 2007 -- in the total contract value (TCV) of contracts awarded. The Y-o-Y drop was greater in the Business Process Outsourcing (BPO) industry at 36 per cent as compared to the IT outsourcing industry's 19 per cent for the same period.
The decline in the number of outsourcing agreements, and relatively-soft outlook for 2007 "is driven by the fact that offshore tasking is considered a preferred alternative to outsourcing among corporates," according to a new TPI report. The reasons for increasing offshoring among corporates include the labour arbitrage focus which is compensating for overall decline in commercial outsourcing. Also the complexities of managing outsourcing contracts and often-unfulfilled expectations of receiving benefits beyond cost savings -– such as those from innovation and operational transformation -- is driving corporates to take to offshoring.
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