* Big outsource firms in India rake in cash
In case you had any doubts about the offshore outsourcing market, India’s No. 1 and 2 outsourcing giants, Tata Consultancy Services and Infosys Technologies, announced almost unbelievable growth numbers this quarter.
TCS, based in Mumbai, said that second-quarter profit rose 52%, beating market estimates. The company reported that its July-to-September profit rose to 5.76 billon rupees, about $120 million, with revenue rising 44% to 24.3 billion rupees, or around $500 million. The company also said that it hired 3,974 employees and that its total headcount is approximately 41,000 people, and it added 42 clients during the quarter. The company is well on the way toward its goal of becoming the first $1 billion outsourcer. TCS also raised $1.2 billion in a record Indian IPO in August, giving the company a large cash position.
Infosys Technologies, based in Bangalore, reported similar gains, reporting that its second-quarter profit rose 49%, to $97 million, on revenue that rose 51% to $379 million. The company also reported that it added 5,010 people during the quarter for a total of 32,949 employees. This means that the company hired nearly as many people in one quarter this year as it added in the entire year previously. Infosys also announced that it plans to add yet another 4,500 people over the next six months.
The total Indian technology export market is estimated to be $12.5 billion, with predictions of growth to $50 billion by 2009. There is, however, increasing competition from other countries, including China, which may limit this growth.
After reading this news, I have to wonder how these companies are managing those growth rates. How does a company hire 4,000 to 5,000 people in a quarter, get them trained, and still maintain (and even increase) profit margins, while continuing to deliver a quality product? After all, we’re not talking about assembling widgets here – a large number of these jobs require highly trained, qualified personnel.
I think the answer is clear – many of the people being brought on board are quite likely receiving minimal training before being converted to a billable resource. It doesn’t hurt that these people get paid on average a fifth of their U.S. counterparts, but I still have to wonder how these companies are going to keep up the pace over the long term without losing customers due to poor service.
In the coming weeks, I will attempt to cover both sides of the Indian outsourcing market, including an interview with the CTO of one company that has had great success with its Indian outsourcing endeavors. I am also trying to locate another company that has not been as successful – if you or someone you know would like to go “on record” and discuss a failed Indian outsourcing project, I would love to speak with you and feature your story in this column.
I welcome your ideas, suggestions and comments on the subject of outsourcing; my e-mail address is below. Thanks for reading.
