Wipro (NYSE:WIT) has announced plans to open two new centers in the US, has already started a new center in Malaysia, and is studying locations in the UK for its expansion plans for several hundred new jobs.

Even as talks of a slowdown in the US and ensuing global recession hit capital markets, and the rupee-dollar ratio shows no signs of an immediate improvement, the larger outsourcing companies in India continue to grow unabated. Alongside Wipro, TCS too has announced a center in the US and has plans to invest in a new center in Thailand. Business process outsourcing company WNS (NYSE:WNS) opened a center in Bucharest earlier this year. Infosys (Nasdaq:INFY) has opened its first subsidiary in Latin America. Cognizant is planning centers in Hungary and the Philippines.

Making hay…
Predictions about the impact of the global slowdown ranges from the highly pessimistic doomsday scenario for Indian outsourcing vendors to optimism about the slowdown leading to a deluge in offshore business. More practically, outsourcing is expected to be unaffected in the medium to long term, albeit in the short run there are fears of delays in orders, budget cuts, pricing pressure and even lay-offs. Notwithstanding the anxiety, the large, financially strong Indian companies expect to counter the short-term hiccups and are already thinking beyond that to exploit the situation to their advantage.

For instance, this seems to be a good time for furthering global delivery capabilities, and moving ‘nearer’ to clients in the US and Europe. Two of the largest Indian outsourcing companies – TCS and Wipro - have announced operations centers in the US and will benefit significantly from the weaker dollar against the rupee. Companies are committing to employ local professionals, allaying fears about jobs moving offshore. Interestingly, the new employees of Wipro will undergo training in India before being committed to the US centers. Moving ‘onshore’ is providing the opportunity to climb higher up the value chain, with ‘sensitive’ or complex processes (with relatively inelastic prices) being provided onshore. Further, cost pressures are raising the demand for ‘transformational’ projects, which are better serviced onshore.

The prospects of a slowdown, led by recessionary fears are also making valuations attractive for those seeking inorganic growth. Wipro is planning acquisitions in Germany, to add to its strength of around 7,000 people in Europe. Genpact too is scouting for acquisition opportunities in India, US and Europe.

Companies are tapping newer avenues within emerging markets such as India, Australia, Asia Pacific and the Middle East to de-risk their business geographically. The global plans of Indian outsourcing companies are additionally serving to take some load off their heads in India – where salary growth, attrition and shortage of talent, coupled with high real estate prices are putting pressure on margins.

Going forward
Although companies are doing a lot to safeguard their position in the event of a slowdown, the overall emphasis across organizations is likely to be on delivering high performance and efficiencies. Integrating global delivery centers and acquisitions is cost-intensive and companies will definitely not like this to be a further drag on their balance sheets in these uncertain times.

ValueNotes Outsourcing Watch: Insights for Investors is a unique news and analysis service from the ValueNotes Outsourcing Practice, focused entirely on outsourcing; This weekly publication analyses events in outsourcing, outsourcing companies, trends in the sector, impact of global competition from offshoring to established US companies, and emerging investment opportunities.

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