| How the financial crisis will affect the outsourcing industry |
| IN ONE respect it has been a record couple of weeks for "outsourcing". Around the world, governments and taxpayers have agreed to help ailing financial firms offload their toxic loans and resolve their liquidity worries. Banks are not the only ones hoping that this will help keep them afloat. The multi-billion-dollar outsourcing industry that runs computer systems and other things on companies' behalf is keeping its fingers crossed, too. After all, financial giants have helped drive the industry's stellar growth in the past few years. Now they threaten to undermine it.
Huge outsourcing deals involving banks are still being done-on October 8th Tata Consultancy Services (TCS), a big Indian firm, announced a $2.5 billion, nine-year deal with America's Citigroup-but they are getting rarer. TPI, a consultancy which tracks outsourcing deals worth over $25m, says that in the first nine months of 2007 financial-services firms signed 132 such deals, worth a total of $17.9 billion; in the first nine months of 2008 there were only 101, worth a total of $10.8 billion. |
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France Télécom has released its financial results for the third quarter of 2008 and, unlike most companies, it believes that the financial crisis has had almost no effect of the crisis on its business. In fact, it is sticking to its predictions until the end of the year. |
| Gervais Pelissier, CFO of France Télécom said in a conference call: |
| "We see no sign of slowdown in our activities related to the economic and financial crisis. Our revenue growth in the third quarter of 2008 has been lower at 2.3% as we had predicted. This is the consequence of several regulatory decisions and of the new way of subsidizing the iPhone, but we are still set for compound revenue growth of 3.4% for the first 9 months at €39.85 million." |
| Financial Crisis Not Affecting Technology Sector |
| The good news is: 'The world has capital coming out its ears'. The even better news is that the guy who said that is the CEO of the Silicon Valley Bank Financial Group, which knows more about the finances of the UShigh-tech sector than anyone else. The CEO, Ken Wilcox, reckons the crisis in the financial industry has not affected the technology industry, or not yet, and that the credit crunch has not affected lending in the high-tech sector. "There is no visible impact of any significance on the technology community or the community of venture-backed companies in the United States," Wilcox told the New York Times recently. The reason for that is, apparently, because VC-backed companies don't depend on the financial services industry or the housing market. Silicon Valley VCs have remained able to raise large funds e.g. Sequoia finished raising $930 million earlier this month. The downside is that the IPO market is shitty. And the ultimate downside is that the crisis may break out of the financial sector to engulf us all. Which raises the question: If the crisis engulfs and impoverishes us all, will the financiers still get their bonuses that year? Source:http://www.electronicsweekly.com/blogs/david-manners-semiconductor-blog/2008/09/financial-crisis-not-affecting.html |
Heaven knows it's hard to be upset about merchant bankers losing their jobs, but the so-called "credit crunch" has now turned into a much more serious crisis of the banking system as a whole. Given the banks' centrality to capitalism's market economy, a serious recession is now very much on the cards. Massive exposure to the tottering pyramid of debt associated with the "subprime" mortgage market and other scams means that the banks have pretty much stopped lending to each other and other businesses. This makes collapses and closures much more likely, with the appalling knock-on effects that these can have, as one set of workers losing their jobs and their pay packets affects demand for other firms' goods and services, all the way down the line. It's extremely difficult to predict what will happen next, but the impacts on working class people's lives are likely to be significant.
We can already catch a glimpse of the possible trajectory of events with the latest figures for employment and unemployment. These show employment falling significantly for the first time in many years (albeit from record highs) and unemployment rising sharply. Employment fell by 122,000 between June and August, while the claimant count (the numbers in receipt of unemployment benefits) rose by nearly 32,000 in September alone. It's worth pointing out that the previous month's claimant count figures were revised upwards from 32,500 to 35,700, and September's figures could yet be revised up as well.
Is the financial crisis affecting your offshoring decisions?
The Duke University Offshoring Research Network (ORN) requests your expertise (both buy-side companies and service providers) to take a three-minute survey . Respondents will be provided with the complete analysis.
Link to survey:
http://duke.qualtrics.com/SE?SID=SV_3U8JSQWp9VxLsc4&SVID=Prod
In the wake of the financial crisis and in response to many requests, Duke ORN is conducting a *Snapshot Survey *of how the current economic situation might affect companies' offshoring decisions. The survey will provide us with valuable data to share with you. The survey will close on November 17th.
For five years, the ORN has been collecting, updating and analyzing firm and project level data on offshoring drivers, risks, location choices, delivery models, outcomes and future plans in functional areas such as IT, software development, customer service, finance & accounting, legal services, human resources, engineering and product development. In collaboration with partner universities in Europe and Australia, the project has been extended from the U.S. to companies from Germany, Spain, Belgium, the Netherlands, Scandinavia, UK and Australia. More than 1,600 companies have already participated in this important research project. Please find more information and research highlights on the links listed below.
Offshoring Research Network homepage: http://offshoring.fuqua.duke.edu
Research FAQ: https://offshoring.fuqua.duke.edu/faq.jsp
Past Research Highlights: https://offshoring.fuqua.duke.edu/research.jsp
Best regards,
Jeff Russell
Director of Research Operations
Duke University Offshoring Research Network, Fuqua School of Business
jrussell@duke.edu
919.660.4099
Check answers at: http://www.linkedin.com/answers/international/offshoring-outsourcing/INT_OFO/361735-13955030?browseCategory=INT_OFO
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