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News Release

Sep 30, 2008

IT Outsourcing trends

In 2008, the world IT market is expected to grow by 9.5% reaching 819 bln USD by the end of year, and surpassing the mark of 1 trln USD by 2011, reports Gartner. IDC writes that the IT market of Asian emerging economies (Bangladesh, Sri Lanka, Pakistan, Malaysia, Thailand, Philippines, Indonesia, Vietnam, China, and India) was worth $96 billion in 2007 and is expected to reach nearly $144 billion by 2011. It is equivalent to 25% of the Western European IT market.

However, the current economic trends pose big challenges to India. The slowing of growth of Indian IT companies is now in focus, and there have been discussions of the possible decline of the Indian IT service providers. The Indian major companies are reporting slowing growth, triggering speculations about the fate of Indian IT services market. For example, the profit growth rate was 18% in 2007 against 56% in 2006 for Infosys, and 11.6 % in 2007 against 42.3% in 2006 for Wipro. The net profit of TCS increased just by 4.9% in Q2 2908 compared to 37% in Q2 of 2007. The three companies provide similar services, have similar target market and business models, and the slow-down is caused by the U.S. financial crisis, drop in the U.S. dollar value against the Indian rupee, as well as high inflation and rising salaries in India.

Russia’s contribution to the global statistics remains modest, but there are reasons to think that drastic changes lay ahead. According to the IDC estimates, Russian IT market volume grew by 47.2% up to 4.4 bln USD over year 2007, which is less than 1% of the global market. However, the 2007 growth rate is twice higher than the 2006 rate.

The IDC forecast for 2009 predicts an increase in the growth of the Russian IT market, and the market volume of 8 bln USD, i.e. twice as much as the current figure. For comparison, Gartner forecasts only 14.3% growth for the Indian IT market by 2012. The analysts have also mentioned the increasing transparency of the Russian IT market, linking it to the “civilizing” government policies. According to the recent report of Economist Intelligent Unit and Business Software Alliance, when it comes to the competitive ability of the Russian IT industry, Russia solidly ranks between India and China.

The outsourcing companies around the world will have to offer innovative and cost-effective service strategies to attract customers. Growing competition will force companies to adopt new views on business expansion, increasing revenue per employee instead of increasing total number of employees, and one of the key success factors is developing better talents management strategies.

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