For the first time in recent memory, outsourcing projects in the United States, a major source of business for Indian software and services companies,are likely to fall from the previous year, predicts Forrester Research.
Forrester estimates companies based in the US will be outsourcing $64.5 billion (Rs2,87,760 crore) worth of projects in 2007, down from $65.2 billion in 2006, and reversing a trend of ever-increasing outsourcing spending.
Forrester is citing some big companies that are looking to shrink their IT spending, such as Ford Motor Co., as well as state-level legislative efforts to try and keep outsourcing from migrating outside the US, as reasons for the slight slowdown, according to Navi Radjou, vice-president of Forrester.
Many American states, such as Virginia, are putting in place local laws that are intended to shed light on the amount of work migrating outside the state. Virginia is bringing legislation by March that will make it mandatory for vendors to disclose the number of projects to be executed at cost-effective locations, said Phil Bond, chairman of the Information Technology Association of America, which represents technology companies in the US.
The US Department of Defense is looking at the flow of software projects to cheaper locations such as India and China. According to ITAA, the DoD has formed a task force to evaluate risks associated with using software products and services developed in offshore locations. "We are concerned about possible recommendations to be released by the taskforce as it could have a ripple effect on private-sector enterprises looking to outsource software work," said Bond.