Peter Bendor-Samuel, CEO of Everest Group, said, “I wonder if the industry deceleration we have been forecasting is catching them by surprise and they are getting feedback from the market that their original forecast is badly off. They may also be looking for a way to tell a better story given these challenging times. Another contributing factor to the uncertainty could be the pause in globalisation that is occurring as signalled by the new administration in the US and Brexit and they need more time to watch how this plays out.”
H. Karthik, a partner at management consulting company Everest Group and leader of its global sourcing practice, said Duterte’s comments about a separation from the United States altered risk perceptions.
“No companies have publicly stated any significant changes in their Philippines strategy, but many of them are adopting a wait-and-watch approach,” he said.
Karthik compared that wariness about the Philippines to developments in other outsourcing locations, such as the political unrest in the Ukraine, Egypt, and Tunisia, and recent widespread public protests in Romania.
Under the arbitrage model, “Infosys will build on its reputation for premium services to protect its industry-leading margins and offset impact on share price by returning cash to shareholders,” said Peter Bendor-Samuel, CEO, Everest Group.
Currently, the industry is dominated by businesses on which the sun may be ready to set. Peter Bendor-Samuel, CEO of US-based research firm Everest Group, adds, “Digital makes up 22% of the Indian services market. The remaining legacy services have shown no growth over the past 12 months.”
The $108 billion Indian IT services industry is bracing for tough times ahead as potential visa restrictions add to their troubles such as a shift towards automation and pressure on margins in traditional services. Technological disruption and faster-than-expected adoption of technologies like artificial intelligence, robotics and the cloud platform are other major challenges for the industry.
Given the continued lack of clarity on changes to the H-1B program, the muted response of India’s IT leaders makes sense. “Everyone wants to avoid the attention of the new administration, and their stance reflects this,” says Peter Bendor-Samuel, CEO of outsourcing consultancy and analyst firm Everest Group. “This includes companies like IBM and Accenture which stand to benefit from the changes, but the being seen to utilize this might cause reputational damage in their client base and also make them a target for the administration.
Restricting the number of H-1B visas could have an impact on the cost structures of arbitrage-based services firms and increase their onshore cost by 10-20 per cent,” said Peter Bendor-Samuel, chief executive of Everest Group, a global IT researcher.
The US is the biggest outsourcing destination with companies like Tata Consultancy Service, Infosys, Cognizant Technology Solutions and Wipro dominating this space.
Two years ago, a report quoting research firm Everest Group said US healthcare related contracts were expected to more than double to about $68 billion in 2020, from nearly $31 billion two years ago, largely due to Obamacare.
As the developed markets of North America and Europe mature, human resources outsourcing (especially in multi-process human resources outsourcing and recruitment process outsourcing) is pivoting towards the faster growing marking in Asia Pacific, according to the latest Everest Group research report.