by Beth Bacheldor

When It Comes to Outsourcing, India’s Up But IBM’s Down

Opinion
Apr 20, 2010
Enterprise Applications

Both TCS and Infosys report business growth; IBM, however, reports a downturn in its outsourcing business.

Once again, Indian outsourcing companies are illustrating an uptick in business. Tata Consultancy Services beat expectations earlier this week with a 47 percent jump in quarterly profit from a year earlier, and TCS says the growth is due to a strong outsourcing demand.

And you might remember, just last week when I wrote about Microsoft’s decision to outsource all its internal IT services to Infosys (India’s #2 outsourcing company, behind TCS), I also reported that Infosys had reported that revenue for the quarter ended March 31 was $1.3 billion, up 15.6 percent from the same quarter a year ago. Net profit grew by 8.7 percent to $349 million.

As for TCS, it reported that net profit rose 19.31 billion rupees ($419 million) for the final quarter of the financial year that ended in March 2010, from 13.14 billion rupees in the same period a year ago. According to reports, TCS inked 10 major deals in the quarter.

On the other side of the world, back here in the United States, things weren’t quite so rosy. IBM reported on Monday that its first quarter revenue—$22.9 billion—was flat. Net income was $2.6 billion, up 13 percent.

But IBM’s total outsourcing services signings, which includes strategic outsourcing and application management outsourcing, decreased 3 percent (8 percent, adjusting for currency) to $6.8 billion. While IBM gained a bit in strategic outsourcing (signings were up 6 percent) it took a big hit in application management outsourcing, which decreased 23 percent, or approximately $700 million. According to IBM, without the impact of this decline, total services signings would have been up 4 percent year to year; instead it was down 2%, to $12.3 billion.

It is difficult to know how many hires IBM’s making region to region (remember that IBM is now only providing a global headcount instead of providing in specifics on the number of employees it has in the U.S.). But unlike TCS, IBM hasn’t added much to its employee roster. It had been reported that IBM apparently dropped some 10,000 U.S. workers in 2009. The annual report doesn’t necessarily reflect that number, however, and indicates that IBM’s roster was up by 0.2%, or just short of 1,000, from 2008. The 10K layoff number is an estimate from the Alliance@IBM/CWA Local 1701, a worker union bargaining for employee rights.

In comparison—while it’s not apples to apples—TCS reported that it hired about 10,700 foreign nationals (it doesn’t specify more than that) and a total of about 16,670 professionals. And for what it’s worth, Ajoy Mukherjee, TCS’ VP and head of global HR, said in a prepared statement that the company has made 20,000 offers on campuses for fiscal year 2011.

So, what all these numbers add up to is, at least when it comes to outsourcing, India is up but IBM is down.