Outsourcing to witness qualitative change

KP Sethunath in Bangalore

The size of outsourcing orders coming to Indian software services companies is set to witness a substantial upward movement in the coming days despite the pressure on the billing rate casting its shadow on the industry.

Speaking with The Financial Express Mascot Systems CEO Gerhard Watzinger said the billing rate was likely to go down by another couple of dollars before it bottomed out to a stable level
According to Mr Watzinger, bigger volumes of business, longer decision-making cycles and stiffer competition will be the main features of software exports from the country, as September 11 has emerged as a cut-off date in terms of business strategy and planning.

“Most of the companies are engaged in that exercise, however, outsourcing is going to be a major factor in the new business strategy,” he said. But this would also trigger off stiff competition between major players in the software services industry to garner maximum orders.

The business model of outsourcing is also set to change, with most of the clients opting for multiple vendors selected through an open process, instead of the earlier practice of having a pilot project and selecting the vendor. “As the size of the order gets bigger the clients would like to have at least two vendors with a configuration of Tier-I and Tier-II players,” he said.

This would further competition among the service providers as most of the customers would be looking for the best possible deal, Mr Watzinger said.

On the strategy of Mascot Systems in this scenario Mr Watzinger said the company would focus on its marketing activities with renewed vigour, while keeping its existing customer base intact. The company will also try to improve the share of its offshore revenue in the coming days. At present, offshore contributes 24 per cent and onsite contributes 76 per cent of its revenue.

On the dependence of the company on GE, which contributes more than 50 per cent of the revenue, Mr Watzinger said,
“In the present situation it is better to have stable customer like GE. However, we are not spending a single dollar on marketing activities connected with the GE business. Every single penny we spend on marketing is on acquiring new customers,” he said. Mr Watzinger also pointed out that Mascot was catering to 19 different business divisions of GE spread across the world. “This means effectively we are dealing with 19 different customers”, he added.