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Saturday, December 18, 2004

Offshoring : 15% of US -IT Jobs to India, Shall Free 30B$/yr, Says AMR, New Diplomacy For Destination India Needed !! -Part I

Lance Travis, VP,Research for AMR Research writes, India Offshore Outsourcing Frees Up $30B for New Investments in the U.S. Excerpts with edits and my views added:

Companies use as much as 80% of their IT budgets to maintain the status quo. They are often forced to delay investments in innovations that aid growth because they are spending too much of their limited IT budgets on non-strategic activities, such as data center operations, application development and maintenance, and staffing an IT help desk. It doesn’t have to be that way.By 2010, cost savings from offshore outsourcing will create an additional $30B per year in new investments for U.S. companies.

In the next six years, 15% of IT jobs required by U.S.-based companies will be performed in India, AMR Research predicts. By then, the Indian IT labor force will be larger than three million, and half of the workers will be performing jobs for U.S. companies. Companies effectively outsourcing to India can slash by 40% to 50% the cost of application management and development, data center operations, help desk support, and other non-strategic activities. With average U.S. IT fully loaded labor costs approaching $80K per worker per year, a worker in India represents a $36K savings per year, and 1.5 million workers represent $54B in savings each year. Our research shows that companies reinvest 60% of savings from outsourcing in IT or business unit projects,that’s $30B per year.

Companies, on average, invest $2.5M per year for a strategic project. Depending on the specific project category, average investments per year break down as follows:
-Supplier-facing projects—$1.8M
- Product Lifecycle Management (PLM) projects—$2.3M
- Customer-facing projects (the most expensive)—$3.4M

With the savings from outsourcing to India, U.S. companies can fund and launch 12,000 new strategic projects
.Outsourcing to India will aid the U.S. economy if the savings from outsourcing continue to be reinvested in new strategic projects. The impact of these new projects can be huge. According to our research into Demand-Driven Supply Networks (DDSNs), investments that allow companies to improve by just 10% their ability to fulfill orders that are complete, accurate, on time, and in perfect condition can result in additional earnings of 50 cents per share—a result that stockholders will applaud

Part II, shall cover what India Inc needs to do to scale up to meet this demand.
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"All views expressed are my personal views are not related in any way to my employer"