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The New Offshore IT Destination – the USA

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Seems an interesting trend has been emerging thanks to the slow down in the US economy, the US IT market is becoming affordable for companies in Europe and Canada. Where the US dollar had been equal to €0.85 (Euros), today it only buys €0.70. That’s a 20% decrease in our buying power but also a 20% increase in Europe’s buying power. This can be seen everyday on the streets in the US where a growing number of European tourists are visiting our cities. But it seems another set of astute individuals are discovering a value in their new buying power thanks to the slow down in the US economy, the US IT market is becoming affordable off-shore options for companies in Europe.

The 20% buying power means that European IT can do more with their dollars by using US resources while the buying power has remained the same with India. Add to this the growing opinion that India tech companies are often difficult to work with and US IT shops become an attractive alternative. But not all companies are positioned well to take advantage of this opportunity, such as multinational companies that already have different rates across geographies.

At the same time many Indian tech companies that thought they could make a fortune selling off-shore services are finding their $1,000,000 US dollar contracts now only worth about $875,000. While many companies believe the real foresight was the Rupee as a risky position, they failed to ignore the fact that their economy would be improving. Add to this the pressures brought by the hot tech market, with people changing employers for better pay and the increased competition, the margins are really beginning to erode. It’s not hard to imagine a little shake up happening there. But what one can really expect is a whole new way of looking at India off-shoring where costs are increasing and contracts are tied to rupees and not dollars.

1 Response »

  1. I can’t argue with the exchange rate – inteesting observation – I do however take issue with the broad generalizations of Indian tech companies. The economics of that sphere have changed dramatically with greater worker mobility and a new problem, labor shortages for the tech community, but it is a model that is working VERY effectively for some. Some not so much but the free market will take care of those.

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