IT Outsourcing Gaining Ground for Business Enhancement, According to Gartner

Silence on STPI leaves IT industry dismayed

The IT and BPO industry, which had been hoping for an extension of STPI scheme beyond March 2009, was left disappointed today as the Union Budget did not offer any relief to companies amid a difficult market condition. To top it, the cost of software is set to go up as the Budget has increased the excise duty on packaged software to 12 per cent from eight per cent, while bringing customised software under the service tax net. We are disappointed that the STPI scheme has not been extended. This was critical for SMEs and BPOs. Also, the service tax of 12 per cent on customised software and higher excise duty on packaged software would lead to increased cost of IT and could slow down the domestic IT usage.

Ravi Venkatesan, Chairman, Microsoft India, said that the cost of software would increase for users as a result of the Budget announcements. "This will have an adverse impact on IT penetration as end-customers - like small businesses, home users, government, academic institutions and NGOs - will be unable to avail the tax credit," he said.

         

IT Outsourcing Gaining Ground for Business Enhancement, According to Gartner

Outsourcing is a strategy that organizations throughout the world use to improve processes, reduce overhead and gain a better outcome. According to a 2007 Gartner survey, more organizations are now turning to IT outsourcing (ITO) to also enhance business. This study of 750 IT and outsourcing executives in North America, Asia/Pacific and Europe, found that 41 percent of organizations are currently outsourcing IT. This same 41 percent use IT outsourcing to enhance business outcomes and performance.

Roughly 47 percent of organizations still identified controlling or reducing costs as the primary benefit expected from ITO. What is evident now is that there is a shift taking place as in 2005 as only 28 percent of respondents reported enhanced business outcomes and performance as the primary benefit of ITO. Cost issues remain strong, and the shift in buyer expectations toward viewing ITO as a means to enhance operations is a sign of a maturing market that has higher expectations from ITO providers, said Allie Young, vice president and distinguished analyst at Gartner, in a statement.