The business of writing software in India has been booming. But some of the
biggest providers Accenture (NYSE: ACN ), Cognizant (NASDAQ: CTSH ), and
Computer Sciences Corp . (NYSE: CSC ) are getting nervous. Is this is a sign of
trouble in these stocks or is there an opportunity to buy? For decades, big
organizations have decided that their computer systems are important but they
simply cant afford to put top programmers on their staff. As a result, they hire
outside companies to build systems to solve problems like keeping track of
inventory or selling products online. This industry is big and growing.
According to Canadian researcher XMG Global , the global outsourcing industry is
forecast to end 2011 at $464 billion 9.2% larger than in 2010, which was 13.9%
up from 2009. And the reason its growing is simple companies need new computer
systems, and while they have the budgets to build them, they cant get the job
done quickly and cheaply with their in-house staff. But XMG believes growth in
the industry goes up in proportion to global economic growth. And now a feared
slowdown in global expansion is scaring some of the biggest outsources. For
example, the top 20 IT companies in India account for more than 60% of
engineering job offers to students there, according to The Times of India . And
those big employers have made plenty of offers. So far in 2011, Indian
outsourcer TCS hired 40,000 students, Infosys 30,000, Cognizant 28,000, Wipro
20,000 and HCL 8,000. They hired that many people based on two factors the
number of big deals in their sales pipeline and the rate at which they expect
programmers to quit or get fired. But the attrition rate is falling as the
number of job opportunities for experienced programmers dries up, and the size
of new deals also is declining. For example, in the past couple of quarters, the
attrition rate has dropped from 25% to 15% and companies no longer are able to
close deals bigger than $100 million.
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