The Hindu Business Line : ‘Consolidation will increase outsourcing’

Hyderabad, Dec. 15 As the financial sector consolidates with mergers and acquisitions during the global economic downturn, outsourcers in India are likely to benefit in the long run, according to management guru Dr C.K. Prahalad.

The Professor at University of Michigan, known for strategy consulting, said for a researcher, the ongoing economic crisis presents excellent case studies to analyse undercurrents that will help chart out future strategies.

Speaking to newspersons at the Indian School of Business (ISB) on Thursday, Dr Prahalad said “contrary to general perception that slowdown and mergers will bring down outsourcing component, I believe that this will create a new wave of outsourcing with more business coming in.”

Citing the recent announcement of Infosys’ effort to align with AT&T to offer services, Dr Prahalad said: “You will see more such deals. The current recessionary trend had pointers as early as 2007 and has blown up fully.”

So when will we see the end of the current recessionary trend? Dr Prahlad said “this could take anywhere between 18 months and 24 months. With the US President-elect, Mr Barack Obama, set to assume office, we expect more pro-active measures to help the economy gradually turn around.”

‘no easy prescription’

There is no easy prescription for a complex problem like recession. One cannot take a knee jerk reaction. Therefore, it is necessary to respond to recession in a measured manner, requiring change in corporate attitude, focussed on costs, quality and integrating with global supply chain, he explained.

Citing the examples of Tata Nano, Chandrayaan and Airtel among others, Dr Prahalad said case studies such as these are being very keenly tracked by researchers globally as they bring to the table new approaches to business.

For instance, as Airtel expands from, say, about 100 million customers to 200 million, with significant part of new additions coming from rural areas, it is faced with the challenge of retaining average revenue per user.

“Since most of the new additions will come from new areas, calling for installation of more towers, operators are sharing towers to make their business financially viable. This changes the business paradigm,” he explained.

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