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US cost-cutting means more offshore work for RP--local exec

By Lawrence Casiraya
INQUIRER.net
First Posted 15:19:00 05/05/2008

Filed Under: business process outsourcing (BPO)

MANILA, Philippines--The current economic downturn in the United States should force businesses there to contract more work overseas to cut on costs, according to the top official here of software services firm Headstrong.

Washington, D.C.-based Headstrong provides software services for customers in the financial services market. In the Philippines, the company employs about 600 people and plans to increase its local workforce to at least 1,500 people.

Nora Terrado, country manager for Headstrong Philippines, confirmed that the current slowdown was affecting businesses in the US, including their own.

"Some companies have cut down on on-site resources, which is why H-1 visas [given to foreign workers in the US] are down," Terrado said in an interview with INQUIRER.net

A recent study of top business executives in the US cites reduced budget allocations for IT spending due to the prevailing economic slowdown.

Conducted by Massachusetts-based IDC, the study conducted in-depth interviews with 27 chief information officers (CIOs) and senior IT leaders from large private companies across various industries.

"These in-depth interviews show a significant shift towards cost reduction rather than revenue generation as a driver for IT investment," said Henry Morris, IDC senior vice president for software and services research.

Businesses are using IT to deliver services in a more cost-efficient manner, in response to the economic downturn and recent mergers and acquisitions for some companies, said Morris.

"Responding to compliance and industry structural changes are also key factors in deciding which IT projects get funded and which get deferred," he added in IDC's report.

The study also noted that respondents in general were expecting further negative impact on IT budgets in the future. Most of them cited funding becoming more centralized for better control and distribution.

But the current drive to cut down on costs while creating efficiencies through IT should encourage US businesses to outsource a lot more, said Terrado of Headstrong.

Headstrong's customers, she added, are also following the "distributed" model or offshoring to different locations in order to leverage on cost advantages. The company has offshore centers in India and the Philippines.



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