Off-shoring is a process by which clients abroad are serviced via centres in India. This avoids sending engineers abroad to work onsite. This also avoids the problem of visas for engineers which became a major bone of contention these days. North America and Europe contribute 60% to revenues; hence shifting business offshore will help reduce costs.

Off-shoring has been rapidly rising. Wipro reported offshore revenues share of 48.5% and this improved operational efficiency by 100 bps. L&T Infotech reported 79% off shore revenues and that helped improve margins by 70 bps. TCS does not disclose offshore mix. Infosys has reported off-shore revenues at 72%.

However, the benefit of this may not last too long. For example, most software companies admit that the significantly lower delivery costs from off-shoring have not been passed on to existing customers and that may not last beyond the next round of negotiation. Apparently, it is estimated that even 1% additional off-shoring add 30-50 basis points to margins.