The World is Flat, So Is the Stock Market.

This past weekend, when not tapping away at the computer or consuming copious amounts of alcohol, I spent time reading Thomas Friedman’s oversimplified explanation of the post bubble, increasingly interconnected world, The World is Flat. (More on that some other time!) He has expressed a lot of admiration for the Indian tech experiment. Why, he was one the keynotes at the TIE conference, which I decided not to attend. Think of his presence as an early indication that things might be getting overheated in outsourcing land. Much like hiring of journalists as VCs indicated the dot-com bubble’s top.

Not a week passes when someone or the other tells me about a new outsourcing outfit, also known as “BPO” that is setting up shop. The stocks of companies like Wipro, Cognizant and Infosys have been in a stratosphere. (Someone has to come up with a way to add stock quotes & Charts in blogs… Yahoo are you listening?) Recent quarterly data shows that these guys are getting closer to the peak and wheezing. Just ask yourself this question: if all was fine and dandy why would GE, a company known to squeeze out profits from even a light-bulb, would get out of the whole outsourcing game. The game has been that of price arbitrage for many of these outsourcing companies – its going to end… soon.

Creditsights’ Senior Technology Strategist Arnie Berman succinctly reminded me this morning of companies like Scient, Viant, and Razorfish, and how they were supposed to be the new services giants. Sometimes, it is good to be reminded of the past.

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