James Dennin, Kapitall: Some analysts are projecting that outsourcing will wind down in 2014. What would that mean for IT stocks?
In a record year for the Dow Jones 30, there was only one loser on the index, IBM (IBM). The information technology (IT) giant is down a little more than 7% for the year, while the index has gained an average of around 18%.
[Read more from Kapitall: 5 Stocks Under 10 Dollars With High Levels of Free Cash Flow]
The main reason for the slip was IBM's roll-out of a massive project in India. Designed to the give the company dominance of the apparent IT capital of the world, IBM expanded its workforce there by more than ten-fold in the last decade. Spending reached about $6 billion, a great deal of it on acquisitions and partnerships with many of India's largest telecoms.The problems started mounting in 2008, when a dubious government auction for new contracts to supply data to Indian markets flooded the country with super cheap cell phone plans. Despite the resulting decline in prices for data plans, IBM was still stuck running much of the country's infrastructure. This came at a time when labor was getting more expensive as the face of outsourcing evolved. For one, India was facing more competition from cheaper countries like the Philippines, which became attractive to outsourcers in their own right. What is more, firms on the ground are competing for fewer contracts, and many of the jobs that can be outsourced already have been. By some estimates, as much as 80% of the workforce that can be moved overseas from Europe and the Americas already has. Some people think outsourcing as a practice could be out of date entirely as early as 2022. Which raises the question, what would a world without outsourcing look like for IT stocks? We built a list of some the biggest companies in outsourcing using an industry journal's ranking of the top companies. What do you think? Click on the interactive chart below to view data over time. 1.Xerox, Inc. ( XRX):Provides business process and document management solutions worldwide. Market cap at $12.79B, most recent closing price at $10.78,
Check Out Our Best Services for Investors
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Model portfolio
- Stocks trading below $10
- Intraday trade alerts