The rupee has depreciated by 20% against the dollar, just from the beginning of this year.  This is a great time to revisit or review your Offshoring contracts.  Several large contracts typically have an exchange rate clause, that lets Clients/ Service Providers revisit negotiated rates/ prices if there are significant fluctuations in the $/ Rupee rates.  This is to allow both the Clients and Service Providers to de-risk themselves / benefit from large movements in exchange rates.

We believe that under the current circumstances, both Clients and Service Providers may benefit from this re-negotiation.  Clients could benefit anywhere from 5-10% in contract value if contracts with Offshore IT Service Providers have this clause.

Indian IT Service Providers could also benefit from this re-negotiation by potentially increasing their share of the client spend.  Clearly, the business case for offshoring is significantly enhanced with the rupee depreciating by 20% and the Service Provider can use this opportunity to incentivize clients to push more work offshore to reduce Client’s IT spend/ costs.

Reach out to us if you’d like to discuss this further at bala@bizofit.com

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