I’ve been talking to a lot of people recently about the issues in the banking market. Regardless of the problems faced by individual companies, the entire banking sector appears to be in paralysis because of the unwillingness of one bank to loan money to another. Who knows where this will lead us, but the uncertainty could change company strategy regarding outsourcing in many other markets.

Stan Lepeak, managing director of research at Equaterra, talked to me about knowledge process outsourcing (KPO). In his opinion there are two sides to the story: “In the short term there will be a negative effect on KPO. There is so much disruption going on in this industry, but in the longer term it is likely that more work will be generated. We are now looking fundamentally at how business is done and so the banks will be exploring the use of more third parties, more use of captives, and the rationalisation of disparate IT systems,” he said.

So that sounds positive for the KPO market in general, but Stan warned that a lot of companies are also going through a supplier rationalisation process. That’s basically a clear out and simplification of the number of companies offering services, so the contracts get larger, but for fewer suppliers.

When I spoke to Cyrill Elschinger, chief executive of Softtek in China, he had a similar view to Stan: “The current economic downtown is going to slow down or reduce the usual forecasts for outsourcing as a whole, but it is a formidable opportunity for China. This crunch time where companies are under massive pressure to keep operating while becoming more efficient and effective is going to force them back to the drawing board to look at new ideas for how to still function and reduce expense.”

Cyrill was also scathing about India, which he believes cannot supply the people for the work being demanded there. “I expect and anticipate that a lot of work will be shuffled into the China market as a result of this economic downturn. Indian vendors are becoming increasingly costly and people are really complaining about their performance,” he said.

On another note away from the credit crunch, but still related to China, I spoke recently to Dr Kevin Fickenscher of Perot Systems. Kevin runs Perot’s healthcare practice and when we got on to the topic of China he had something really interesting to say.

“If you go to places like India and China for example, they are now leapfrogging a lot of the healthcare technology we have been used to in places like the US and Europe. It’s just like the mobile telephone industry that has found the strongest service penetration in places that never had a strong telephone infrastructure using copper wire. It’s likely that we are going to find a lot of new healthcare technologies being trialled and exported back to us from places like India and China because they are the most innovative environments,” he said.

It’s nice to capture some of these executive thoughts in this blog. At least we can all feel confident that if the banking market collapses in Europe, there is probably a job waiting in China.