In-Depth

Indian Outsourcers Vie for Global Dominance

The worldwide market for IT services is booming—and the largest Indian services providers now threaten the market share of top global players

• By Stephen Swoyer
• 08/22/2006

According to a new report from market watcher International Data Corp. (IDC), the worldwide market for IT services is booming—thanks in part to demand from U.S. customers—and Indian services providers are actually starting to threaten the market share of top global players.

As a result, IDC predicts that offshore services providers will capture $29.4 billion in worldwide IT spending by 2010.

Offshore vendors—and especially those on the Indian subcontinent—also aren’t content to subsist on the application maintenance, help-desk management, and other easy-to-outsource tasks that have sustained their business model since its inception, IDC reports. These vendors are focusing on developing services offerings that help foster operational and strategic relationships with their clients.

“Offshore vendors are aggressively pursuing outsourcing deals that go far beyond the application maintenance engagements that built the industry to what it is today,” said Barry Rubenstein, program manager for application outsourcing and offshore services at IDC, in a statement. “By continuing to appeal to the customer need for low-cost labor, while simultaneously offering services that truly add value by helping customers increase revenue, ensure compliance, and become more responsive to changing business conditions, offshore vendors are continuing on an impressive trajectory.”

The top offshore services providers have strengthened their onshore presences, cultivated relationships higher up in the food chain in customer organizations, tapped new technologies, and invested in developing hosting infrastructures, IDC reports. One consequence of this, the market watcher argues, is that the largest offshore vendors now pose a serious threat to the top global players.

“With continued investments in remote infrastructure management, onshore datacenters, and tools to automate application development and maintenance processes, several of the large offshore vendors are posing a serious threat to incumbent global providers,” said Rubinstein. “To be sure, problems still remain, particularly employee productivity and the attendant revenue per headcount, as well as a lack of onshore consulting presence, but overall the market for offshore IT services is quite robust.”

Other factors that have helped fuel rapid offshore growth include increasingly large contract signings; the expansion of delivery capabilities beyond India and into China, Central and Eastern Europe, and Latin America; signing strategic partnerships with technology providers such as SAP and Microsoft; the availability of new services, such as software testing.