Indian IT services firms are no longer simply vehicles for Western businesses to make massive cuts in IT costs, but are now suppliers of business expertise that is complemented by IT, according to Indian IT association Nasscom.
IT services from India became big in the West when overly concerned corporates invested in services to help them prepare for the perceived risks of the millennium bug in 2000. Software services were needed in large volumes and India had the resources to meet this demand at a fraction of the cost of the same expertise in the UK and other developed countries.
This has been a stigma for Indian companies such as TCS, HCL, Infosys and Wipro. They see themselves as being much more than a lower-cost option.
All major IT companies now have resources in lower-cost regions such as India. IBM, for example, is one of the country’s largest IT employers.
But what do the Indian IT services firms offer today?
Recently appointed Nasscom chairman KK Krishnakumar Natarajan, who is also CEO at tier-two Indian supplier Mindtree, said clients are looking for business knowledge, not necessarily technology knowledge, and they are making the transition.
More about Nasscom
“A lot of members of Nasscom have moved away from just being a source of cost-competitive services to [become a strategic partner for] the customer, such as doing transformation or innovation to help them compete,” said Natarajan.
He added that Indian companies have now been working with large corporates in the UK and US for years and have built up great domain expertise during that time.
“A lot of that is coming based on the experience that has been gained by Indian suppliers over the past 20 years. They have built intellectual assets which they are using to deliver services,” said Natarajan.
He cited stock exchange trading software as an example of how Indian companies have matured. The New York Stock Exchange is currently looking to replace a 20-year-old trading platform, for which three Indian firms have been shortlisted. And of course it was a company not far from India – in Sri Lanka – known as Millennium IT, which replaced the London Stock Exchange's previous trading platform.
Asked why Indian suppliers do not make large acquisitions in their home country, but prefer to acquire small companies in Europe, KK Krishnakumar Natarajan said European companies are much cheaper.
Research over the past decade from ISG revealed an increase in global market share of 13% for Indian IT services firms, compared with a decline of 7% for their multinational equivalents.
But growth will slow for the Indian companies unless they establish services that offer non-linear growth, spread geographically beyond their main markets in the US and UK, win government contacts and develop core software and business process outsourcing (BPO) aimed at specific vertical sectors, according to Sid Pai, president at ISG Asia-Pacific.
Peter Schumacher, CEO at management consultancy Value Leadership Group, recently told Computer Weekly that Indian suppliers are more mature in their evolution than they are often given credit for.
“The traditional players in Europe and the US have been more static than the offshore suppliers,” he said.
There is also a competitive threat to Indian suppliers coming from companies based in Eastern and Central Europe.
Countries such as Ukraine and Moldova have the highly skilled IT workers as a result of the legacy left by the Soviet Union. These resources are less expensive to UK businesses than home-grown workers and are in close proximity making real-time communication between onshore staff and those in Eastern Europe possible.