India-based IT services firms increased their share of the total contract value of UK private sector IT and BPO contracts from 4% to 25% in a five-year period at the expense of large US-based service providers.
This is happening in all mature IT services markets. Fears that offshore services represent a security and continuity risk, and are just a form of labour arbitrage, are evaporating.
Research carried out by Internet Services Group (ISG) revealed that Indian suppliers accounted for 4% of spending in the period 2002 to 2005; 15% from 2006 to 2009; and a substantial 25% since 2010.
During the same periods, US suppliers have seen the share of their total contract value fall from 41% in 2002 to 2005 when the group had its largest share; to 38% in 2006 to 2009; and to 24% since 2010. Meanwhile, UK based suppliers had a 35% share in 2005; 32% in 2009; and 36% since 2010.
"In the commercial world in particular we have seen substantial growth in the market share of India-based providers, but this has come at the expense of other foreign providers, particularly those based in the US and Europe,” said ISG.
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TCS squares up to IBM
The ISG figures support industry claims that IBM Global Services, the biggest IT service firm in the world, faces its strongest competition from India’s largest supplier, Tata Consultancy Services (TCS).
Peter Schumacher, CEO at management consultancy Value Leadership Group, recently told Computer Weekly that TCS is the main challenger to IBM Global Services.
He said that, based on meetings with about 200 large outsourcing customers around the world, IBM was losing ground to offshore-based firms.
He said pricing is one reason but added that top customers also cite IBM's "arrogance" and weaker partnership capabilities as key reasons. “In Europe, TCS will add almost $1bn in new business in 2014, which underlines the enormous market momentum and customer confidence they now enjoy,” said Schumacher.
TCS has 276,195 global staff, 92.3% of which is Indian. Just over 21,000 of the company's staff are not Indian, while it has an increasing UK workforce, with more than 10,000 UK-based staff.