Subscribe / Unsubscribe Enewsletters | Login | Register

Pencil Banner

Small Indian outsourcers will need to specialize

John Ribeiro | Nov. 12, 2010
Medium-size Indian outsourcers will continue to play an important role in the IT services market, despite the fast growth of large Indian outsourcers such as Tata Consultancy Services, Infosys Technologies and Wipro, according to Everest Group research firm.

FRAMINGHAM, 12 NOVEMBER 2010 - Medium-size Indian outsourcers will continue to play an important role in the IT services market, despite the fast growth of large Indian outsourcers such as Tata Consultancy Services, Infosys Technologies (INFY) and Wipro, according to Everest Group research firm.

But they will have to specialize by focusing either on an industry vertical, or a few services, or a specific geography as a market, Everest said in a report released on Thursday.

For example -- MindTree, a mid-size outsourcer in Bangalore -- gets 46 percent of its revenue from outsourced product engineering services, while Microland, another mid-size company in Bangalore, is focused on remote infrastructure management. Headstrong is focused on services for the capital markets industry, while Sonata Software in Bangalore addresses mainly the travel industry and product engineering.

Choosing a specialization around a vertical market can however be tricky, as market opportunities can change very quickly or get commoditized, said Siddharth Pai, a partner at TPI, a sourcing data and advisory firm.

Mid-size companies have to either have the capability to make the shift quickly to new vertical markets or focus on technologies and intellectual property that can be used to address a variety of markets, he added.

There are good opportunities for mid-size outsourcers in that a large number of small and medium-size customers are looking to outsource to India to cut costs after the recession, said Jimit Arora, research director at Everest, on Friday.

One advantage medium-size companies offer small and mid-size customers is the focus and attention that they may not get from large outsourcers, Everest said. Customers can for example have access to the top management at a medium-size outsourcer, which they won't get if they are dealing with a tier-I outsourcer, Arora said.

But the market is getting competitive as some of the large Indian outsourcers are also targeting this business, Arora said.

Medium-size providers are better able to compete as they have relatively lower corporate overheads, relatively lower margins and are usually more agile in making decisions compared to the larger providers, Arora said.

India's US$27 billion offshore IT services business accounts for about 50 percent of the global offshore IT services industry, and the country remains the single largest location for offshore delivery of IT application development and maintenance (ADM) and remote infrastructure management (RIM) services, according to Everest.

The offshoring business in India is dominated by the Indian services operations of large multinational IT companies like HP (HPQ), IBM (IBM) and Accenture (ACN), and by large Indian outsourcers, each with annual revenue above $1 billion.

 

1  2  Next Page 

Sign up for CIO Asia eNewsletters.