Even as there is a backlash against outsourcing in the United States, the Indian information technology industry may soon have to grapple with another challenge: competition from other developing countries.
"India's main advantage has been application development and maintenance. However, due to low entry barriers, providers from other developing countries are actively pursuing such offshore provisions. The emerging scenario leaves no room for complacency among the Indian IT service providers and calls for recognising competition at the provider level and not at the national level alone," Craig Baty, vice president and chief of research, global IT management sector, Gartner said.
To meet the situation Baty advocated that Indian companies must tap new markets and move up the value chain.
"Today the Indian advantage is experience and project management coupled with language and a solid reputation. To compete with emerging markets, Indian companies should look at partnering with lower cost providers and add value to their base offerings. Indian service providers must continue to develop and adopt true marketing intelligence," Baty added.
Baty also pointed out that decisions regarding IT sourcing in companies were being made at the senior levels.
Consequently, the Indian IT companies will have to understand the needs of senior management.
Despite the backlash, the outsourcing of IT services will continue, said Rita Terdiman, VP & research director, Gartner. The key driver to this was globalisation and the quest for speed, she pointed out.
A poll conducted by Gartner in Los Angeles revealed that 80 per cent of the respondents (companies) would continue to outsource despite it resulting in layoffs of domestic employees.
The poll also revealed that 72 per cent of the companies expected layoffs due to outsourcing although only 18 per cent had actually witnessed one, Terdiman said.
IT services spending seen topping $707 bn
Global IT services spending will cross $707 billion by 2007 growing at a compound annual growth rate of 5.7 per cent, Gartner has said.
The primary growth drivers will be government spending, manufacturing, communications and financial services. The $13.1 billion IT services industry will, however, grow at a much faster compounded annual growth rate of 29 per cent in this period, Gartner has estimated.
The highest growth will be witnessed by Asia Pacific at 9.5 per cent, followed by Eastern Europe, Middle East\ Africa, Japan, Latin America, North America and Western Europe.
India and China will see maximum growth within Asia-Pacific, a media release issued at the Gartner Summit India 2003 said.