Indian software services companies, better watch out. For, 15 per cent of the Fortune 500 companies in the US which have outsourced projects to India are now looking at new locations in order to reduce their dependence on just one country for their IT requirements.
The calculations have been made by Neo IT, one of the leading international outsourcing consultancy firms, representing major US and European multinationals.
The global services sourcing company is expected to undertake business worth over $1 billion in the next 12 months.
Speaking to Business Standard, Michael R Taylor, vice-president of the US-based company, pointed out: "Many of the Fortune 500 companies are now looking at ways and means of hedging their bets and diversifying risks in outsourcing. They are looking at other locations, including China, the Philippines, and Vietnam, key locations at the moment."
Taylor pointed out that while India had a 90 per cent market share of the offshore business in the US, this would decline in the next few years. One reason is geopolitical.
Multinational companies want to hedge their bets on one country so that in the case of international political uncertainties (like an Indo-Pak war) or domestic problems (like the riots in Gujarat), they can shift to other locations.
Also, new markets like South Africa and Latin American countries have the advantage of being in time-zones much closer to that of the US than India, a major advantage in the IT business.
More importantly, while India still has an advantage in terms of cost, compared to many countries, China is already a cheaper destination with labour costs at least 25-30 per cent lower than in India.
Taylor also pointed out that Japanese companies were increasingly looking at China as an offshore base rather than India because of 'cultural similarities' between the two.
He further said just as in manufacturing where most companies hedge their bets when they globally outsource, a similar trend is discernible in the IT business.
Neo IT's prescription for Indian IT services companies is to leverage their strengths by opening up beachheads in the new markets, which MNCs are looking at for outsourcing. Taylor said: "Indian IT services companies must have a presence in China and the Philippines, the key offshoring bases which will open up and grow. Anyone who does not will be at a great risk."
Taylor pointed out that the other urgent need was consolidation in the IT services industry in the country.
He said: "There are too many IT services companies in India and it is difficult to differentiate one from the other because all of them are focused on price, rather than quality or any other criteria. So there is an imminent need for consolidation."
© 2026