How IT sector can compete with global cos

Indian IT-ITeS service providers may have grown their operations in the last few years with a paradigm shift in size of deals, competitive landscape and client expectations, but they still need to scale up aggressively to compete with giants from the US and Europe, according to a discussion note by KPMG and Nasscom.

A possible scenario for the sector would be to follow the hub-and-spoke model. Indian companies, for instance, could scale up offshore centres in the Central and Eastern Europe, Central and South America, China, the Philippines and Canada.

These countries are also keen to collaborate with India and offer a comprehensive and compelling value preposition. This makes it a win-win situation for both the Indian IT-ITeS industry and for emerging global IT-ITeS destinations, the report stated.

The report, which was unveiled at the Nasscom's 'Emerging Companies Forum' in Hyderabad on Monday, stated in the last few years that India had seen new emerging destinations with IT and ITeS centres opening in Malaysia, China, the Philippines and Central and Eastern Europe, Mexico and Brazil.

"This trend is catching up in many countries which aspire to be IT destinations, including the Bahamas. Indian IT and ITeS companies are also opening centres in other countries. These movements clearly indicate that national boundaries are slowly becoming less relevant," it said.

According to the report, Latin American countries Brazil, Mexico, Chile and Argentina have competitive wages and a good educational system. "Although widely known, English is not the first language for most of the Latin American population.

The Latin American countries primarily speak Spanish or Portuguese. This, however, works to the advantage of business processes that cater to the Spanish or Portuguese speaking parts of the world. This market is estimated to be over 380-million-people-strong worldwide, with the US alone having a Spanish speaking population of 40 million," the report added.

In the Philippines, the outsourcing industry is fuelled not just by traditional low value-adding call centres, but also by high-end outsourcing activities such as legal services, web design, medical transcription, software development, animation and shared services, according to the report.

"Malaysia and Vietnam are also emerging as viable offshore IT development locations, offering competitive prices, low employee churn and greater stability," it said.

Emerging Destinations for Indian IT/ITES industry:

* Central and Eastern Europe (CEE) have near saturation presence of foreign IT/ITeS companies and hence highly attractive for Indian companies to invest

* Latin America due to its language capabilities serves as best option for non-English language voice and non-voice support in the world

* APAC consisting have the fastest growth but strategising here is difficult

* The IT/ITES wage rates in Canada are lower than the nominal wage and offer great value proposition in terms of costs

* Indian companies need to focus on locations offering requisite language, transaction processing, high-end programming and knowledge processing skills.