Indian IT Companies turn to India Market

Wednesday, 25 March 2009

Until recently, Global and Indian IT companies were competing in two different markets. Global IT majors such as IBM, Accenture, EDS, etc. garnered a significant share in the Indian market while the Indian IT companies like Infosys, Wipro and TCS were predominantly focused on the US markets. However, with the recession and the economic turmoil, Indian IT service providers are diverting their energies from the US and exploring other attractive markets. With privatization and increasing competition, companies in India are now undertaking massive computerization and investments in technology. Aggressive adoption of IT and centralization of operations will serve as a key enabler to IT outsourcing in these markets. Indian companies from high-growth sectors like telecom, retail, banking and financial services are amongst the leading buyers of IT services. The Indian Government is also making massive investments in IT as they plan to automate procedures. Global majors such as IBM, Accenture and EDS bagged large contracts and have rapidly built capacity in the Asian markets. In fact, IBM already has about 36% of the share of India’s $5.6 b software outsourcing market at present. Over the last five years, IBM won contracts from Bharti, Idea and Vodafone-Essar.   While the global IT majors have been bagging large contracts in the Indian market, the Indian service providers are now waking up to this opportunity. In 2007, TCS signed a Rs. 5,740 m (approx. $120 m) outsourcing contract with BSNL for managing its call centre and administrative work. More recently, Wipro won a $228 m contract for computerization projects from Employees’ State Insurance Corporation and HCL Technologies signed a Rs. 3,930 m (approx. $82 m) outsourcing deal with the National Insurance Corporation. Infosys started targeting the domestic market only around early 2008. In January, Infosys won a Rs. 2,500 m (approx. $52 m), five-year contract from the Income Tax department. According to industry sources, Infosys is likely to win another large government contract this year. Currently, Infosys’ revenues from the domestic market are less than 2%. Binod, HR, Head of India Business Unit at Infosys, was quoted in a leading publication that the company will focus more on the domestic market and is presently pursuing many contracts. Wipro and TCS generate less than 10% of their total revenues from the domestic market. So far, the revenues from India only occupy a small percentage of the total revenues of the service providers. The Indian IT companies are aggressively targeting the Indian domestic market. The Indian government plans for IT projects worth approximately $6 b. Given the huge untapped domestic market, there is enough room for both the global and Indian IT giants. While the global giants score over the Indian majors in terms of their size, financial muscle, and visibility, with the Indian IT companies battling in their home turf, the service provider landscape will get much more competitive.

 

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