Each of these providers is pursuing growth in the broad-based IT services market. Although the roots of several of these providers were in the application services market, over time each has evolved its coverage of the services market, expanding into a broader base of services, such as infrastructure services. |
Mr. Arup Roy, senior research analyst, Gartner, said, "With such strong growth rates that exceed the overall market, the India-based IT services providers are increasing in their competitiveness and taking market share away from the rest of the market. Increasingly they are competing in larger outsourcing deals, with deal values routinely exceeding $100 million and spanning multiple years."
"While application development and management services remain the bulk of their revenue stream, there is a gradual diversification in other service lines, such as consulting and remote infrastructure management services, where they have experienced high growth. Expansion of service offerings by India-based providers has enabled them not only to build and mine existing accounts, but also to increase visibility as full-service providers", said Mr. Roy. "Consequently, they are now regularly invited to bid for larger and more-complex outsourcing contracts, requiring multiple services. There is a gradual shift in increasing their revenue share from discrete project based outsourcing services to annuity-based multi-year outsourcing contracts, thereby ensuring ongoing revenue streams. The approach has involved expanding the portfolio of service offerings, tapping new regions and focusing more on high-value services."
TCS maintains its position as the largest of the India-based IT services vendors worldwide in 2007, rising from a ranking of 35th in 2006 to 28th in 2007 on revenue growth of 34.8% (in terms of US$). While TCS' growth was slightly below average for this group of vendors at 38% in 2007, it grew more than three times the growth rate of the total market on revenue of $3.8 billion in 2006.
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In 2007, the India-based group of SWITCH companies accounted for 3.6% of the U.S. IT services market, compared with 2.8% in 2006 and grew its Western European revenue 51% in 2007, almost four times the total market. In 2007 the group accounted for 1.9% of the Western European IT services market, compared with 1.5% in 2006. TCS, Wipro and Infosys now occupy market share positions within the top 50 of Western European services leaders (see Table 2).
Commenting on the inroads made in the Western European market, Mr. Roy said, "Since 2001, each of the India-based service providers have made strong advances in the worldwide, U.S. and more recently, Western European market share rankings. The India-based providers in general have not penetrated the Western European IT services market to the extent they have in the U.S. market, but all indications are that this is the next target growth area for offshore services. The India-based providers have a conclusive lead in this area against other more traditional IT services providers."
According to Gartner, the next twelve months will be particularly challenging for this group of India-based providers. The gap between themselves and the traditional service providers in terms of global delivery competencies and multicountry delivery sites has narrowed. Thus, individually they will need to establish differentiation, while at the same time leveraging the value of the "India offshore" brand, which will continue to serve them in the near term. With a significant amount of cash available, the India-based providers will likely focus on expansion of the service portfolio and geographic penetration through organic as well as inorganic means.
Additional information can be found in the report "Market Share: India-Based Providers Post High Growth Rates in IT Services Market, Worldwide, 2007" which can be found on Gartner's Web site.
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