A watershed year

It was a different kind of year for the Indian information technology (IT) services industry. Multinational IT enterprises suddenly scrambled to expand their Indian operations.

Several Indian IT companies announced cross-border acquisitions and mergers. Two senior IT company executives "� Polaris CEO Arun Jain and Senthil Kumar, CEO of i-flex solutions in The Netherlands "� were arrested in Indonesia and in the UK, respectively.

Their arrests triggered off a debate on what visa should be used for what purpose and brought to fore the legal aspects "� contract structuring and visa regulations "� of doing business worldwide.

Nor was this all. A huge backlash against the outsourcing of jobs from the US and other western nations to countries like India developed. And the US cut the number of H1B visas it offers foreign workers.

Some Indian IT companies have responded by trying to move more work offshore faster to reduce the dependency on visas and by seeking local recruits for on-site positions.

Cognizant Technologies, for instance, has started recruiting in US colleges for people to work in India for a period.

With outsourcing becoming the order of the day, Indian IT companies started bagging large orders worth $50 million to $100 million, up from $10-25 million earlier. Foreign companies started working with multiple partners to spread their risks.

The potential outsourcing alternative to India -China "� continues to be debated every other day in corporate boardrooms.

Perhaps for the first time in its history, the industry was globalised in the true sense of the term.

India's IT companies have acknowledged that they face global competition and that they have to adopt best global practices "� hire a multicultural workforce, establish a global footprint with development centers across the globe, provide end-to-end solutions and acquire companies overseas.

In other words, 2003 changed the landscape of the IT industry like never before.

Look closer at these trends. The entry or the expansion of global system integrators such as Accenture and IBM Global Services has made the Indian IT services industry sit up and acknowledge that they need to do a lot to compete in this ever changing competitive landscape.

When these companies announced their offshoring plan, most Indian IT companies said complacently that these MNCs could not scale up fast, that this is a people's business, a process-oriented business and that most Indian global companies were at CMM Level 5.

But both Accenture and IBM have announced that they would have 10,000 employees by the end of 2004 and that one of the two is already assessed at SEI-CMM Level 5.

To be sure, both companies have a long way to go in integrating their onsite and offshore businesses. But the fact that they are a robust force to reckon with has just about dawned on Indian IT companies.

Indian companies have begun building a strong front end, started spreading their risks across locations and are trying to retain quality people after they lost talent to these multinationals.

In short, India's IT industry has learnt that they need to worry about competition from multinationals.

"The highlight of the year is the entry of the global system integrators which have changed the landscape of the IT industry in India," acknowledges Lakshmi Narayanan, president and CEO, Cognizant Technologies.

"With their entry Indian companies will further sharpen their skills, improve their competitiveness, differentiate themselves and provide greater value to their customers," he adds.

The backlash against outsourcing and the New Jersey bill against outsourcing state government jobs to India have clearly demonstrated the importance of IT professional and trade bodies making an impact in the US and Europe, of developing a good image for the industry.

Indeed, the National Association of Software and Service Companies has, for the first time, been working closely with the Information Technology Association of America (ITAA). It even got key ITAA people to tour India and Indian companies.

More importantly, the need to establish a global brand for the Indian IT industry was identified. Nasscom has successfully launched an initial brand campaign 'Served from India.'

Strikingly, India's IT companies have embarked on a global hiring spree and have recruited a number of non-Indians. To cite but a few examples, in the US, i-flex solutions' chief marketing officer Dennis Roman and chief operating officer Cafo Boga are local Americans.

At Wipro Technologies, Richard S. Garnick, chief executive, Americas' field operations, joined the company in 2001 from Global Digital Media Inc, where he was chief executive officer and chairman. Masaki Nagao heads Wipro's Japan operations.

Indian IT companies are becoming truly global enterprises in other ways too. Infosys recently bought Australian company Expert Info Solutions to stay in the Telstra deal. Wipro brought in its US marketing head to participate in a Nasscom show in India.

Says Sangita Singh, chief marketing officer, Wipro Technologies: "Companies like Wipro have understood that to be counted as a truly global player one needs to have a global talent pool and also new service lines to offer customers. This to a large extent drove Wipro to acquire companies like Spectramind and Nervewire."

For the first time this year, two Indian companies (Wipro and Infosys) are set to join Tata Consultancy Services in the billion dollar club.

In short, the year marked the emergence of Indian IT multinationals.

Finally, the Indian IT industry has begun to take the threat from China seriously. Several Indian software companies have established a beachhead in China not just to counter competition or for business continuity reasons but to leverage the talent available in the Chinese market.

China is seen as a resource and marketing hub for the Asia Pacific region, particularly Japan, given the cultural similarities of these markets.

India's IT companies may have arrived on the world stage, but they won't be content at being just global companies "� they want to secure a position among the Global 10 in the years to come.

Given their aggressiveness, the best international practices they're adopting and the quality of resources they're tapping, don't be surprised if you see them quickly marching towards that goal in 2004.