Offshore Solutions Provider in India - Challenges

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Offshore Solutions Provider from India need to bounce back in terms of their commercial attitude towards Offshore Software Development, in order to face the challenges posed by the multinational software and consulting firms, establishing their offshore base in India.

According to a McKinsey survey, 80 percent of the top 40 global IT services firms have their major presence in India. And with these multinationals heading towards success in their offshore outsourcing strategies focused in India, they pose a very big risk for the local offshore software developers in the long run. This is because even these multinationals can now offer the same cost advantages. As for example, Microsoft has one of its biggest software development centers in India after the US.

Analysts believe that most MNCs are growing their Indian operations by at least 40-50 percent every year, and in many cases even in more pace than that. This includes software services companies such as IBM Global Services and Cognizant and spellbound offshore software development centers set up by companies such as HSBC, Standard Chartered, and P&O Ned Lloyd. Global players like Accenture, EDS, besides others, are all rapidly adopting this model.

Some Facts: IBM Global Services India (IBM GSI) is aiming at adding 7,000 professionals over the next three years, in its six-development centers across India. While bidding for a large project, Indian players often come across IBM GSI.

Cognizant had a gross addition of 993 professionals in the Indian center last year. This figure is expected to cross the 6000 mark in the very near future. Apart from these companies having their own offshore development centers in India, there are other players forming joint ventures with local companies in the same field to take the advantages of the huge market.

The tight spot for many or large number of clients who are looking at Indian players, is the lack of differing from amongst the Indian companies. The Indian companies need to position themselves very specifically. And with so many companies coming up with the CMM and ISO level certifications, local companies need to find out a new USP to stay competitive and on top.

It is now feared that the “cost-effective” offshore proposition has become a common denominator and the only differentiation left is the ‘India-centric player’ tag. Hence, Indian companies like Infosys and Wipro have also started investing heavily to ensure that the ‘brand message’ is communicated effectively. Wipro for example, has branded its offshore delivery mechanism as ‘ShoreGain’.

The way to go:

MNCs have come on top of competition in India with many of the strategic steps that are being seen as very important for the Indian companies to look at and come out with some more innovative than them to stay competitive and lead the race. Outsourcing being the major focus at present for everyone, the Indian companies need to concentrate on what would be an outsourcer's vendor evaluation method, before outsourcing its work to anyone. These can help them target the exact requirements of the prospective clients and hence develop and maintain healthy business relations.

EDS: EDS made-up in outsourcing using IBM mainframes for Frito Lay. Initially EDS worked with government clients (US Navy, US Federal Government) and automotive companies (General Motors). Then it acquired A T Kearny and others to move up the value chain and offer consulting services. The acquisitions also gave the company an entry into the private sector. It has made 10 acquisitions in the last three years

Accenture: Communication and the high tech areas formed a basic part of its strategic integration to jump in the competition. By regulating methodologies (Method One) and launching a network of alliances (SAP), it expanded into other verticals like utilities and energy. Deals on the lines of Accenture’s acquisition of ITT’s two divisions helped the company expand the scope of its service lines.

CSC: This Company has conducted over 20 acquisitions in last three years. In 2001, acquisition revenues were $2.8 billion (IT Services, Combitech and Mynd). It has also expanded geographically BHP IT in Australia and KPMG in France.

Conglomerates: EDS, IBM Global Services and PWC are working together on a 10-year $3 billion deal for UK’s social security system. This joint strategy can be adopted by leading Indian vendors to collectively bid for a large project. The Indian players need to come out with this kind of associations to cope up with the upcoming competition.

Follow the Leader: These biggies of the global software industry have posed a serious threat to the Indian players. But then again, where there’s a will, there’s a way. Instead of taking them as a threat, these MNCs can be followed in their footsteps of strategies or on the other hand the Indian companies can go forward for the joint ventures and collaborations in the market. Even some of these MNCS give the Indian players a big bunch of work if there’s some kind of relationship in between them in business terms. Hence, the Indian players need to come up with innovative things as against these MNCs to compete them vis-à-vis being one of them in the competition.

The Indian software industry is currently, undergoing a decisive phase in its advancement today, and it would be a judicious step for the industry to learn their lessons from the Big Five. Acquisitions being the current trend, the industry needs to focus on the upcoming trends and act accordingly.