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Software companies should opt for global allies: IDC

BS Corporate Bureau in New Delhi

Indian software services companies should be open to partnerships and any lack of global partnership could hamper the growth of the country's booming software services sector, points out a leading analyst with the International Data Corporation.

"Indian companies, particularly the large ones, are not very open to partnership fearing loss of power and control. This will be a factor that would hamper the growth of the sector," said Ned May, manager (worldwide services), IDC.

According to him, after attaining a certain scale of operations, the Indian companies should look at partnering to attain new domain knowledge and access to new markets.

He also advised the companies to concentrate on areas where they have expertise than diversifying into multiple areas.

"Indian companies have acquired a reputation in the low-end of the software services segment. This market itself is very big. The companies will be taking a risk by venturing into other areas, where there are already established players," May said.

May also pointed out that the Indian companies should be patient about success. "The companies should work out a steady growth strategy and should be patient about achieving that goal. Impatience can lead to failure and one failure is enough to damage the reputation of the Indian market," he said.

Michael Melenovsky, senior vice-president, IDC, further said, "It's in the light of the need of strategic partnerships and offshore capabilities that Indian players have immense opportunities even amidst tightened business environment."

He said average IT services deal sizes are shrinking worldwide. It has come down to $58 million till September 2002 from $88 million in 2000.

"This pressure is expected to improve only marginally in 2003", Melenovsky said.

According to Melenovsky, the consulting and systems integration market in the US and Europe is expected to consolidate further, so deep technological skills, trusted partnerships, breadth of portfolio and vertical expertise would be key to any country doing outsourcing jobs.

According to an IDC survey, 51 per cent of the companies in US were in favour of a strategic relationship with the outsourcer. Melenovsky warned that there is currently an oversupply of technical manpower.

"Supply of technical professionals outweigh domain availability and that is an area of concern at present", he said.

The excess capacity utilisation could be possible only by the end of 2003 or early 2004, he added.

Melenovsky said India has covered just two per cent of the global outsourcing market and there is a bigger scope to expand if it moves in the right direction.

"The weak areas are that there are several cultural mismatches between the Indian companies and their clients and this could hinder expansion," he said, reaffirming his thrust on more onsite jobs, which could lessen the differences.

On whether India faces any real threat from China, he said, "at least I do not see China catching up with India in services for the next 10 years. Manufacturing is their forte."

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