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India's BPO reign under threat
December 08, 2004 18:15 IST
India's dominance in IT services offshoring market would be threatened if companies do not diversify their offerings and delivery bases, according to analysts.
"Indian companies address only a small part of the IT market and limited geographies as opposed to competitors like Accenture. There is a very real threat that bigger companies try to poach on their territory as customers would like to engage with one service provider than multiple partners," analysts at IDC said.
"The biggest IT service companies have delivery centres all over the world and a capability to provide services in all languages and execute complex projects requiring expertise across many categories. For all you know they might even take over a small percentage of work Indian companies do and might even offer to do it for free," Phil Hassey, associate director, Asia-Pacific, said.
He said Indian companies were too much dependent on English speaking world and engagement with existing clients.
"If some existing client moves work elsewhere and they miss quarterly numbers they would on a shaky ground with market capitalisation falling rapidly. Companies like IBM would not buy them because they will be expensive but will move in to fill the void in the market," Hassey said.
He said that growth of 30 per cent that Indian companies were clocking was not sustainable.
"India currently accounts for close to 80 per cent of the global outsourcing market but strong competition is emerging and in next five years its share will come down though growth will continue," Hassey said.
Hassey said Indian companies must leverage locations like Singapore, Malaysia, New Zealand, Australia, China, Ireland, Poland, Portugal and Latin America for building capabilities with which they can address markets in Europe and Japan.
He said their effort should be to broadbase their offerings.
"China is a huge IT market which must be addressed. After putting up a base in China, companies can service markets other than China," Hassey said.
"Indian IT companies have done the easy part. Now the challenge before them is to get companies which have not outsourced so far to outsource and do it to India," Jason Bremner, Director Canadian Outsourcing Services at IDC said.
"There are companies who may not have been as adventurous as earliest outsourcers. They may have options other than India to outsource," he said.
Bremmer also suggested new client relationship management on the part of Indian companies. "If Indian companies can share the risks and rewards of developing new applications with their customers more companies might be attracted to outsource. Earlier, all risk has been borne by the customer," he said.
He also suggested partnership model for India companies to penetrate North American market further.
"Till now Indian companies have sold directly to their clients in North America. Partnerships with local players will also help them netting new customers," Bremmer said.