Words like business process outsourcing (BPO) and offshoring may not exist in the IT dictionary by 2015. Substitutes like business service outsourcing and global delivery model (GDM), necessitated by the changing business model of IT firms, are likely to replace them over the next seven years.
"In five to 10 years, you will see a dramatic change in the way people are serviced. Who will care from which location they are being serviced? A large number of processes will get globalised. There will be more automation. Companies will reinvent themselves every six months, and IT will be further embedded in their processes. The BPO sector, too, will be providing end-to-end business services. In fact, there may be no such word like BPO or offshoring," asserts Nasscom President Som Mittal.
Sudin Apte, senior analyst with Forrester Research, concurs and predicts there will be two types of players by 2015. "You will have five or six large players with multiple lines of services across low-cost delivery centres," he says.
These players will comprise both Indian players like Tata Consultancy Services and Infosys and multinationals like IBM and Accenture. These firms will have thousands of workers in different geographies, and be servicing many industry verticals. Forrester referred to them as Billion-Dollar Babies 18 months ago.
Today, they lead over the rest of the offshore vendor pack by a widening gap of almost a billion dollars. Currently, TCS, Infosys and Wipro contribute more than 46 per cent of total IT services export from India.
There will also be "specialist" firms that will cater to niche verticals, three or four lines of services and use India as a predominant base, says Apte.
But smaller firms which cannot compete with the bigger firms in scale would "divorce" clients, he predicts, since they could save on fresh investments that would be required to service new clients both onshore (US or UK) and offshore (India). Firms with single-digit profitability will find it difficult to invest in near-shore locations and on-shore capability.
There will also be a lot of consolidation, especially with smaller firms being bought out by the bigger ones, says Monish Chatrath, National Markets Leader, Grant Thornton. "Smaller firms will have an established customer base, niche offerings, and respectful order book will command a premium. The others will have to make do with lower valuations," he adds.
Besides, smaller firms will find it difficult to move to special economic zones (SEZs) unless the government modifies the Act to accommodate these players, or extends tax benefits beyond 2010 for such firms.
Siddharth A Pai, Partner & Managing Director, TPI India, says by 2015, the "Super Achievers" or tier-1 firms of today will have built significant operations in western countries, either through acquisition or through aggressive, investment-backed organic growth. "My bet is that there will only be one or two such firms," he asserts.
The "Also-Rans" will come next. These are the tier-1 firms of today, which will choose not to globalise and continue to manage their bench mainly in India and to a lesser extent, in low-cost geographies.
Then there are the Survivors -- the tier-2 firms of today that specialise in one or two industry sectors or one or two areas of technical competency. These companies will do well, but be subject to the vagaries of growth dynamics in their chosen industry or technical domain (the current credit crunch affecting financial services firms, for instance), notes Pai.
The size and composition of the industry, too, is likely to be radically different by 2015. Nasscom has already predicted, and is sticking by its target, that software and services exports will touch $60 billion by 2010.
Back-of-the envelope calculations suggest that software and services exports combined by 2015 could touch $335 billion if it grows at 24 per cent CAGR. At 21 per cent CAGR,the number could touch $276 billion while at 18 per cent CAGR, the number could be around $226 billion.
No analyst firm, nor Nasscom is ready to put any figures since the Indian rupee-US dollar volatility could affect the predictions in a big way. Besides, investment banking firms like Goldman Sachs expect growth in IT spending to slip from 7 per cent to 5 per cent in 2008.
The effect of the sub-prime crisis has not been fully felt, and this could affect the demand for discretionary IT projects, and consequently, revenue projections.
