IT Competition in 2012
India's National Association of Software and Service Companies (NASSCOM) said that the current economic slump in the U.S. will benefit Indian outsourcing companies, as more U.S. companies must cut costs. A NASSCOM member said: "In this economic downgrading, the Indian IT industry is strengthening its partnership with U.S. customers to help them overcome problems and build business efficiencies with our skilled workers. We are ready to help U.S companies to reduce costs, to focus on their core business, because we can take care of their IT works.”
The U.S accounts for about 65 percent of the revenue of Indian outsourcers, with Europe accounting for about another 25 percent. The view of many Indian is that when the developed countries' market shrinks in a crisis, the business to India will increases because of its lower costs advantage. Last year, India outsourcing industry brought in $97 billion dollars but this year it is expected that the number could go as high as $120 billion. The most explosive areas are mobile platform, cloud computing, and embedded software. All top five Indian outsourcing companies are offering services in these areas and directly challenge IBM, Oracle, Microsoft, Amazon, and newcomer HP who just joining the list of companies offering software as a service.
Infosys, India's second largest outsourcer, is offering business platforms on the cloud, as part of its strategy to grow more business in the U.S. Within six months, the company has signed 20 large companies for its business platforms delivered through the cloud and it expects to have more. Each of these contract is valued at several million dollars. One Wall Street financial analyst said: “If they can deliver these services extremely well, they could capture most of this lucrative markets worth several hundred billion dollars.” Today Infosys already has several of their own products in the areas of human resource, procurement, social commerce, and digital marketing, and an app store that offers services to mobile telephony operators. All of these are fully integrated and charge the customer on a pay-per-use model.
By moving quickly to cloud computing, Infosys will have to compete with many U.S companies that have built strong positions in this business. One financial analysts commented: “The business of cloud computing requires large investments, large scale of operations, large number of supporting personnel, and large group of talented service managers which Indian companies may not have at this time. Most Indian companies are providing coding testing, these are product development. However, cloud computing is service providing, not software development. Where do they find all the expertise in service area?”.
However, in the past six months Infosys has already set up a large center to train 14,000 people and plans to hire another 45,000 additional people as the company is transforming itself into new business model. A financial analyst commented: “The current model is not well matured enough as you just cannot keep hiring more and more people to get more revenue. Having people trained in providing service requires different mindset, different thinking, different way of doing business. I do not think within the next few years, Indian companies could bypass companies such as IBM, Oracle or Microsoft. However, by moving to the cloud computing, it seems that many Indian's companies are changing their business from outsourcing to cloud service providing. This is a very smart move to the next level as outsourcing is aiming at lower labor cost where software as a service I aiming at bring in better revenue. The estimate value could be five to ten times more and if they succeed, Indian could bring in several hundred billion dollars per year instead of a billion as they have achieved last year. This also mean instead of creating million jobs, it could translated into several hundred million jobs. However, this is something we need to look at carefully because they are not supporting us but now competing with us on jobs creation, something that the U.S is badly needed.”
The competition in the global IT market has begun and it remains to be seen in the next few years whether Indian companies will succeed or not.
Sources
- Blogs of Prof. John Vu, Carnegie Mellon University
