The top six?offshore IT service providers of the country, collectively called ‘Switch’ companies (Satyam, Wipro, Infosys, TCS, Cognizant and HCL Technologies), accounted for 2.4% of the total worldwide IT services market in 2007 compared to 1.9% in 2006, according to a recently published Gartner report.
Collectively and individually, Switch companies have achieved growth rates that have outpaced the rest of the market. The report predicts that the Western European market is the next growth area for offshore services.?Arup Roy, senior research analyst, Gartner, said, ?increasingly India-based IT services are competing in larger outsourcing deals with deal values routinely exceeding $100 million and spanning multiple years.?
In 2007, the Switch companies accounted for 3.6% of IT services market of the US, compared with 2.8% in 2006 and its revenue from Western European market grew by 51% in 2007. Last year the group accounted for 1.9% of the Western European IT services market, compared with 1.5% in 2006. TCS, Wipro and Infosys now occupy market share positions within the top 50 of Western European services leaders.
?While application development and management services remain the bulk of their revenue stream, there is a gradual diversification in other service lines, such as consulting and remote infrastructure management services. Expansion of service offerings has enabled them not only to build and mine existing accounts, but also to increase visibility as full-service providers?, observes Roy. Consequently, the domestic IT companies are now regularly invited to bid for larger and more complex outsourcing contracts, requiring multiple services.
There is a gradual shift in increasing their revenue share from discrete project-based outsourcing services to annuity-based multi-year outsourcing contracts, thereby ensuring ongoing revenue streams. The approach has involved expanding the portfolio of service offerings, tapping new regions and focusing more on high-value services.
The Indian IT major, TCS maintains its position as the largest India-based IT services vendors worldwide in 2007, rising from a ranking of 35th in 2006 to 28th in 2007 on revenue growth of 34.8% (in terms of dollar). TCS grew more than three times the growth rate of the total market at revenue of $3.8 billion in 2006.
According to Gartner, the next 12 months will be particularly challenging for Switch companies. Individually, the companies will need to establish differentiation, while at the same time leveraging the value of the ?India offshore? brand, which will continue to serve them in the near term, observes the report. With a significant amount of cash available, the India-based providers are likely to focus on expansion of the service portfolio and geographic penetration through organic as well as inorganic means, projects the report.