It seems small is no longer beautiful. With near-recession in the world’s largest economy, small and mid-sized IT firms are finding it difficult to pedal their expertise in the US. The reason: Project-starved bigger players are eating into the pie of small-sized contracts and as Tier-I companies flex their brand and size, the small and medium enterprises (SMEs) are losing out on the marketing war.
?It would be tougher for smaller companies to get business with all (companies) bidding for all kinds of contracts. The only solution is for companies to build a definite market niche for themselves and innovate. Small players should not just become another Java programming company,? says Nasscom chairman and Pune-based Zensar Technologies global CEO, Ganesh Natarajan.
He said while there were approximately 3,000-3,500 IT SMEs in India, only around 35% had a ‘defensible niche strategy’.
Analysts say the main reason for the larger players eyeing these smaller contracts is due to the pressure to meet their targets. ?Larger players eye short-term and smaller contracts to meet revenue targets,? says Vinu B Kartha, principal at investment advisory research firm Tholons.
?For smaller companies marketing their services in the US has become tougher. We have tracked a few larger companies going after $5 million to $10 million contracts. Moreover, clients like to reduce their exposure to smaller brands and outsource work to larger players who are more established,? he says.
In particular, product development companies could have a hard time in the market as clients halt new purchases and implementations.
Software firm Mindteck that employs 1,000 people post recent acquisitions has taken the cue and started spreading marketing efforts in non-US markets like Europe and South-East Asia. Mindteck made four acquisitions since January 2008 including two in the US for expanding its client base.
?We are concerned that we could lose American contracts to bigger players. The acquisitions and our other markets’ focus should help us face the heat,? adds chief technology officer Shankar Velayudhan.