Financial Daily from THE HINDU group of publications
Monday, Aug 30, 2004
Info-Tech - Insight
Lasting out the ride
THE dynamics of the offshore marketplace are poised for a dramatic change. But in this great leap forward, do not expect big-bang announcements or fireworks marking this change. It will be a slow and insidious turf battle, which will be fought between multinational vendors (of the likes of IBM, Accenture, CSC or EDS) and the top five Indian vendors Tata Consultancy Services (TCS), Wipro, Infosys, HCL Technologies and Satyam.
Forrester Research, in a recent report titled "Low-Cost Global Delivery Model Showdown", expects that this tussle for supremacy between Indian and MNC vendors will continue for the next three to five years.
As this evolution progresses, it appears that qualitative parameters (such as having a good onsite-offshore model or a multicultural workforce) of Indian vendors will play an equally important role in investment valuation as financials do, on a quarterly or half-yearly basis. There is a fear that with employee numbers of top vendors crossing 25,000 and recruitment of about 3,500-5,000 employees every year, quality initiatives and customer intimacy among these vendors may suffer. This is a typical qualitative metric for which information can be gathered only through greater dissemination of information by companies. Top vendors will have to share more information about, say, certified professionals in different verticals such as insurance or manufacturing or strategic investments in tools and methodologies on an ongoing basis.
The growing sophistication of software services is expected to force the investor community to demand and monitor a larger set of metrics (with a few to be developed along the way) on an ongoing basis to keep tabs on:
It is already becoming clear that the top three Indian vendors are likely to pursue different strategies to achieve this move up the software value chain.
TCS is likely to use its size to great effect.
For instance, in terms of revenues in 2003-04, the package implementation business of TCS is almost 1.4-1.5 times larger than that of Infosys, Wipro and Satyam. Wipro, clearly, has the widest portfolio of service offerings among the top five vendors.
Through a combination of organic initiatives and acquisitions of, say, Spectramind, Ericsson's telecom practice, American Management Systems (for utilities) and Nervewire Inc (for the higher end of the financial services space), it has moved ahead of the pack.
Infosys, on its part, is broadbasing its offerings through a consulting foray made earlier this year.
MNC vendors such as Accenture or EDS can today leverage their global presence to offer competencies (in different verticals or technologies) across different geographies. Consider EDS.
According to the latest Forrester report, EDS has its onsite presence across 11 countries, spanning all low-cost geographies such as South Africa, Brazil, Mexico, Malaysia and Czech Republic.
At the moment, TCS has probably walked the farthest along this path, with global delivery centres at low-cost locations such as Uruguay, Budapest, China and Brazil. But the employee numbers are still very small in comparison to their MNC counterparts.
Clearly, for the top Indian vendors, broad-basing their geographic presence will be either through the organic route or acquisitions.
A string of small acquisitions will become even more important as this will help the Indian vendors also build up a truly multicultural workforce.
Picture by Shaju John
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