The competitive pressure in Europe is likely to intensify in the coming quarters. Significantly, according to Datamonitor's "IT Services contract database," in the July-September quarter, not only the Indian companies, but second-rung service providers such as Keane Inc have also bagged multi-million dollar contracts.

Keane is said to have bagged a $367-million deal from the State Government of Victoria, Australia, for a public transit ticketing system.

As the number of billion dollar deals comes down, the average deal size will decline and that will help Indian vendors participate head-to-head on several key outsourcing deals that matter.

As Indian vendors are broad-basing their service lines, vertical exposure and business mix, this trend will prove to be a decisive change.

At the same time, challenges are emerging for Indian vendors in two key areas:

"We now have over 35,000 people in the network globally, including more than 16,000 in India." And Accenture is/will be offering application management services to its existing clients and go after new clients in this area to whom they could cross-sell other services in their portfolio. Other vendors such as Sapient and ACS (Affiliated Computer Services) also have a reasonably strong offshore presence. On close observation, MNC vendors, by stepping down the value chain into the Indian vendor space, are likely to exert greater pricing pressure in the application management space and force Indian vendors to move up the software value chain faster than before.

Even other global systems integrators and IT service providers from the US and Europe, such as Keane Inc, Cap Gemini, EDS, Xansa, Atos Origin, Fujitsu or Unisys, have realised the significance of the offshoring strategy.

Players such as EDS have entered into a strategic alliance with Cognizant (for application management services) and toying with a tie-up with another Indian vendor for BPO and infrastructure management. It has been reported that companies such as Cap Gemini, Xansa and Keane that have bagged some large contracts recently are planning to execute application management contracts from their Indian offshore delivery centres. All this is bound to intensify the competitive pressure on the Indian vendors. More so, if one or more of these European/US vendors make a couple of disruptive acquisition moves in the Indian marketplace to catch up with their peers.

Going by data from the global sourcing advisory firm, TPI, (which handled the ABN AMRO deal) as of June 2005, the number and value of active deals in the pipeline that IBM, Accenture and EDS are participating in remains quite healthy. According to senior executives at TPI, the ABN AMRO deal is a significant win for Indian offshore companies. They, however, aired the view that the offshoring model will get truly vindicated only when Indian vendors bag a large European contract involving takeover of employees executable from different geographies, including India. Among Indian vendors, TCS has made the greatest progress in operating delivery centres in Hungary, Latin America and China and expanding its multicultural footprint. But others are also working on aggressive initiatives in this direction.

Picture by Vino John

maverick@thehindu.co.in

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