India 3 set to take on giants

India 3 set to take on giants

Large Indian outsourcing providers will need to cut down on staff numbers if they want to maintain their unprecedented business success, analyst firm Gartner has warned. But three Indian firms are likely to pose a serious challenge to global champions IBM, Accenture and EDS.

The "India-3" are growing three times as fast as the world’s current “mega vendors”. Partha Iyengar, regional research director at Gartner, said : "The emerging mega-vendors have made dramatic progress in the past few years and have more than doubled their revenue in a four-year period, with the 2007 revenue being 2.6 times the 2004 revenue. This level of growth differential has continued even as these vendors have become multibillion dollar enterprises. To put this in context, there are just 100 service enterprises globally with more than $1 billion in revenue.”

According to Gartner, Tata Consultancy Services, Infosys Technologies and Wipro Technologies are increasingly considered for service deals over today’s global "mega vendors" but demonstrate much lower levels of productivity which needs to be addressed if they are to "truly achieve mega vendor status".

"The Indian providers will have to address the issue of moving away from resource-intensive revenue growth to a model that provides higher leverage and increase revenue without a linear relationship to head count," said Iyengar.  "Revamping and continually reinventing their delivery capabilities, even as they address the challenges of managing their growth opportunities, will determine how and when these emerging mega vendors will actually achieve mega vendor status."
 
Gartner attributes the success of India-3 to four critical competencies: process excellence, world-class HR practices, provision of high quality services at a low cost and achievement of significant and disproportionate ‘mind share’ compared to their actual size. A statistical analysis done by Gartner shows that market capitalization of India-3 is much higher than that of EDS, and almost on par with Accenture.
 
“By combining process excellence to deliver higher quality with the less expensive (and larger) workforce available in India, the India-3 providers were able to create the combination of low-cost, high-quality services, which has proved to be the most alluring factor for clients,” Iyengar said. “These qualities have resulted in a higher level of mindshare among clients and prospects globally that is significantly disproportionate to their revenue and overall size, as compared with the incumbent megavendors.”