Indian IT industry is on track to achieve its long term aspirations of US$ 50
billion in export revenues by 2008 and remain the pre-eminent destination for
exports. The industry has grown at a CAGR of 46 percent since 1999, which is
higher than the growth rate required to reach the target set in the first
Today, India is undoubtedly the pre-eminent destination for offshore IT
services. However, China has the fundamentals to emerge as a credible offshore
IT services destination in the medium term.
The Indian IT services industry landscape is being fundamentally reshaped by
changes in customer and competitor behaviour, and the emergence of new
opportunities along service lines, verticals and geographies.
Sustaining future growth will call for new capabilities, an expanded business
footprint, and radical changes to existing business models. India needs to take
several initiatives to sustain its lead in exports of IT services and also
explore opportunities to engage with China.
IT Enabled Services
Based on location and people attractiveness, ten countries were identified as
strong contenders for the global ITES market in 1999-- India, Ireland, UK,
Australia, Singapore, Hong Kong, China, the Philippines, the Netherlands and
Mexico. Among these, only two countries, India and Ireland, have created a
substantive presence till date.
Today, India and Ireland surpass other competitors in terms of employment,
number of companies sourcing ITES as well as spectrum of verticals and services
lines. India, in particular, is witnessing rapid growth due to its cost
advantages, the early success achieved by the reference lighthouse customers and
government initiatives implemented to improve location attractiveness. The ITES
industry has grown at more than 70 percent over the last two years and currently
employs over 1,00,000 people. India is fast emerging as the new leader,
especially in traditional services such as call centers, back office processing,
etc. India is also the first country to see significant third party
Philippines and China could pose the strongest competition to India and
challenge India's supremacy in the medium to long term. Only China and the
Philippines, other than India, have a sizeable, low cost talent pool, which
could meet global ITES manpower needs. Governments in both countries are taking
significant steps to improve their attractiveness for the ITES industry.
Other countries like Malaysia, the Caribbean, South Africa, Hong Kong, etc.
have seen some ITES activity. However, the small size of their talent pools and
lack of reference customers severely constrains their ability to emerge as hubs.
The Indian ITES industry is set to move well beyond contact center,
low-skilled work driven by the early success of the first movers. Capturing the
opportunity will require players to crystallize their business models and
develop tailored value propositions.
The Government will need to focus on three areas to help the industry realize
the potential--removing regulatory hurdles especially in emerging service lines
such as IT-enabled services; unlocking growth in the domestic market; and
proactively addressing potential infrastructure and talent bottlenecks to ensure
that India stays ahead of competition.
NASSCOM will need to take on the mandate of developing and positioning India
as a global services sourcing hub. Specifically it should focus on three main
tasks--developing India's presence and strengths in emerging service lines such
as IT-enabled services, systems integration, infrastructure management, and
RD services; helping companies break new ground in long under penetrated
geographies; and, strengthening the India Inc. brand.
Learn more about the advantages of India as an Offshore Destination