India's Hot IT Market Drives Domestic Interest in Outsourcing


India, which has established a reputation as a favored provider of outsourced IT services, is now becoming a major consumer of such services. According to Gartner, the local IT services market will hit $10.73 billion by 2011 after notching an impressive five-year compound annual growth rate of 23.2 percent.


The CTO of Indian retail chain Shopper's Stop, interviewed in an InfoWorld article, says his company is in the midst of six IT projects and will undertake another dozen in the next six to 12 months. So it isn't surprising that Shopper's Stop supplements its internal staff of 45 by outsourcing IT chores including network maintenance, monitoring of ERP applications and software development.


Though such business growth is a primary driver of outsourcing, Indian companies also must compete with service providers -- locals and multinationals like IBM alike -- for talented staff. In fact, scarcity of talent led Gartner last summer to advise Indian companies to consider offshoring.


Until recently, says Gartner, many large Indian service providers neglected the domestic market in favor of drumming up business abroad. IBM commands 11.2 percent of the Indian IT services market, followed by Tata Consultancy Services with 10.9 percent and Wipro with 4.1 percent, according to InfoWorld. Some 40 percent of domestic business goes to small local service providers.


An executive with Bharti Airtel, an Indian telecom in the midst of a $1 billion outsourcing contract with IBM, says his company chose IBM because of its investment in India, expertise in the telecom sector and willingness to enter into a long-term agreement.


Indeed, in a blog from August, I noted that Everest Research was advising Indian service providers to tweak their capabilities and consider different pricing models in order to avoid losing business to multinationals.