Premier location: Yes, India has become one for offshore IT services

Global it giants like IBM, EDs and accenture seem to be losing their vice-like grip over large transactions in the international it outsourcing market. And India and Indian companies are beginning to make a noticeable mark in this space, though the absolute figures are still comparatively small. According to statistics from TPI, the Woodlands, Texas-based global sourcing advisory firm, India-based vendors accounted for 5 per cent of all global outsourcing deals in the first half of 2006, up from 1 per cent in 2004. In absolute terms, they won 11 deals worth $1.74 billion (Rs 8,004 crore). This means India-based companies are also winning bigger deals-the average deal size has risen from $128 million (Rs 576 crore then) in 2005 to $159 million (Rs 731.4 crore) this year. More significantly, the share of the global giants tumbled from 71 per cent to 54 per cent between 2004 and 2006. But these stats, as is their wont, hide much more than they reveal. "Though the share of India has increased over the last few years, 73 per cent of these deals were awarded to the local arms of MNCs," says Siddarth Pai, a partner at TPI. This indicates that homegrown Indian companies have gained comparatively less than what the headline figures seem to suggest.

While acknowledging the growth of India and Indian vendors in the global it market, Steve Heidt, Vice President, EDs, says global vendors will continue to bag most large contracts in the foreseeable future. "Companies such as ourselves have a much larger global presence (than Indian companies) and, therefore, the ability to win and execute large, potentially multi-billion dollar, deals," he says.

"Nevertheless, large Indian vendors have achieved significant growth and are beginning to win larger and more varied deals," counters Pai. They are also competing for a much larger slice of the global outsourcing pie than before. TPI data shows that the value of contracts that Indian companies are vying for is 284 per cent higher than last year. "India is today established as the premier location to undertake offshore it services and we believe we are ideally positioned to leverage the country's cost and quality merits," says Kris Gopalakrishnan, Joint Managing Director, President & coo of Infosys Technologies.

Despite the hype over it outsourcing, it's actually the business process outsourcing (BPO) sector that is growing faster in the first half of 2006. According to the TPI report, a record 92 contracts (compared to 58 last year) valued at $11 billion (Rs 50,600 crore) were signed globally in the first six months of 2006, an increase of 20 per cent compared to the corresponding period of last year. Financial services leads the way with 27 contracts valued at over $4 billion (Rs 18,400 crore) and accounts for almost 40 per cent of the market. "The BPO market is beginning to mature," says S. Nagarajan, coo of 24x7 Customer, a Bangalore-based operator.

It is difficult to pinpoint the exact share of Indian vendors in BPO deals, but Pai, who tracks deals over $25 million (Rs 117.5 crore), says they now have a very noticeable presence in this market. "We are winning big global contracts, and are ramping up our technological capabilities," says Wipro Technologies' Chief Strategy Officer Sudip Nandy.

Despite the recent high-profile withdrawal of companies such as Apple and UK-based utility Powergen from India, TPI believes that there is little evidence to suggest that clients in the West are dissatisfied with Indian vendors. "Our data predicts further growth in the value of work being moved offshore," says Pai.

INSTAN TIP
The fortnight's burning question.

The Delhi High Court has ordered the government to implement CAS in Delhi, Mumbai and Kolkata by December 31. Will it make television viewing more expensive for most Indians?

No. Jawahar Goel, Director & Vice President, Indian Broadcasting Foundation

It will give viewers the choice of watching what they want. CAS is just another medium of delivery. Its implementation will help sort out the issue of under-declaration.

No. K. Jayaraman, CEO, Hathway Cable & Datacom

CAS will be a cheaper proposition for people who want choice. If all you want to watch are free-to-air channels, you won't have to cough up the Rs 250-300 that you have to today.

No. G. Krishnan, CEO & ED, TV Today Network

The average monthly expenditure on cable television per family is Rs 200-250. Introducing CAS will let viewers pay only for the channels they choose to watch. Thus, for most households, the cost may actually come down.

-Compiled by Aman Malik

Q&A
Education Quality Is An Issue

Vivek Wadhwa, 49, is adjunct Professor at the Pratt School of Engineering at Duke University. Prior to this, he ran two hot start-ups, Seer Technologies and Relativity Technologies. Wadhwa tells BT's Rahul Sachitanand that India is graduating fewer quality engineers than is required to stay competitive in the global market. Excerpts:

You recently said the US produces more engineers than India and China. Is this correct?

Our report said a total of 134,406 engineers graduated in the US last year, 112,000 in India and 351,537 in China. A vast majority of Indian engineering graduates are in it. The difference: in the US, about half are in traditional engineering.

What are the long-term repercussions of this?

India is graduating fewer engineers than it will need for its long-term economic development. The vast majority of them are from colleges that rely on rote learning and their curriculum is 20-30 years out of date.

Why is this relevant?

The graduation rate of engineers is a measure of global competitiveness.

What should the government do to solve this problem?

The best thing the government can do is to leave the universities alone and give them the funding and freedom to innovate and modernise.