India, the king of the IT outsourcing industry, is now being threatened by new players. Fifty other countries -- Malaysia, Vietnam and Eastern European nations, including Hungary and Poland, together could pose a viable challenge to India in the months ahead. Recent surveys and studies suggest India's share could be reduced from 85 per cent to 45 per cent.

India is a great source for providing IT solutions to the West. IT solutions include developing software solutions for almost all areas of business and for all sectors, ranging from automotives and aviation to transport and medical services to the media and retailing. From low-end solutions like data entry to Enterprise Application Integration almost every level of knowledge work is done here. There is no denying that outsourcing to India is growing because of the low-cost labour and efficiency of workers. India has a well educated, talented, low cost and English speaking workforce, excellent IT and networking infrastructure, a fairly stable political scenario, friendly laws and well laid taxes and quality certified software firms. The fact that India churns out 2.5 million English graduates every year is not easy to miss.

As the boom continues, Asian workers are expected to get the highest pay hikes in the world in 2007. Workers' annual salaries are expected to climb an average 3.6 per cent in Asia this year, a 50 per cent jump from 2.4 per cent in 2006, according to a survey by human resources firm ECA International. Workers in India are set to enjoy the sharpest jump in real wages across the globe this year at 7 per cent. The average wages for programmers, call centre representatives in India, China and the Philippines have grown from anywhere between 20 and 40 per cent. This is rather high when pitted against the salaries for the same positions in the West.

The Indian IT outsourcing model has been premised on cost-effectiveness and stands to be threatened by the acceleration in wages here. The brunt of this escalation in wages has been passed on to the international customer. It would be a no-brainer to understand the change if Western countries are driven to search for more commercially viable shores.

Experts believe that India presently dominates and will continue to dominate, blessed by the sheer scale of skills in the country at low costs. One way for Indian companies to maintain their competitive advantage and ensure their international clientele is to upgrade the services they offer and come up with more sophisticated back up services to the basic call center services.

In order to emerge as truly global players and undercut the competition, Indian outsourcing companies should also think about expanding their brand globally by setting up delivery centers outside of India. India has to make inroads into non-English speaking markets as well, similar to what Ireland has done to successfully service the European market. India also needs to devise a long-term strategy to ameliorate infrastructure and consistently grow its labour force. In the recent past, the highest attrition rate has been recorded in India. The going is definitely not going to be easy.