Page - 1

Industry Environment

India has become the premier destination for IT services outsourcing and is acquiring a disproportionate share of the global shift to outsourcing. We are optimistic that this trend will continue, in line with the NASSCOM-McKinsey estimate that India’s IT services industry will grow at a CAGR of 34% till 2008.

However, optimism notwithstanding, the industry faces significant challenges. While volumes are increasing, so is competition. Multinational customers are integrating backwards to set up IT extensions of their global operations in India, becoming increasingly self-sufficient with regard to their own requirements. Multinational IT service providers are also strengthening their offshore delivery capabilities, which is going to increase competitive pressures in the offshore IT services space.

A paradigm shift in the customer acquisition process is becoming evident. The customer wants to be accessed and serviced through domain or vertical expertise rather than commoditised horizontal or technical expertise. Customers are demanding solutions based on domain familiarity that extend beyond technology services and enhance their business competitiveness.

Customer engagement models are also becoming progressively complex as customers are moving up the 'Contract Value chain’, demanding fixed price and fixed price-SLA type models. Simpler time and material contracts are not the preferred choice. Global customers are showing an increasing preference for large and global IT service providers for sourcing their IT needs. IT service providers who can scale their operations and retain flexibility without compromising quality will be better equipped to sustain their long-term growth.

Concept of Verticalization

Verticalization is a solution that deepens functionality in specific industry sectors. Verticalization allows firms to become full-package producers that can quickly respond to orders, control quality, and build better relationships with retailers.

Next

* Contributed by -
Varun Gupta,
B.E. (Electronics), Mumbai University,
MBA, ICFAI University, Hyderabad,
Currently working as Business Analyst with NSE.IT Ltd., Mumbai.