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Gartner Says Top 6 India-Based IT Service Providers Outpace Market Growth in 2007

'SWITCH' Companies Account for 2.4% of the Total Worldwide IT Services Market

In a recently published report, Gartner said that the top six India-based IT service providers, collectively referred to as the ‘SWITCH’ companies (Satyam, Wipro, Infosys, TCS, Cognizant and HCL Technologies), accounted for 2.4% of the total worldwide IT services market in 2007 as compared to 1.9% of the total worldwide IT services market in 2006. Collectively and individually, this group of companies have achieved growth rates that have outpaced the rest of the market. All indications are that the Western European market is the next target growth area for offshore services.                                                         

Each of these providers is pursuing growth in the broad-based IT services market. Although the roots of several of these providers were in the application services market, over time each has evolved its coverage of the services market, expanding into a broader base of services, such as infrastructure services.

Mr. Arup Roy, senior research analyst, Gartner, said, “With such strong growth rates that exceed the overall market, the India-based IT services providers are increasing in their competitiveness and taking market share away from the rest of the market. Increasingly they are competing in larger outsourcing deals, with deal values routinely exceeding $100 million and spanning multiple years.”

“While application development and management services remain the bulk of their revenue stream, there is a gradual diversification in other service lines, such as consulting and remote infrastructure management services, where they have experienced high growth. Expansion of service offerings by India-based providers has enabled them not only to build and mine existing accounts, but also to increase visibility as full-service providers”, said Mr. Roy. "Consequently, they are now regularly invited to bid for larger and more-complex outsourcing contracts, requiring multiple services. There is a gradual shift in increasing their revenue share from discrete project based outsourcing services to annuity-based multi-year outsourcing contracts, thereby ensuring ongoing revenue streams. The approach has involved expanding the portfolio of service offerings, tapping new regions and focusing more on high-value services.”

TCS maintains its position as the largest of the India-based IT services vendors worldwide in 2007, rising from a ranking of 35th in 2006 to 28th in 2007 on revenue growth of 34.8% (in terms of US$). While TCS’ growth was slightly below average for this group of vendors at 38% in 2007, it grew more than three times the growth rate of the total market on revenue of $3.8 billion in 2006.

Table 1. IT Services Revenue Worldwide for the Top Six India-Based Leaders, 2006 – 2007(Millions of Dollars)

Rank

Vendor

2006

2007

Growth (%)

Share (%) 2006

Share (%) 2007

28

TCS

3,828

5,162

34.8

0.6

0.7

37

Infosys

2,713

3,757

38.5

0.4

0.5

40

Wipro

2,278

3,405

49.5

0.3

0.5

63

Cognizant

1,424

2,136

50.0

0.2

0.3

69

Satyam

1,350

1,936

43.5

0.2

0.3

76

HCL

1,155

1,648

42.7

0.2

0.2

Source: Gartner (May 2008)

In 2007, the India-based group of SWITCH companies accounted for 3.6% of the U.S. IT services market, compared with 2.8% in 2006 and grew its Western European revenue 51% in 2007, almost four times the total market. In 2007 the group accounted for 1.9% of the Western European IT services market, compared with 1.5% in 2006. TCS, Wipro and Infosys now occupy market share positions within the top 50 of Western European services leaders (see Table 2).

Table 2. IT Services Revenue in Western Europe for the Top Six India-Based Leaders,2006-2007 (Millions of Dollars)

Rank

Vendor

2006

2007

Growth (%)

Share (%) 2006

Share (%) 2007

28

TCS

1,044

1,516

45.2

0.5

0.6

36

Wipro

683

1,046

53.1

0.3

0.4

37

Infosys

708

1,029

45.3

0.3

0.4

73

HCL

324

499

54.1

0.1

0.2

82

Satyam

254

395

55.6

0.1

0.2

88

Cognizant

184

344

86.8

0.1

0.1

Source: Gartner (May 2008)

Commenting on the inroads made in the Western European market, Mr. Roy said, “Since 2001, each of the India-based service providers have made strong advances in the worldwide, U.S. and more recently, Western European market share rankings. The India-based providers in general have not penetrated the Western European IT services market to the extent they have in the U.S. market, but all indications are that this is the next target growth area for offshore services. The India-based providers have a conclusive lead in this area against other more traditional IT services providers.”

According to Gartner, the next twelve months will be particularly challenging for this group of India-based providers. The gap between themselves and the traditional service providers in terms of global delivery competencies and multicountry delivery sites has narrowed. Thus, individually they will need to establish differentiation, while at the same time leveraging the value of the "India offshore" brand, which will continue to serve them in the near term. With a significant amount of cash available, the India-based providers will likely focus on expansion of the service portfolio and geographic penetration through organic as well as inorganic means.

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