Indian Outsourcers Grow Fast, Gain ProminenceIndian Outsourcers Grow Fast, Gain Prominence

For the first time, offshore providers garnered enough responses to be included in information Research's Analyzing The Outsourcers study. While the companies--Infosys Technologies, Tata Consultancy Services, and Wipro Technologies--didn't score particularly high in the overall rankings, their very appearance shows the shifting landscape of the IT-services market.

Most of the Indian firms have been providing a range of offshore services for years. However, they've shown stunning growth in recent quarters. Infosys, Tata, and Wipro are expected to, on average, see revenue growth of 36% this year, according to company projections, while expansion in the IT-outsourcing market as a whole is expected to be in the single digits. And overall, worldwide spending on offshore IT services will grow to $17 billion in 2008 from $7 billion in 2003, a compound annual growth rate of almost 20%, according to IDC.

So what drives buyers of IT services to employ Indian labor? It's more than price. All three offshore firms scored well in terms of domain expertise and range of offerings, an indication that Indian service providers are outgrowing their reputation as body shops that specialize in commodity work. A number of offshore players are winning more infrastructure-management contracts.

That's leading a number of Indian service providers to increase their presence in the United States. Wipro has more than 3,000 employees in the United States and Canada and maintains offices in almost every large North American city. Other major Indian firms are following suit.

A Wipro survey this year of 145 technology executives worldwide showed that 30% planned to offshore their companies' IT infrastructure over the next year. Our survey shows that location was the least important factor driving the selection of a service provider--technology executives are more concerned with a vendor's reliability, value proposition, and technical skills.

Next year, a new market entrant could pull even more business offshore. General Electric Capital International Services, based in India, is being spun off from parent company GE and plans to compete aggressively for IT and business-process-outsourcing contracts outside of GE. With more than 12,000 employees and plans to expand into South America and Eastern Europe, expect the GE spin-off to show up on future reports. Says Stan Lepeak, outsourcing analyst at Meta Group: "They will be a significant player in the market."