In the blog debate between Vinnie and Sadagopan about India’s 5 SIs, one gushes about their growing importance in SAP and Oracle implementations. The other brings the India 5 (TCS, Infosys, Wipro, Cognizant, Satyam) to earth by insisting that they are mostly about “post-live” support. I think both are missing the point.
The reality is that fast follower strategy works in IT services. Initially the India 5 used their India-centric model to build a portfolio of services comparable to those of the Old 4 (IBM GS, Accenture, EDS, etc.). As the service portfolio gap has reduced, the Old 4 can see the looming competitive threat. Consequently some of them (IGS and Accenture in particular) have responded with a fast follower strategy of their own. They are copying the India-centric model with gusto. They too haven’t caught up yet but are closing the gap.
The effects of the convergence are visible. On one side is the astonishing revenue growth of some of the Big 5. For instance, Infosys took 5 years to go from $100m to $1b, then 23 months to get to $2b, and will take only 12 months to get to $3b. On the other side is the rapid headcount growth of the Old 4. IBM, for example, has well over 50K employees in India and is still growing its headcount at a frenetic pace. So far the real losers in the battle of titans have been the mid-level players in both India and the US. In fact, the real battle between both sides will only start when this middle slack runs out. That’s when it will be become a zero-sum game. Suddenly the market growth rates that all the big players are seeing right now will disappear.
In this scary next stage of the battle, it’s important to realize that the old competitive factors will become table stakes. These old factors – service portfolio, customer relationships, and global delivery model – will not define the competitive landscape at this stage. New factors will step in to take their place. This is exactly what happened to the PC market. Now that HP has narrowed the operating efficiency gap with Dell, the defining basis of competition has shifted to a new set of factors.
What will the new competitive factors be? And who among the India 5 and Old 4 will move faster to adjust to the new competitive landscape? These are the real questions that need to be answered.
I don’t have the answers; I am, after all, a products guy. But I am calling out to Vinnie and Sadagopan to share their respective buyer and vendor perspectives on this. I hope they will respond.
sorry, what convergence? EDS alone has more revenues than the Big 5 Indian vendors. IBM services is 2.5 times EDS. And IBM itself has less than 5% market share of global tech services. The services market is fragmented and will continue to be. There are plenty of unfilled niches for mid sized Indian firms to move in to around new SaaS offerings, underserved verticals and geogrpahies, new markets around mobility, telemtery, digital market, next gen analytics etc. Problem generally is services firms tend to be herd followers. Every one has an SAP, Oracle, Java and .net practice, If you want to stay in those safe markets, scale matters…but if you are willing to look at other less concentrated markets there is plenty of white space…
Sharad - I think the real answer may lay in how the disruptive forces of enterprise technology like SaaS, SOA begin to mature in their adaptations. Till then the current pack of strong service players would continue to gain marketshare - particularly, offshore headquartered leaders & offshore delivery centric global players would continue to grow their practices. And services business is centered on scale, relationships & delivery capabilities. More of it later as am travelling.
I dont have too much experience to refute, rebuk or ascertain any of the claims but being a CEO of a small firm I feel there is a lot of scope for small and medium companies as long as they won’t be the “herd follower” and get a new dimension in this game which should be used as a differemtiating factor and a entry barrier (for others to enter) and get a strong hold of that niche vertical or service or domain. What is that new dimension is something which come out only when we are very innovative in each step and each thinking of setting aup nd building the company.
my inexperienced $0.02 cents
Manju
S7 Software Solutions
www.s7solutions.com