Despite concerns about the rise of China, India's IT services firms face a bigger and more immediate threat to their status as a preferred partner to large enterprise customers in North America and Europe.
This was the theme of a keynote address delivered to high-level IT services executives and investors by Marty Wolf at the IT Enterprise Value Summit 2013 in Bangalore this Fall.
The threat comes in the form of a dramatic shift in the types of services large enterprise customers are buying in these two key geographies. Spending on application outsourcing services - an historical strength for Indian IT firms - has been eclipsed by spending on infrastructure outsourcing services. Spending in both categories is now being rapidly outpaced by spending in cloud services - an area where Indian IT firms have yet to make their mark.
Still, Indian IT firms have continued to do well with customers in the West, who are still wary of doing business with China. This is especially true of the large, Tier 1 companies, which have continued to grow organically and through strategic acquisition, increasing their valuations 20% over the past year. Valuations for Tier 2 companies, in contrast, have declined 20% over the same period.
So despite a relatively positive near-term outlook, the Indian IT services industry remains concerned about three things: how to retain existing large enterprise customers in North America and Europe, attract new business, and maintain its competitive advantages over China and other competitors.
In his Value Summit keynote, Marty offered the following advice to Indian IT executives:
In an article based on his keynote published today in VCCircle, Marty wrote, "To remain competitive over the long haul, Indian companies must redouble their efforts to expand their geographic footprint and move up the value chain - or their key customers in these important geographies will leave them behind."
- Go big or go niche
- Develop a culture of innovation
- Diversify your customer base
- Move up the value chain
- Be aggressive about M&A
- Be smart about M&A
To read more about Marty's thoughts on the changing landscape for Indian IT services firms, read the complete article in VCCircle.