The momentum is building up for the $86-billion Indian IT services export industry with healthy demand for outsourcing and offshoring from its key markets like US and western Europe. This buoyancy has created a kind of disruption among the top-tier Indian IT services companies and much will depend on each firm’s strategy to grab the market opportunity,
Partha Iyengar, vice-president and distinguished analyst, Gartner, said while talking to PP Thimmaya. Edited excerpts.
How do you see FY15 outlook for the Indian IT services industry?
The Indian IT services industry needs to be looked at via two lenses. Earlier, we could talk about IT services as one homogenous industry either doing well or badly, we are beyond that now. Demand is going to come back very healthily and it has already started. The second aspect that will define success or failure is an individual companies’ strategy and capabilities and this is where — if you look at last three or four quarter results in the same market — we have seen some outperform and others starting to struggle. That will continue and it is the new normal.
Is the demand strong in US and western Europe?
The economic environment, a sense of doom and gloom is lifting in the US market. In spite of mixed results, the general consensus is that it is back on track economically. Similarly, in western Europe, a sense of worst is behind them.
There has been huge explosion of interest and outsourcing, especially to Indian companies. In the next two to three years, one is actually going to see the percentage of revenues grow fairly radically, that is already happening to a couple of companies.
The key determinant, unlike the US market, Europe is fairly fragmented where you need much more local sales. How these companies crack the model, which will work there in order to really scale either through acquisition or organic hires will depend on the individual latitudes and needs.
The third aspect is Japan, which is sort of a dark horse. It is third-largest IT economy and there is tremendous amount of activity bubbling there. Though there will be some cultural challenges for Indian IT services provider but that is the market they cannot to afford to ignore. They will have to focus strongly and some of the companies are doing reasonably well.
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