Gartner in a new research report, stated that the top six India-centric offshore service providers, collectively referred to as SWITCH companies (TCS, Infosys, Wipro, Cognizant, Satyam and HCL Technologies), accounted for 1.9% of the total US $672 billion IT services market in 2006, compared to 0.5% of the US $554 billion IT services market in 2001. (See Table 1)
Table 1: Market Share of Top 10 IT Services companies Worldwide and the Leading India-Centric Service Providers in 2006
2006 Rank |
2001 Rank |
Company |
Market Share (2006) |
1 |
1 |
IBM |
7.2% |
2 |
2 |
EDS |
3.2% |
3 |
3 |
Fujitsu |
2.7% |
4 |
4 |
Accenture |
2.6% |
5 |
- |
HP |
2.4% |
6 |
5 |
CSC |
2.2% |
7 |
7 |
Lockheed Martin |
1.6% |
8 |
- |
Capgemini |
1.4% |
9 |
9 |
ADP |
1.4% |
10 |
- |
Northrop Grumman |
1.3% |
|
|
TOTAL MARKET SHARE OF TOP 10 COMPANIES WORLDWIDE |
26.0% |
Top Six India- Centric Providers |
35 |
68 |
Tata Consultancy Services |
0.6% |
43 |
125 |
Infosys Technologies |
0.4% |
49 |
130 |
Wipro |
0.3% |
73 |
212 |
Cognizant |
0.2% |
79 |
153 |
Satyam Computer Services |
0.2% |
86 |
160 |
HCL Technologies |
0.2% |
|
|
TOTAL MARKET SHARE OF TOP SIX INDIAN COMPANIES |
1.9% |
Source: Gartner (August 2007)
Allie Young, vice president and distinguished analyst, Gartner says, “India-centric providers have perfected their respective value propositions through global delivery models (GDMs), providing high-quality yet lower-cost labour to buyers globally. These companies are making inroads in key clients, often beginning with smaller, project-based or staff augmentation work.”
Despite their relatively smaller size, the top six India-centric offshore service providers are making significant strides to challenge the market share leaders' positions by continuing to show strong annual revenue growth far exceeding the market norm. The average annual growth rate of the SWITCH companies was 42.4% in 2006, compared with a 4.3% growth of the market leader during the same period.
Ms. Young said, “Some may argue that the reason for high growth rates, is the smaller revenue base. While percentage growth on a smaller revenue base is easier to achieve, the India-centric providers are outperforming (in total dollar gains) many organizations far larger than they are.”
Analysing for example, the revenue growth of the leading global and Indian provider in 2006, it can be seen that despite IBM's $48 billion total IT service revenue, its dollar growth year over year was less than $1 billion. TCS on the other hand increased its revenues by over $1.2 billion in 2006, and achieved this increase from a revenue base 1/18th of IBM's size.
The increasing competitiveness of the India-centric service leaders is evident in growth rates that outpace the market, and market share rankings that have grown stronger each year. In 2001, the ranking positions of the top six service providers in India spanned from 68 to 212. By 2006, they were within the top 100, with rank positions spanning from 35 to 86.
Partha Iyengar, vice president, distinguished analyst and regional research director, Gartner said, “From being relatively unknown brands a decade ago, leading India-centric providers now offer formidable competition to the global players. Buyer adoption of offshore service delivery and a willingness to consider emerging offshore service brands has had a material impact on the competitive landscape and providers' market share performance. Large outsourcers are now re-evaluating their preferred vendor rankings to include Indian companies, especially for multi-vendor engagements. If the India-centric IT service providers continue to grow at the current pace, at least two companies will be a part of the top ten companies globally.”
Nevertheless, while these six leading India-centric providers are enjoying strong growth rates, it would still take them a number of years to challenge the top service providers or appear among the top three market share leader roles — unless they make a major acquisition.
According to Gartner, the India-centric leaders must carefully assess which type of acquisition is most suitable to their long-term objectives. If market share leadership in the top three is a goal, they will need to pursue an acquisition of considerable size.
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