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Global Reach
IDC India forecasts 16.4% average annual industry growth over 2008–2013, moderated from
24.3% over 2003–08.
Captives and Vendors Shift Up
Today, as captive (foreign owned) R&D centers are being given a larger role by their parent
companies in global product development, many of India’s smaller IT service companies are
struggling, and its major IT firms are working hard to move up the value-added ladder, from
simple business process outsourcing (BPO) and writing basic code, to knowledge process outsourcing
(KPO), systems integration, and the development of expertise in key industry segments
(“verticals”) such as health care, telecommunications, life sciences, and financial services.
Employment in legal services offshoring, a form of KPO, is projected by ValueNotes to grow
from 7,500 professionals in 2006 to 32,000 by 2010. Financial service firms are expected to increase
their use of offshore resources, as are engineering firms. India’s Engineering Promotion
Export Council estimates that the country’s engineering process outsourcing (EPO) market is
likely to reach $30 billion by 2015, reflecting growth in the global EPO market to a range of
$110–140 billion.
For most of India’s IT majors, a key to the future lies in IT systems integration—which helps an
enterprise’s disparate proprietary and incompatible legacy systems work together more effectively
or replaces them with a single, unified solution updated for the enterprise’s current and future
needs. The global market has become increasingly specialized, both by function and by sector:
• Specialized product development. Outsourced IT is now designing custom IT products and
systems for the automotive, energy, medical, financial services, and other sectors.
• Web-based IT and software. Vendors are offering a variety of off-the-shelf enterprise software
solutions—from human resources and customer relations, to document storage
and retrieval, to project management—on a subscription basis, run from their servers via
the Web. Some have made available on a license basis the source code for specific software
modules, or platforms, that users can access to build their own custom solutions.
• Remote infrastructure management (RIM) services. A 2008 McKinsey study suggests RIM services
may be the most potent long-term growth area for Indian IT, involving design and
development of integrated service infrastructures—including hardware, software, connectivity
and people—across an entire enterprise, such as a power generation grid,
school system, manufacturing supply chain, hospital network, or smart highway system.
Infrastructures may be managed by the enterprise from a central location or outsourced
to a third-party vendor. McKinsey foresees a $524 billion in global expenditures. After
stripping out emerging market countries unlikely to commission projects in the foreseeable
future and government or business services likely to be maintained in-house for
security, IP, or competitive reasons, McKinsey sees an addressable $96–104 billion outsourcing
market over time. As much as 75% of infrastructure management can be outsourced
but to date, vendors and captives in low-cost locations such as India have only
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