The Indian outsourcing market is becoming increasingly dominated by the big three firms, Tata Consultancy Services (TCS), Infosys Technologies and Wipro, analysts have revealed.
The big three are expected to account for 41% of India's outsourcing export revenues in the financial year ending 31 March. Three years ago, the same three companies accounted for just 26% of outsourcing export revenue, Forrester Research said.
Sudin Apte, Forrester's senior analyst and country head for India, said smaller outsourcing companies in India are being marginalised as businesses look for large well known outsourcers with strong financial results, according to analysts from .
Staff also preferred to join larger Indian outsourcing companies, he added. In a tight labour market, small and medium-sized outsourcing companies had to compete for staff with both large outsourcers and the Indian operations of multinational IT services firms such as IBM and Accenture.
As a result, the revenue gap between India's smaller outsourcers and the top three is widening – and is likely to widen further, because the revenue growth rates of the top three are almost double those of other Indian outsourcing companies, Apte said.
While the top three Indian outsourcers have annual revenues ranging from about £1bn to £1.5bn, most of the small and medium-sized companies have revenues of less than £250m a year, although three have revenues around the £500m mark.
The smaller outsourcers are still expanding, but both revenue growth and new contracts have slowed, Apte said.
Apte said the smaller firms tended to spread their limited staff and financial resources too thinly across different services. "They usually want to be mini-TCSs or mini-Wipros.”
But the smaller outsourcers would need to differentiate their offers to survive, picking a few service lines and vertical markets, and focusing on creating expertise in that domain, Apte said.
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