Indian technology firms seem to have cracked the code for success in United Kingdom’s commercial outsourcing space. This comes at the expense of American and pan-European vendors.

Indian IT majors Tata Consultancy Services, Infosys, Wipro and others have seen their collective market share for both IT and BPO deals grow by over 6 times in less than a decade, a new report by the NASDAQ-listed Information Services Group has suggested.

“In the commercial world in particular, we have seen substantial growth in the market share of India-based providers (up from 4 per cent in 2002-2005 to 25 per cent since 2010) but this has come at the expense of other foreign providers, particularly those based in the US and Europe, rather than domestic providers,” the report said. According to research firm IDC, United Kingdom’s enterprise IT services market was worth $38.5 billion in 2013. Indian IT firms generate about 27 per cent of their UK revenues from the financial services domain.

European competition

As competition within Europe rises and costs spiral, UK-based companies are increasingly viewing outsourcing as a valid means of cost reduction.

Peter Schumacher, Chief Executive Officer of management consultancy firm Value Leadership Group, says European IT services firms have fallen behind the pack because they are trapped in out-dated business models.

“While European firms were busy restructuring, offshore firms were outperforming the European firms in all key financial metrics by a factor of 6. Additionally, they used their financial strength to accelerate the pace of change,” Schumacher added.

Indian providers, on the other hand, have wisely built on their cost and labour arbitrage advantage to get into higher value services.

“There was a time when some of our larger UK-based clients would look at Indian firms for smaller projects and the American vendors for big ticket deals. But now, Indian companies are competing head-to-head on all levels with their global counterparts across applications, consulting, infrastructure and other technology areas,” said Ganesh Natarajan, Vice-Chairman and Chief Executive Officer of RPG group company Zensar Technologies.

Arun Jain, Chairman of Polaris Consulting and Services, believes that the top IT companies (TCS, Infosys, Wipro and Infosys) deserve credit for leading the way and creating a positive brand image for Indian IT as a whole.

However, Indian firms are yet to make significant inroads into UK’s public sector outsourcing market, which continues to be dominated by domestic vendors.

Analysts see Indian providers giving tough competition to their American counterparts not only in UK but also rest of Europe and Asia. “Our closed-door strategy meetings with 200 top customers in the UK, USA, and Asia underscore that Tata Consultancy Services is now being seen as the most formidable challenger to IBM Global Services,” said Schumacher.

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