New generation technology players threaten Indian IT outsourcing growth

The Indian IT Outsourcing is in for trouble. Some of the biggest technology players in the international market are coming up with the latest generation technologies that can challenge the traditional USP of Indian IT industry, which is the cost saving. The challenge is expected to come from companies like Google and Amazon.com.

The main factor behind this threat is the emergence of cloud computing. Multi-national companies such as Google, Amazon, Microsoft as well as Hewlett-Packard are increasingly making use of cloud computing for hosting the IT based infrastructure for larger as well as midsized enterprises. They are hosting this infrastructure in their own data centres at a much lesser incremental cost. It is expected that this cloud computing technology has the potential, of lowering IT costs of the clients by a minimum of around 40%. More over these companies have built the reputation of reliability too which will make them dear to clients compared to their Indian counter parts.

This development can have significant influence on the Indian IT outsourcing which has dominated this sector riding on the advantages of cost reduction and technical knowhow. The cloud computing technology is expected to help global technology providers to gain both these advantages. Now they can provide a reliable software environment with highly standardized management of commodity servers and processes thus enabling effective utilization of resources too.

The cloud computing is expected to provide extreme challenges in the days to come to the Indian IT outsourcing. Cloud computing has three levels of delivery models namely infrastructure-as-a-service, platform-as-a-service at the middle tier and also software-as-a-service at the user level. The presence of value added services such as analytics also enhances the cloud based service offerings. This is where firms like Google, who is already an expert in data analytics will score heavily over traditional Indian IT outsourcing vendors.

The emergence of social media as well as use of mobile devices in the enterprise combined with the cloud computing technology is paving way for new dimensions in the information technology sector. It was made clear in the Nasscom Strategic Review 2012 report too, where they have clearly explained the potential risk that these next generation technology vendors can pose for the Indian IT outsourcing industry.

The challenges are all set to increase for the Indian IT Outsourcing industry as greater privacy measures and stricter regulatory norms are now being implemented in US and European markets. The expected hike in wages by 10 to 12% in Indian market is going to further raise the hurdles for enterprises that look out for cost effective solutions.

Indian IT outsourcing companies are now moving towards outcome-based pricing model instead of the input-based model they had opted for years. This is considered to be one of the ways to overcome the challenges they are facing with the emergence of newer technologies.




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