Battling It Out

Smaller IT services companies are finding the going hard, with just a few exceptions.

- Venkatesha Babu

Amid-sized retailer in the US was recently looking for a vendor to maintain a back-end computer application. The contract size was not large, just $40 million, spread over seven years. So, imagine its surprise when its request for proposal (RFP) got an overwhelming response. But the real surprise was aggressive wooing by one of India's largest IT companies, which in the past would have not given such a contract any attention. In fact, a senior vice president even spent time with the retailer's chief technology officer. Finally, the large Indian IT company priced itself in such a way that the smaller vendors had no chance of getting the deal.

This perfectly sums up what is going on in the Indian IT industry, where the struggle to grow and survive is making companies brush aside many of their old assumptions and calculations. Rajesh Gupta, India Partner at ISG, a global technology research and advisory firm, which acts as an intermediary between customers and IT services players, says he is not surprised at the price aggression being displayed by the larger players.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

This hunger to win even the not-so-big projects, and that too after compromising on the price, is driven by a number of reasons. The biggest is the buffeting of Indian IT players by the shift to automation, digital and cloud - areas where they are not at all strong - and visa and other restrictions in their big markets such as the US and the UK, forcing them to reinvent delivery models. Worse, their traditional work such as AMD (application maintenance and development), testing and validation, and package implementation, has been largely commoditised - price alone is becoming the sole determinant for winning contracts of this nature.