Why US Companies Should Partner With Indian Outsourcers, Part 1

Most technology and solution providers in the US are missing a tremendous opportunity to grow their sales through alliances with India’s IT outsourcing leaders.  This is particularly true for firms offering on-site services, possessing vertical or domain specific solutions or operating in highly commoditized industries such as desktop support, product acquisition or transactional-based services.

To be fair, there are challenges to this strategy.  India is a long way from the United States, ten or more time zones makes for conference calls at really odd-hours.  Culturally the two regions are quite different – a reality that becomes evident for US travelers the moment the plane doors open on your first trip to Bangalore, Mumbai or Delhi.   There is also a stigma in the US associated with Indian-delivered tech support and, to many Americans, India equals off-shoring and job losses.    

So why consider it with so many obstacles to overcome?

The most fundamental reason is to look at it from the classic ‘shareholder perspective’.  Sales alliances with Indian companies can be great for the bottom line.   The largest of India’s outsourcer community, collectively referred to as SWITCH (Satyam, Wipro, Infosys, TCS, Cognizant and HCL) are big, fast growing companies.  Their combined total revenues for the most recently completed fiscal year exceeded $19 billion (USD) according to annual reports, and the group averaged 37.5% in revenue growth last year.  Most impressively, they generated more than $4.2 billion in net income during that same period.   Compare that performance to EDS (prior to acquisition).  Last year, the Texas based company that created IT outsourcing made just $716 million in net income on $22 billion in revenue.

The trend is likely to continue according to Gartner.  In August 2008 the research firm reported “India’s top outsourcing companies will likely become the next generation of “mega-vendors” for IT services by 2011, competing for deals worth more than US$1 billion,”.   The report went on to say the largest players will increasingly compete with other top players such IBM, Accenture and EDS for those large deals.   

Do big, successful companies need partners?   In research report published last year, Ravi Radjou, a Forester Vice President and Principal Analyst commented bluntly that, “Indian IT providers lack the outward-facing skills needed to orchestrate Innovation Networks — global ecosystems of internal and external R&D and go-to-market partners that collaboratively design and deliver business innovations that clients’ desire.”   He further added, “In particular, Indian IT providers’ CEOs — many of them engineers by training — must dare to reorganize their sacrosanct CT office and R&D groups to act less as inventors, and more as brokers, of external innovation partnerships.”[1]

Evidence recommendations like these were taken seriously can be found in Everest Research Institute’s second quarter 2008 Market Vista report.  They state that off-shore centric suppliers (India’s top tier), announced 19 new alliances in Q2 alone, a near 100% increase over the first quarter, when ten new alliances were formed.   This figure counts ‘only’ those alliances formally announced on web-sites and press releases and excludes many more tactical associations that were likely formed during the same period.

Developing alliances with India’s outsourcer community is a pathway to growth both in the US and internationally.  While many Indian companies still derive the majority of their revenues from US customers, they are very focused on growing other global regions to diversify from their US dependency.   They need partners that can help them establish market presence in regions such as APAC, Europe and Latin America and also those which make them stronger or more competitive in mature markets like the US.

Coming in Part 2: How To Establish Sales Alliances With Indian Outsourcers


[1] Indian IT Providers Must Reinvent Their Innovation Strategies To Sustain Global Leadership, February 28, 2007, Navi Radjou, Forester Vice President and Principal Analyst February 28, 2007

 

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