There’s little question, however, that all of them are coming on strong. They are starting to make acquisitions of other firms, particularly those that are customer-facing, a trend that IT research and advisory company Gartner Inc. expects to accelerate.
And the leading Indian firms are creating consulting divisions to further their ambitions. “Our business model is clearly changing,” says Infosys Consulting CEO Stephen Pratt (based in Fremont, Calif.), moving beyond pure outsourcing. “Forty percent of our revenues are from services we introduced over the past five years. We’ve gone from all outsourcing to much more of a project-based company.” This puts him in direct competition with the IBMs and Accentures of the world. The competition “is getting really serious now,” says Pratt, who worked for Booz Allen Hamilton for eight years and Deloitte Touche Tohmatsu for 12 years. “The idea that we were on a collision course started four or five years ago, and now we’re actually colliding.”
HCL, formerly Hindustan Computer Ltd., says that of all the Indian firms, it is the one leading the way into more complex work traditionally dominated by the U.S. majors. Shami Khorana, president of HCL America, based in Vienna, Va., says three deals are at the center of this drive. The first was HCL’s $40 million acquisition in February of Capital Stream, a Seattle-based provider of consulting services for commercial banks. Second, HCL inked a $100 million deal with CA, the former Computer Associates, in which the Indian firm has taken responsibility for developing and supporting an antivirus product for CA’s customers; CA sells the service but shares revenue with HCL. “It’s absolutely a new model,” says Khorana. Third, HCL signed a joint venture a year ago with Toronto-based Celestica, an electronics contract manufacturer, in which the Indian company designs, prototypes, and manufacturers new products.
For its part, IBM maintains that it still enjoys a commanding advantage over its Indian challengers. It is the number one seller of technology services in India. IBM spokeswoman Angela L. Sullivan says that the company’s revenues from India approached $1 billion in 2007, and that it has recently launched the IBM India Institute for Business Value, a think thank that will enhance IBM’s lead over its Indian rivals.
Overall, the company has 53,000 employees in India, and believes it is beating the Indians on their own turf. IBM says it won out over Wipro and Tata, for example, to help the Delhi International Airport Ltd. implement an enterprise resource planning system. “IBM is seizing opportunities to win in India and is beating the Indian pure plays in their own backyard,” says Sullivan. She adds, “IBM’s approach to global delivery is very different from the Indian players, who are still almost completely reliant on low-cost talent in one or two countries.”
The question is how much longer the Indians will be relying on low-cost talent in one or two countries and be considered pure plays. The answer appears to be: not much longer. “These companies are going to get dramatically bigger and dramatically more complicated in the next three to five years,” says Harvard’s Khanna.
How does the battle shape up from a customer’s perspective? Tom Lamming, chief information officer of Australian telecommunications provider Telstra, in Melbourne, spent 25 years with Accenture and now buys services from both the U.S. giants and the Indian challengers. He likens the industry to construction. First, an architect has to draw up a concept. Then engineers need to create detailed blueprints. Only then can contractors and builders get to work. “An architect makes more money than a carpenter,” he says.
Keeping with that analogy, the Americans have been better at designing solutions for Telstra. “Indian firms deal well with very structured problems,” says Lamming. “But if I have a business problem and ask, ‘How do I solve it?’ they can’t do that as well.”