AS04: Offshoring power shift

Look who's calling the shots now

Indian politicians edged out by the country's IT powerhouses? It's just more proof there's been a shift of power in the offshore outsourcing market, says Andy McCue.

The offshoring phenomenon has rapidly become a mainstream IT issue for businesses. It was represented on last year's Agenda Setters poll by the then Indian Prime Minister Atal Bihari Vajpayee, who made his debut at number 8.

Since then much has changed. Vajpayee and his Hindu nationalist BJP party were voted out of power at the Indian general election earlier this year in favour of the more socialist Congress alliance. Not surprisingly, Vajpayee has dropped off this year's list but the continuing rise of offshoring has brought a new trend on the poll.

Now it's the leaders of India's homegrown IT companies who are household names in Europe and the US. While not the only offshore location, India still dominates the market and so it's the heads of the Indian offshorers who make it into the top 50.

All of the execs are new entries and the highest on the list at 20 is S Ramadorai, CEO of India's largest IT company Tata Consulting Services (TCS). On the back of a $1.17bn IPO earlier this year, Ramadorai is committed to making TCS a top ten global IT company by 2010 and he may yet well look to Europe for an acquisition to support that aim.

Although lower down the list at 45, Ratan Tata, chairman of TCS' parent company Tata, is perhaps a more significant inclusion. Tata took over the Tata Group in 1991 and turned a stagnating organisation into a dynamic and entrepreneurial group with business units in everything from auto to steel and IT, which now makes up 2.4 per cent of India's GDP.

Agenda Setters panellist and venture capitalist Bundeep Singh Rangar said: "Ratan Tata is my pick because he epitomises the growth and not just [in] IT but beyond that."

Another of India's iconic businessmen, and one who can also claim much of the credit for the growth not only of his own company but of India's IT market, is Azim Premji, chairman of India's number two IT company Wipro who comes in at 35.

Premji often sits back and lets his charismatic US-based CEO Vivek Paul, who also makes the list at 26, dominate the spotlight. But it was Premji who took over the running of a $1.5m cooking oil company after his father's death in 1966 and diversified it into the $1bn technology and services company it is today.

Paul, meanwhile, has driven Wipro's high growth rate of around 35 per cent a year and, like Ramadorai at TCS, his aim is to move Wipro up the IT service value chain and turn it into a genuine competitor to the established western big guns Accenture, CSC, EDS and IBM.

Panellist and Quocirca head of research Clive Longbottom said: "Vivek Paul is the one who's been driving the whole professional services side and I think he's got more ahead of him. But certainly I think Wipro has been the Indian engine that's shown it can be done, that Indians themselves can do project management, and it's not just a case of 'hey we've got the skills and some of us can speak passable English'. It's a case of, 'hey, we can do the whole thing, you can sub-contract to us as a block'."

The entry of the Indian IT execs on the Agenda Setters poll represents something of a power shift within India itself when it comes to offshoring and the tech sector. The homegrown IT companies are now big enough to set the agenda.

There have been concerns the change of government earlier this year would have a negative impact on the IT sector as the Indian Congress Alliance came to power on a popular vote of Indians disillusioned at how the benefits of the IT revolution had failed to trickle down through society. But, perhaps acknowledging the economic reality and the power of the IT companies, Congress has committed to continue supporting initiatives that will benefit the Indian IT and BPO sector.

The next 12 months promise to be challenging for the likes of TCS and Wipro as they move to counter a US-led backlash against the loss of jobs through offshore outsourcing as well as try to fend off competition from other developing countries. It is also vital that the Indian companies move up the IT and BPO value chain from pure programming and call centre work to project management, enterprise IT services and high-level R&D.

Offshoring will undoubtedly still be on the agenda next year but it will be interesting to see if it is the same names heading the pack.