Indian IT firms told to seek big acquisitions

Indian outsourcing companies need to make big acquisitions if they are to challenge the existing world order of global IT services companies.

The top six India players: Cognizant, HCL, Infosys, Satyam, TCS and Wipro — collectively referred to as Switch — accounted for 1.9 percent of the total $672bn (£332bn) IT services market in 2006, compared to 0.5 per cent in 2001, according to figures from analyst Gartner.

It said these companies are making inroads into "key" clients, often beginning with smaller, project-based work. Despite their smaller size, it also said they are making "significant strides" to challenge the market share leaders' positions, by showing strong annual revenue growth far exceeding the rest of the market.

The average annual growth rate for the Indian companies was 42.4 percent in 2006, compared with a 4.3 percent growth of the market leader during the same period, the analyst group said.

Gartner vice president Partha Iyengar said companies are re-evaluating their preferred vendor rankings to include Indian companies. "If the India-centric IT service providers continue to grow at the current pace, at least two companies will be a part of the top 10 companies globally," he said in a statement.

But Gartner said it will still take a number of years for Indian companies to challenge the top service providers or appear among the top three market share leaders — unless they make a major acquisition. And the analyst group said that if market share leadership in the top three is a goal, these companies would need to pursue acquisitions of "considerable size".