...make it to the big league?

With a large pool of technical manpower and lots of successful NRI entrepreneurs, e-biz consulting was but a natural course to follow for a new breed of Indian companies. Will these companies be able to change the image of India as just a cost-minimization destination?

n 1999, many Indian pure-play companies jumped onto the e-biz consulting bandwagon in the US. They joined the big brothers like generalists Infosys, Wipro and HCL Technologies. Many of them like Planetasia, Netacross and Plexus, which had started earlier with the idea of serving the Indian market as well, focused more on the US market and are now recognized by name in the US market. And a few companies, like MindTree and TechSpan, promoted by veterans of the Indian IT industry, started from scratch in 1999.

After almost two years, what have they achieved?

Yes, they are still comparatively smaller companies by the US standard. In fact, the Voice&Data estimate of the total sales of the pure-play Indian origin (including TechSpan, headquartered in the US) companies, at $136 million is less than the Q3 2000 sales of Sapient. They still compete (in most cases) on price. And compete with smaller companies and not really with the likes of Scient and Sapient (except for a few isolated cases).

Yet, they have been able to make an impact in the US market. What gives them the strength to compete in the long run with the big US companies? Price is one thing. But can they sustain this business—this is no mechanical coding work—simply on price?It seems they have found a few answers. And that is good to begin with.

One way these companies differ from the other Indian software services companies is that their strategies are centered around a new truth that they have discovered—as Indian companies, their advantage is cost, not price.

And this is what it means. Definitely, doing things in India by Indians is cheaper. However, that cost-saving need not be passed directly to the clients as price-cuttings. A few smart companies are using this cost-advantage to do a little bit of research on horizontal expertise areas, major products that are used in e-business in their Indian centers. That is not only making them better equipped, but giving their young professionals a hands-on training. And that expertise is being offered to the US clients as a value. The US companies cannot afford the same kind of research in the US, which will be much more costly.

Revenue Analysis (Top Six)

Two, they have been projecting another strength of India—the access to a large pool of technical manpower. Indians have built a reputation as tech-savvy people. In fact, estimates say that most of the US e-biz consulting companies have a large percentage (as high as thirty to forty percent) of Indian professionals. But these companies are restricted to either hiring locally in the US or through recruitment consultants in India. Indian recruitment agencies don’t really have the expertise to do that. Many of them are planning to open Indian offices, primarily for hiring people out of India. One of the first ones is market leader Sapient, which has opened an office in Delhi.

In fact, access to resource is what most Indian pure-play e-biz consulting companies are projecting as the primary strength in a market, which sees low-price companies with a little suspicion.

And three, they have used the above strength to build another internal strength. The US operations of most Indian pure-play e-biz consultants are very high on utilization rates. Ideally, about seventy to seventy five percent utilization is considered right in this industry, as that gives room to a company to take up larger, new projects anytime, and also manage high employee turnover. In fact, most US companies have lower utilization rates. And many of them are laying off staff now. With better access to manpower, most Indian companies do not have that problem. They are sometimes as high as ninety percent on utilization. Their Indian operations are a different story, though.