June 2008

Indian firms to double UK IT market share
...as skilled local workers ready themselves to 'head for the hill’s...

India's five largest IT services suppliers look set to double their market share in the UK by 2011, said Pule Mokoena, Group Executive at Innovation Group, leading business process consulting and administration company – the SA subsidiary of global business outsourcing operation.

According to the latest research, Infosys, TCS, Wipro, HCL and Satyam are on track to boost their share of the UK's software and IT services market over the next three years from three to seven per cent.

"A seven percent market share might not sound that big. But it is a big market. It was also reported in the UK-based on-line publication, www.contractorUK.co.uk that at least one of these software giants will breach the $1 billion-a-year revenue mark," said Mokoena.

"Despite a lot of conjecture about India losing its foothold as the leading software outsourcing destination of choice, it still has a lot of clout. Despite facing capacity problems - such as energy supply problems - they are still a force to be reckoned with. It is unlikely that they are going to tumble from the world rankings very far in the next decade - if at all."

The forecast from www.contractorUK.co.uk is based on the companies' current growth trajectories. Additionally, they must overcome some obstacles before it is achieved. This is according to Pierre Audoin Consultants, which made the statement in the press at the end of January.

The consultancy said that among the challenges the five companies will need to show they can execute staff transfer deals, which often involve IT contractors - and manage sub-contractor and local partner networks.

WWW.contractorUK reports that, in the last 18 months, UK companies including Carphone Warehouse, Skandia and DSG, have all committed to contracts with Indian IT suppliers worth over £100m.

"Yet to continue to secure deals of this magnitude, the IT vendors must also tackle the steady erosion of their price advantage in light of rising domestic labour costs.

"Low prices are no longer the only weapons in the armoury of the Indian services vendors, and they are winning business against Western suppliers on the quality and depth of their offerings," said Nick Mayes, senior consultant at PAC.

Meanwhile, Karen Geldenhuys, MD of Pretoria-based IT recruitment firm, Abacus Recruitment, said these "market rumblings don't augur well for South Africa's brain drain."

The company has recently being predicting another skills exodus as the country is gripped by a wave of political mistakes and misconduct, such as the pending trial of Jacob Zuma on fraud and corruption charges, the sacking of national police commissioner, Jackie Selebi, and what appears to be gross incompetence as evidenced in Eskom's debilitating load shedding activities.

"Skilled workers are lining up for greener pastures. We haven't seen this type of negative sentiment in the recruitment domain for many years. Those that have the skills, are looking for ways to find employment overseas. If Indian companies are looking to employ - and to further encroach on markets in the UK, for instance - this will certainly offer opportunities for local IT workers.

"While one of the positive factors of SA was the fact that our economy was looking good - and was growing at a healthy rate - it now appears that growth is going to be stunted due to Eskom's capacity problems. The mining industry is set to cut its investment in the country by 25% due to the power problems and analysts are predicting that the energy crisis could lop up to 2% off our GDP during the next year. This is going to have a devastating affect on the economy and is likely to scupper the government's plans to halve unemployment by 2014. Given the bleak economic data emanating from various sources and the backdrop of severe political uncertainty as the ANC threatens to derail due to internal faction-fighting, many skilled workers are going to simply head for the hills."