Challenges and Strategies for Indian IT MNCs in 2010

Abstract

IT service providers in India have been increasingly concerned about competitive threat to their export business from emergingfirms in China. The world over competition is being replaced by co-opetition. Competitors are becoming global in their view of service markets and are driven by demand from buyers for dealing with well-known trusted and large service brands. Alliance with Chinese firms will allow scale and risk diversification for Indian vendors to compete as global brands. Opportunity for achieving scale of operations emerge from projections of the Chinese software market size to grow to $22-27 billion' by year 2006 from $5.024 billion in 2000. Risk diversification opportunity exists in the form of expanding markets to Japan and South Korea. A word of caution is that the hype surrounding China will eventually subside. A hype cycle Model enumerates why the predicted revenues might not be realised due to government policies and economic turmoil, hence entry strategy should be well timed. We suggest entry in 2004 as appropriate timing for Indian MNCs. On the other hand the perceived threat of China emerging as an alternative outsourcing base is not substantiated by facts. Based on current data we estimate an acute shortage in skilled labour. India too will face skill shortages to a lesser degree. We recommend process innovation in software development methodologies as a strategy for meeting the projected supply shortages. Finally, companies are likely to face internal challenges. The genesis of these challenges lie in its implementation part and top management vision. A balanced scorecard has been evolved for IT companies to link strategies with critical success factors and generate key performance measures for internal strength of the organisation. The paper tries to make certain recommendations which are emerged during the discussions with various CEOs of different companies.