Strategic Opportunities

for Indian IT Companies: A Study

Yagnil Mehta* and U S Rao**

Indian IT/ITES industry has seen unparalleled growth since its inception and has been contributing
substantially to Indias GDP as compared to other industries. This being a knowledge industry has been
less affected by the economic downturn. The success story of the Indian IT industry propelled other
countries to expand their business portfolio to move higher towards services offering to a wider geographic
base. This forced the value proposition to shift from labor arbitrage to innovation, non-linear business
models and transformational business needs. Hence it has put tremendous pressure on the companies to
change the traditional business model for sustaining future growth. The emergence of disruptive
technologies, talent scarcity and cutthroat competition are the major forces acting on the organizations,
impelling them to evolve from traditional linear business model to nonlinear business model. Clearly, the
Indian IT companies need to think from the strategy perspective to garner the customer value chain to
gain sustainable competitive advantage. This study will help the Indian IT companies to cope with the
dynamic environment and deal successfully with rivals and challenges that stand as hurdles and obstacles
to their growth.

Introduction
Information Technology (IT) being a knowledge-based industry and often known as knowledge
economy has grown tremendously since the early 1990s and has the potential to become the
key driver for the accelerated growth amongst all the sectors and to contribute substantially
to GDP, employment and exports. It has also forced many IT firms to concentrate on optimal
utilization of resources, productivity and efficiency in terms of both human and hardware
resources. The upcoming trends of disruptive technologies like cloud computing and
sustainability and Green-IT have the capability to change the equations. The value proposition
has also shifted from labor arbitrage to innovation, skill variety, transformational objectives
and non-linear growth models. The success of India in the IT sector has also propelled the
low-cost economies, enabling the big players to add offerings and move higher towards service
offerings, catering to a wide geographic base. More and more people are using the best of the
technologies and the consumption patterns are also shifting from US and UK to India, China
and Latin America (PricewaterhouseCoopers, Indian IT/ITES Industry Evolving Business
Models for Sustained Growth, 2010). According to NASSCOM, IT-BPO Industry of India
has registered continuous growth in revenues, as shown in Figure 1.
*

PG Student, Sri Sathya Sai Institute of Higher Learning, Prashanthi Nilayam 515134, Ananthapur, Andhra
Pradesh, India. India. E-mail: yagnil.1988@gmail.com

* * Former Hon. Professor, Sri Sathya Sai Institute of Higher Learning, Prashanthi Nilayam 515134, Ananthapur,
Andhra Pradesh, India. India. E-mail: usraosssihl@gmail.com
22 2015 IUP. All Rights Reserved.

The IUP Journal of Business Strategy, Vol. XII, No. 1, 2015

Figure 1: IT-BPO Revenues

Source: NASSCOM (2012)

This is one of the industries that is very less affected, compared to other industries, by the
economic downturn, and India, like any other emerging market, continues to exercise strong
growth and opportunities (Mittal, IT has packed Agenda, 2012). Businesses are also looking
to IT to help face the challenges of modern customer support, supply chain management,
optimizing complex business processes and accelerating innovation drive in various businesses.
Every industry, every process, every business paradigm is being re-examined, re-engineered
and re-defined. In the same way, new technology development is also impacting the personal
and social lives along with the communities and the societies in which we live
(Chandrashekharan, 2013). India also holds a dominant share of the global offshore IT-ITES
sector: approximately 65% of the global market in offshore IT and 46% of the ITES market.
In fact, estimates by National Association of Software Services Companies (NASSCOM)
and Booz Hamilton say that IT-ITES export could touch $328.9 bn by 2020 (Sameer, 2010).
Internet-linked services and its penetration will generate $100 bn or 3.3% to Indias Gross
Domestic Product (GDP) by 2015 up from $30 bn or 1.6% to GDP in 2011 (The Hindu
Business Line, 2012). The Industry has traditionally started tapping the opportunities in the
mainframe space and still this section holds the major portion of the maintenance business.
The development of the modern technologies and the Internet-based technologies promote
the thriving explosion of the opportunities in todays shrinking world
(PricewaterhouseCoopers, 2010).
Having seen the significant importance of IT in the business processes and growth, IT
strategy has become one of the prime factors while designing business strategies for
organization. It makes sure that organizational goals are crafted in line with IT strategic
process. The global business provides enormous opportunities as well as challenges as imposed
Strategic Opportunities for Indian IT Companies: A Study

23

Figure 1: IT-BPO Revenues

Source: NASSCOM (2012)

This is one of the industries that is very less affected, compared to other industries, by the
economic downturn, and India, like any other emerging market, continues to exercise strong
growth and opportunities (Mittal, IT has packed Agenda, 2012). Businesses are also looking
to IT to help face the challenges of modern customer support, supply chain management,
optimizing complex business processes and accelerating innovation drive in various businesses.
Every industry, every process, every business paradigm is being re-examined, re-engineered
and re-defined. In the same way, new technology development is also impacting the personal
and social lives along with the communities and the societies in which we live
(Chandrashekharan, 2013). India also holds a dominant share of the global offshore IT-ITES
sector: approximately 65% of the global market in offshore IT and 46% of the ITES market.
In fact, estimates by National Association of Software Services Companies (NASSCOM)
and Booz Hamilton say that IT-ITES export could touch $328.9 bn by 2020 (Sameer, 2010).
Internet-linked services and its penetration will generate $100 bn or 3.3% to Indias Gross
Domestic Product (GDP) by 2015 up from $30 bn or 1.6% to GDP in 2011 (The Hindu
Business Line, 2012). The Industry has traditionally started tapping the opportunities in the
mainframe space and still this section holds the major portion of the maintenance business.
The development of the modern technologies and the Internet-based technologies promote
the thriving explosion of the opportunities in todays shrinking world
(PricewaterhouseCoopers, 2010).
Having seen the significant importance of IT in the business processes and growth, IT
strategy has become one of the prime factors while designing business strategies for
organization. It makes sure that organizational goals are crafted in line with IT strategic
process. The global business provides enormous opportunities as well as challenges as imposed
Strategic Opportunities for Indian IT Companies: A Study

23

by regulatory or market forces which are rapid and radical. To respond to these changes,
business firms should not only develop business strategies but also align them with IT strategies
to remain ahead in the world of cutthroat competition. The Indian IT industry which has
spread across the global map in almost 52 countries now needs IT strategies for taking the
growth story forward. With IT becoming so central to business development and strategies, it
needs to be given much more attention than it was given in the past.
Technological advancements are putting further pressure on each and every firm to remain
competitive and also creating new opportunities for development and innovation. The
$100 bn Indian IT sector is seeing a change in the pecking order and continues to see pricing
pressures, small wage hikes and reduction in project volumes in an uncertain economic
climate (The Hindu Business Line, 2012). In addition to that, educated buyers and customers
are demanding higher value for money and hence there is a strong need to align the
organizations business strategy to IT strategy to offer transformed business propositions and
more value to customers. Therefore, the continuous drive concentrated on the R&D, the
innovation capabilities and the operational efficiencies will force organizations to be
innovative and offer unique business solutions to the customers. The industry needs to
embrace new business models which create higher value added offerings to customers.

Literature Review
DAveni (2004), in his article, Corporate Spheres of Influence, explains that it is a framework
to examine the strategic intent of the organizations portfolio and its impact on the competitive
strategy. Sphere consists of product and geographical portfolio on steroid which is a portfolio
with influence over the organizations competitive space. It clearly gives a systematic approach
to develop and manage corporate portfolio that operates, integrates and moves beyond the
traditional models. The framework also considers market power, economies of scale and
synergies while using companys portfolio to mold the portfolio of rivals to create more
favorable situations. It also helps organizations to protect their cores and project the power
to weaken the rivals and devise strategic future moves. The organizations must invest in
other markets that are used as a defence to core. The various zones of the sphere are shown in
Table 1.
Table 1: Zones of Sphere
Zone of the Sphere

Strategic Intent

Core

To keep economies of scale and value leadership

To build critical core competencies

Vital Interests

To create economies of scope and integration

To support, leverage or fund core initiatives

Buffer Zones

To use blocking brands/products as barriers to entry

To fill in a power vaccum before a rival does

Pivotal Zones

To invest in real options risky, big upside opportunities

To absorb into (and hence migrate) the core in the long term

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The IUP Journal of Business Strategy, Vol. XII, No. 1, 2015

Table 1 (Cont.)
Zone of the Sphere
Forward Positions

Power Vacuums

Strategic Intent

To launch offensive strikes to capture rivals strongholds

To establish multimarket contact in a rivals core
To harass, distract or divert a rivalss resources or attention
To be monitored to anticipate future threats and opportunities in
emerging areas currently not controlled by any major player

Source: DAveni, Corporate Spheres of Influence (2004)

A well-balanced corporate sphere indicates the organizations grand strategies and

maintaining of the market power with respect to its rivals (DAveni, 2004).

Core Competence
In their article The Core Competence of the Corporation, Prahalad and Hamel (1990)
have mentioned that the most powerful way to prevail in the cutthroat competition in the
global scenario is through the core competence of the organization. Core competence provides
the potential access to a wide variety of the global markets. It makes a remarkable contribution
to the perceived customer benefits of the end product. It is also difficult for the competitors
to imitate. Hence the top managements real responsibility lies in the building of strategic
architecture that enforces competence building of the organization (Prahalad and Hamel,
1990).

Mapping Your Competitive Position

DAveni (2007), in his article, Mapping Your Competitive Position, explains that with the
dynamic environment and rapidly changing technology, organizations need to build fresh
competitive advantages and countervial others competitive advantages much faster than
they used to do. In hypercompetitive market, this tool is very useful in helping the organization
to systematically analyze their competitors position. He suggests that companies could capture
their competitive positions by drawing the price-benefit positioning map. It is also used by
organizations to benchmark themselves against their competitors and combat their (rivals)
strategies. Hence by knowing the companys related position against their competitors, it
can device strategies to move up in the value chain.

Strategic Analysis
That brings us to the various profitable areas Indian IT companies need to enter to get
sustainable competitive advantage over its competitors and continue to be among the top
Indian IT companies and become a top global company. To know more about which area
Indian IT companies should enter or in which area they should increase their presence, we
need to look at the corporate sphere of influence. The strategies can be formulated for current
businesses and emerging businesses to harness the opportunities to garner the customer
value chain by evolving from traditional value chain to value grid.

Core Competencies of Indian IT Companies

Indian IT Companies core competencies comprise highly skilled and experienced manpower
and Organizational Culture and Global Network Delivery Model (GNDM) which provides
Strategic Opportunities for Indian IT Companies: A Study

25

difficult-to-beat end-to-end IT services proposition. These give Indian IT companies a

sustainable competitive advantage over other competitors.
As shown in Figure 2, India has the most diverse and talented human capital which
becomes a significant differentiator in harnessing the upcoming business opportunities in
five areas, viz., social media, big data, mobility, analytics and artificial intelligence.
Figure 2: Human Capital Leadership

Source: NASSCOM (2015)

GNDM has supported the full service capabilities, and this strategy is widely recognized
by leading industry analysts and observers as an industry benchmarkoffering one global
service standard to customers across the world seamlessly. This model helps customers in
their business expansion plans in emerging markets. It also supports customers various
operations in different regions of the world. This concept has given a significant advantage
to the Indian IT companies as they are have a presence in almost all prime business locations
and provide the same superior quality service anytime and anywhere.
Hence, Indian IT companies need to capitalize their core competencies to remain
competitive and stay ahead.

Mapping the Competitive Position of Indian IT Companies

Indian IT companies competitive position has been plotted by considering two factors:
value and margins. To map competitive position, a few major direct competitors are considered,
viz., TCS, Infosys, Wipro and Cognizant. The major indirect competitors chosen are Google,
Facebook, IBM and Accenture.
From Figure 3, it is clear that TCS is far behind the global giants like IBM, Google,
Facebook and Accenture in terms of high value added businesses and high margins. There is
cutthroat competition in application development and BPO offerings and Indian IT
companies margins are falling very fast. On the other hand, Apple, Google, Facebook, IBM
and Accenture are delivering high value to the customers and they are also getting high
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The IUP Journal of Business Strategy, Vol. XII, No. 1, 2015

margins because of their unique capabilities in offering services and products. Indian IT
companies should move up in the value chain to get sustainable competitive advantage over
others by leveraging on their core competencies and extending their capabilities.
Figure 3: Mapping Competitive Position of Indian IT Companies

Facebook

Google
IBM

Accenture

Margin

TCS
Cognizant

Infosys

Wipro

Value

The corporate spheres of influence for Indian IT companies are shown in Figure 4.

Core
The core of the sphere for the organization is the products or services which generate the
major portion of revenues and profit. This is also the basis of the organizations power. These
are the areas in which an organization wants to create its core competencies. It demands
value leadership and dominance over the core market (DAveni, 2004). The areas for Indian
IT companies are application development and BPO which generate almost 56% of the
revenues for the companies. Indian IT companies must give priority to safeguarding their
core areas.

Vital Interests
The vital interests provide the core with critical and significant complementary strengths
that create integration as well as economies of scope. Moreover, they leverage or support the
Strategic Opportunities for Indian IT Companies: A Study

27

Figure 4: Corporate Spheres of Influence for Indian IT Companies*

Forward Positions
Search Engine, Social Media
Portal, KPO and Product
Development
Pivotal Positions
SMAC, Cyber Security and
E-Commerce
Buffer Zones
Global Consulting and
Engineering and Industrial
Services

Vital Interests
Enterprise Solutions and
Infrastructure Services

Core
Application
Development
and BPO

Note:

SMACSocial Media, Mobility, Analytics and Cloud Computing.

competencies and core initiatives. These provide resources such as raw materials, know-how
and skilled labor (DAveni, Corporate Spheres of Influence, 2004). Indian IT companies have
enterprise solutions and infrastructure services as vital interests in their portfolio.

Buffer Zones
These are defensive positions which provide protection against attack by a rival which may
enter the core. Buffer zones are expendable because they constitute a small percentage of the
companys revenues. The company does not mind losing a battle in the buffer zone than in
the core, thus protecting the companys core products or services (DAveni, 2004). In this
sphere, Indian IT companies have Global Consultancy and Engineering and Industrial Services
which generate 8% of the revenues.
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The IUP Journal of Business Strategy, Vol. XII, No. 1, 2015

Pivotal Zones
These are the future of the industry or in which future power may reside. Entering and
securing a position in the pivotal zone is making a bet on the future but not with any particular
any rival in the back of the mind (DAveni, Corporate Spheres of Influence, 2004). These
areas are Social Media, Mobility, Analytics and Cloud Computing (SMAC), cyber security
and e-commerce. These are the future of the IT industry towards which the entire world will
be moving, and hence Indian IT companies should get into these areas by leveraging their
core competencies.

Forward Positions
These offensive positions are frontline positions and typically are the vital interests or core
of the specific competitor. These positions can be used to destroy or weaken the core part of
a competitor but it can also be used to create stability when each rival defends and maintains
positions in the others core to build mutually assured deterrence. These positions can also be
used to distract, harass or divert a competitors resources and attentions (DAveni, 2004). In
this area, Indian IT companies should focus on search engine and product development
(against Google and Microsoft), social media portal (against Facebook and Twitter) and KPO
services.
The corporate spheres of influence have given us the areas where Indian IT companies
must enter to gain sustainable competitive advantage (see Table 2). Now we can find the
approximate growth rate of the current business areas of Indian IT companies and how far it
should sustain the growth rate for a place on the global business map.
Table 2: Areas Which Indian IT Companies Must Focus
on to Emerge as Global Players

Particulars

Average % of
Revenue in 20122013 of TCS,
Infosys and Wipro

Projected Growth
Rate (%)

Current Businesses
Application Development and Maintenance

44.70

23.01

BPO

11.00

23.01

Assurance Services

7.50

23.01

Asset Leveraged Solutions

3.90

23.01

Engineering and Industrial Solutions

4.60

50.00

Global Consulting

2.60

50.00

Enterprise Solutions

11.00

50.00

Business Intelligence

4.60

50.15

10.10

50.15

New Businesses

Infrastructure Services
Strategic Opportunities for Indian IT Companies: A Study

29

Table 2 (Cont.)
Average % of
Revenue in 20122013 of TCS,
Infosys and Wipro

Particulars

Projected Growth
Rate (%)

Emerging Businesses
Social Media
Product Development and Systems Software
Mobility
Make an entry into
selected promising
areas by acquisitions
or joint ventures

Cyber Security
Search Engine
E-Commerce
Chip Design and Embedded Systems
Animation and Gaming
Total

100.00

Revenue Growth
The revenue growth of IT companies is shown in Figure 5. The revenue growth rate of TCS
increased from 9,774 cr in FY2005 to 48,894.08 cr in FY2012. It grew by approximately
26.26% on an average during this period, while Cognizants revenues grew by approximately
38.94% on an average during the same period from 3,867.53 cr in FY2005 to 37,467.01 in
FY2012. Infosys revenues grew from 7,130 cr in FY2005 to 33,734 cr in FY2012. It grew by
approximately 25.43% on an average during this period. Wipros revenues grew from 7,276.18
cr in FY2005 to 31,682.90 cr in FY2012. It grew by approximately 24.61% on an average
during the same period (see Table 3).
Figure 5: Revenue Growth of IT Companies
60,000
50,000
40,000

TCS
Infosys

30,000

Wipro

20,000

Cognizant
10,000
0

30

2005

2006

2007

2008

2009

2010

2011

2012

The IUP Journal of Business Strategy, Vol. XII, No. 1, 2015

Table 3: Key Financials of Indian IT Companies from 2009 to 2013

Average from
2009-2013

TCS

Infosys

Wipro

Average

Revenues
(in cr)

41,410.69

27,965.78

26,959.79

32,112.09

Total Assets
(in cr)

26,380.96

27,400.60

27,386.32

27,055.96

22.24%

25.62%

15.93%

21.26%

0.38

0.3

0.3

0.33

Margins
Dividend
Payout Ratio

And Indian IT companies must find a way to match the rate at which other global giants
are growing.

Sustainable Growth
The sustainable growth rate is the maximum growth rate a company can achieve with a
robust and sound financial policy. It is calculated as follows:
Sustainable Growth Rate = (P*(1 d) * (1 + L)) / (T (P *(1 d) * (1 + L)))
where
P is the existing and target profit margin;
d is the target dividend payout ratio;
L is the target total debt-to-equity ratio; and
T is the ratio of total assets to sales.
The company can achieve sustainable growth rate by increasing financial leverage,
increasing equity capital or increasing profit margins.
Target debt/Equity ratio = 1 : 1
Sustainable Growth Rate = (0.2126 * (1 0.33) * (1 + 1)) /
((27,055.96/32,112.09) (0.2126 * (1 0.33) * (1 + 1)))
= 51.34%
The sustainable growth rate is almost three times more than normal growth rate (23.01%
revenue growth rate in last five years) and hence Indian IT companies can raise the debt to
achieve sustainable growth rate of almost 51.34%. This will enable Indian IT companies to
look out for new opportunities to grow faster.
Hence considering the opportunities which exist for current as well as new products and
services, this is high time for Indian IT companies to embrace the emerging opportunities by
leveraging on their strengths and adopting the non-linear business model achieve sustainable
growth and garner customer value chain.
Strategic Opportunities for Indian IT Companies: A Study

31

Strategy Recommendations
With the emergence of disruptive technologies and cutthroat competition in low value
added businesses, the firms need to move to high value added areas across the value chain to
grow consistently. The technological developments are also mounting pressure on the current
linear business model of the organizations. With the rapid adoption and acceptance of IT in
various verticals, the customers knowledge and understanding of the areas have also improved.
The organizations also need to think out of the box and evolve from traditional value chain
to value grid, and fence their core and vital businesses to get sustainable competitive advantage.

Strategies for Indian IT Companies

1. Indian IT companies should acquire skills in the social media (which is one of the
emerging technological trends) in the following ways:
Acquire companies which have expertise in social media to get the
know-how. Table 4 lists the recent mergers and acquisitions in social media.
Table 4: Recent Mergers and Acquisitions in Social Media
Acquirer

Target

Month

Description

IBM

Kinexa

April 2012

To improve customer service by providing frontoffice software tools and foster internal innovation
and expert discovery through a cloud-based, social
network solution.

LinkedIn

SlideShare

May 2012

To get connected to people through content sharing.

Facebook

Instagram

April 2012

To get photo sharing applications from Instagram.

Source: Bird and Ward (2013)

Provide training and development programs to employees to build competencies

which are required for social media; as India being the human capital leader, it
has an ample talent pool which can build the competencies required to harness
the potential of social media.
Make strategic alliance with the companies which have the expertise in social
media; for example, in August 2013, Google Wildfire and Isobar announced a
global strategic alliance. Through this alliance, Isobar will have the benefit of
using Wildfires Security-as-a-Service (SaaS) to achieve new level of global
scale and true accountability (Brockington, 2013).
2. Indian IT companies should acquire skills in enterprise mobility (which is one of
the emerging technological trends) in the following ways:
Acquire companies which have the expertise in enterprise mobility to get the
know-how. Table 5 lists the recent mergers and acquisitions in enterprise
mobility.
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The IUP Journal of Business Strategy, Vol. XII, No. 1, 2015

Table 5: Recent Mergers and Acquisitions in Enterprise Mobility

Acquirer

Target

Month

Description

AppSense

Rapsphere

May 2012

To embrace BYOD in the enterprise while

protecting corporate applications and data on mobile
devices.

SAP

Syclo

April 2012

To strengthen and broaden the Enterprise Mobile

applications portfolio.

IBM

Worklight

February
2012

The industry leader (Worklight) helps to reduce

the time to market, complexity and cost.

Motorola
Solutions

Rhomobile

October
2011

To expand their Enterprise Mobile applications

portfolio.

Source: McQuire and Salmeron (2012)

Provide training and development programs to employees to build competencies

which are required for enterprise mobility (organic growth).
Make strategic alliance with the companies which have the expertise in
enterprise mobility; for example, in March 2012, IBM Global Business Services
formed a strategic alliance with Huawei to develop mobile solutions for
enterprise customers (ITP, 2012).
3. Indian IT companies should acquire skills in the cloud computing (which is one of
the emerging technological trends) in the following ways:
Acquire companies which have the expertise in cloud computing to get the
know-how. Table 6 lists the recent mergers and acquisitions in cloud computing.
Table 6: Recent Mergers and Acquisitions in Cloud Computing
Acquirer

Target

Month

Description

Oracle

Taleo

February 2012

For expansion of cloud computing business.

Twitter

Dasient

January 2012

To get cloud-based antimalware technology.

IBM

Platform
Computing

January 2012

To get grid and cloud management software for

distributed computing environment.

IBM

Green Hat

January 2012

To get automation testing tools for integration,

implementation and cloud-based deployment.

Source: Boissevain and Cummings (2012)

Provide training and development programs to employees to build competencies

which are required for cloud computing (organic growth).
Make strategic alliance with the companies which have the expertise in cloud
computing; for example, in July 2013, IBM formed a strategic alliance with
EMC for Platform as a Service (PaaS) (ITBusinessEdge, 2013).
Strategic Opportunities for Indian IT Companies: A Study

33

4. Indian IT companies should use their highly skilled and experienced manpower in
the emerging technological trends like SMAC in the following ways.
Acquire companies which have the expertise in SMAC to get the know-how
(inorganic growth).
Provide training and development programs to employees to build competencies
which are required for SMAC through R&D (organic growth).
Make strategic alliance or joint venture with the companies which have the
expertise in SMAC.
5. Indian IT companies should enter into defence and aerospace sector by offering
cyber security and cyber warfare applications by creating a separate division which
will cater to their needs.
6. Indian IT companies should get into search engine development for Indian
Government as it would like to avoid using Google on concerns of spying and cyber
security.
The spying activities of the US on Google, Facebook and other social networking sites
have increased a lot. They are collecting huge amounts of Internet and confidential data
(McGregor and Waters, 2013). Hence the Indian government will support a local search
engine with cyber security. Later it can be made available for the entire country in various
languages and extended to China and other countries after addressing their cyber security
requirements.
7. Indian IT companies must acquire certain skills in cyber security (one of the biggest
concerns in the world) in the following ways:
Acquire companies which have the expertise in cyber security to get the knowhow. Table 7 lists the recent mergers and acquisitions in cyber security.
Table 7: Recent Mergers and Acquisitions in Cyber Security
Acquirer

Target

Month/Year

Description

Cisco

Sourcefire (FIRE)

October 2013

To provide intelligent cyber security solutions.

IBM

Trusteer

August 2013

To provide cyber security solutions.

Intel

McAfee

February 2011

To include next-generation firewalls and

intrusion detection.

Source: Booton (2013)

Provide training and development programs to employees to build competencies

which are required for cyber security through R&D (organic growth).
Make strategic alliance or joint venture with the companies which have the
expertise in cyber security; for example, in September 2013, Alert Logic which
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The IUP Journal of Business Strategy, Vol. XII, No. 1, 2015

is the leading provider of SaaS solutions for the cloud allied with Kroll- the
worlds leading risk management to tackle data breaches and other security
attacks. Jaiprakash Associates will open a chip unit in association with IBM to
tackle security issues in space, atomic energy, defence and power sectors.
8. Indian IT companies should develop e-commerce portals, logistics management
software and online marketing portal which will be helpful for Small and Medium
Enterprises (SMEs).
9. Indian IT companies should move higher in the value chain to get sustainable
competitive advantage by entering into high value added businesses of product
development. Table 8 shows the difference between revenues and profit as of 2012
of TCS, Infosys and Apple. As we can see, the product development company
Apples revenue and profit are much ahead of Infosys and TCS with less number of
employees.
Acquire companies which have the expertise in high value added businesses to
get the know-how. Table 9 lists the recent mergers and acquisitions of product
development firms.
Table 8: Product Versus Service
Apple

Infosys

TCS

Founded

1976

1988

1968

Employees

72,800

1,55,629

2,63,637

Revenue
(Y2012, billions, US$)

156.508

7.0

10.17

Profit
(Y2012, billions, US$)

41.733

1.71

2.2

2.150 million

44,978

38,575

5,73,255

10,987

8,344

Revenue (US$)
per Employee
Profit (US$) per Employee

Source: Verma (2013)

Table 9: Recent Mergers and Acquisitions of Software Product Development Firms

Acquirer

Target

Year

Business

Google

Bump

2013

Mobile Software

Microsoft

id8 Group R2 Studios

2013

Home Automation

Google

Channel Intelligence

2013

Product e-commerce

Apple

AuthenTec

2012

PC and Mobile Security Products

Source: Google, Microsoft, and Apple (2013)

Strategic Opportunities for Indian IT Companies: A Study

35

 Provide training and development programs to employees to build competencies

which are required to grow more in product development through R&D (organic
growth).
Make strategic alliance or joint venture with the companies which have the
expertise and large market share in product development as MSC Software and
IBM formed the global strategic alliance to help industrial manufacturing
customers like automotive, defence, and aerospace (PRNewswire, 2013).
Make partnership with the major clients in high value added businesses.
10. Indian IT companies can also promote or form subsidiaries for rural shores rural
BPO to achieve inclusive growth and compete effectively with companies from
the Philippines, Bangladesh, Cuba, China, Sri Lanka, Vietnam, etc.
11. Indian IT companies should selectively move into various countries/markets like
China, Middle East, South Africa, Australia, Japan, APAC, etc., to diversify the
risks related to specific markets like US and Europe, as Infosys has recently opened
the new branch in Sydney as it expects business growth of more than 500% in New
South Wales by 2018 (Deccan Chronicle, 2013).
Acquire companies which have the large market share in these countries
(inorganic growth).
Set up development and delivery centres in these countries.
Make strategic alliance or joint venture or collaboration or partnership with
the companies which have the large market share in these countries.
Make collaboration or partnership with big clients in these countries to spread
the footprints.
12. Indian IT companies should increase their presence in emerging verticals like
healthcare, education, energy and utilities and e-governance in the following ways:
Acquire companies which have the expertise in these sectors to get the knowhow (inorganic growth).
Provide training and development programs to employees to build competencies
which are required to grow more in these sectors through R&D (organic
growth).
Make strategic alliance or joint venture with the companies which have the
expertise and large market share in these sectors as Cognizant is the market
leader in the health and life science sector. IBM is the market leader in energy
and utilities sector. Moreover, Samsung has already started enterprise solutions
for healthcare, education, transportation and hospitality. Hence, Indain IT
companies should form strategic alliance with Samsung to get to know about
various verticals.
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The IUP Journal of Business Strategy, Vol. XII, No. 1, 2015

 Make partnership with the major clients in these sectors like Apollo Hospitals,
state governments, various educational institutions, etc.
13. Indian IT companies should get into IT consultancy, IT services management,
market intelligence, KPO, CRM and predictive analytics, which are high value
added, in the following ways:
Acquire companies which have the expertise in the above-mentioned
technology trends to get the know-how (inorganic growth).
Provide training and development programs to employees to build competencies
which are required for the above-mentioned technology trends through R&D
(organic growth).
Make strategic alliance or joint venture with the companies which have the
expertise in the above-mentioned technology trends.

Conclusion
Clearly the IT industry is at a very crucial stage and it has the potential to become one of the
important growth engines of the Indian economy. It can contribute to urban employment
and exports to achieve a vision of young and resilient India. The study avers that for capitalizing
on the above opportunities, it is necessary for Indian IT companies to create profit centres for
new areas of business under able and dynamic leaders (by putting under each profit centers all
the allied businesses), giving them the necessary mandate to make companies significant players
in the world in each of these areas. The study is helpful to the companies to cope with the
dynamic environment, to gain sustainable competitive advantage, to evolve from traditional
value chain to value grid and to become top global IT companies in the world.
Limitations of the Study:

The study mainly uses secondary data available in the respective sectors and hence
it is bound by limitation of information available.

The selection of companies (Top Indian IT companies) is based on the data available
and also as per the credibility expressed by the various websites.
Scope for Further Study: Future studies can focus on collecting primary data through
interviews of top executives who can give more meaningful insights. The most strategic
opportunities for Indian IT companies are in the emerging technological areas. IT being a
volatile industry, these technological areas can be studied in-depth for a comprehensive
understanding of the challenges and opportunities for Indian IT companies.

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