RealTime IT News

'Old Standbys' Losing Ground to India

India-based IT and outsourcing companies are poised to overtake EDS , Computer Sciences Corp. , Perot Systems and BearingPoint .

That's the conclusion of consulting firm Katzenbach Partners. In a new report, researchers said corporate customers who believe the legacy players' size and reach will translate to higher efficiency, quality and savings are probably mistaken.

The U.S. players will be facing cost pressure, said Richard Schroth, who led the Katzenbach research team.

"They may be prone to turn over projects to more junior staff, pay less attention to older customers and focus on rationalization, consolidation and even withdrawal from businesses that require greater innovation investment," he said.

That's counter to what Indian firms such as Infosys , Wipro , Satyam Computer Services and Tata Consultancy Services are expected to do.

"We expect that [Indian firms] will continue to invest in growth, invest in people and invest in client retention," said Nathaniel J. Mass, a Katzenbach Partners senior fellow, said in a statement.

That investment will continue over the life of the outsourcing contract.

"The Indian companies will continue to invest in clients even three and four years into a contract, when half of all outsourcing deals normally would fall apart," Schroth said.

The report is based on a new corporate performance metric called the Relative Value of Growth (RVG). The formula determines the degree to which a company is rewarded -- in terms of market capitalization -- for growth and/or margin improvement.

Schroth said U.S. and European outsourcers must improve their growth and margins "or face forced mergers, consolidation or a general loss of leadership positioning."