Increasing pace of globalization, focus on English language and soft skills, and cost arbitrage is what makes China focus on the IT/ITeS market. While the competition in the low-end jobs may increase, it is not a disruptive threat to the Indian IT/ITeS industry even though margins will continue to face pressure. The more significant threat is talent. It is becoming increasingly difficult to get good talent. Domain skills do not come easily, and hence poses a serious challenge in terms of moving up the value chain. The companies are primarily engaged in the routine (testing, maintenance etc.) work, but the more significant opportunities are in upgrading to data mining, analytics, business intelligence etc. that solve business problems.

In the current economic scenario it is difficult to predict the size of the industry, because we do not know the exact state of the global economy in the next six months. However, given the dynamics, ironically the lower end market will not be impacted because cost cutting and squeezing efficiency is an imperative. American companies have become very efficient. They will continue to try to become more and more efficient, and to squeeze margins or reduce risk. In general, margins at the low end will continue to erode slowly.

The challenge ahead for the Indian IT industry is in creating global brands, which not only offer backend efficiency but also integrated solutions. In this light the Indian IT industry needs to build capabilities to provide these integrated solutions. The path for the next three to five years is to continue to harvest the existing market but establish brand that positions you higher on the value chain.