Will Infosys and TCS disappear in 8-10 years?

This thought would hardly ever cross anyone's mind as Infosys or Tata Consultancy Services (TCS) are not just any other company in India. They are Information Technology (IT) giants. They enjoy the reputation of being a bellwether in the Indian software industry. They are the leading players when it comes to grabbing offshoring opportunities in the global arena. In addition to that, most of the industry experts feel that there still exists a great potential for growth in the Indian IT sector. However, recent views given by The Hackett Group, a US-based strategic advisory and research firm, on global offshoring projects an altogether different story.

According to the Hackett Group, offshoring of jobs to India would peak by 2014 and would start declining thereafter. Even worse, in the next eight years, offshoring would reach the end of its lifecycle. The research firm predicts that only half of the existing business services jobs in the developed economies such as the North America and the Europe would be in existence in 2016. That reduction would badly hurt the number of potentially offshorable jobs.

No doubt, all this casts a dark cloud over the expected future growth prospect of Indian IT industry. After all, so far it has thrived on the very concept of outsourcing. That too, most of the growth was witnessed on the back of the developed economies such as the US and the Europe. However, does this projection by the Hackett Group negate the all growth potential of the flourishing Indian IT sector? Certainly not.

To understand why, first let us revisit as to how all outsourcing business from the developed economies started. The root reason is its cost effectiveness. To add to this, there was a lack of sufficient human resources in these countries. All this led to the growth of outsourcing. One can always argue that this is just history. The important question of the day would be "is the situation different now"? Has outsourcing reached its end? Not really.

As a matter of fact the need to increase business efficiency is only growing by the day. The current crisis in the developed economies is forcing companies in those regions to look for cost effective business solutions. And they are unable to get these solutions from within their own countries. There still exists a dearth of the right talent at a cost comparable to that available in India. Hence, global outsourcing potential is here to stay. After all, India still holds the tag of the most popular destination for offshoring.

The buck does not end here. The big companies in the sector have matured. They know that the world around them is fast changing. Hence, they are also trying to move up in the business value chain. They are no longer restricting their business to just US and Europe. They are diversifying across the geographies. They are focusing on the growth potential in the Asian counties as well including India.

To put things in perspective, just take the example of Infosys. The Company has completed 30 years of its journey. Now the company is looking at the next phase of the journey. In the first phase of the journey, Infosys 1.0, the company created GDM (Global Delivery Model) which became the de-facto standard in the industry later on. During Infosys 2.0, the company developed the capabilities of providing end-to-end solutions and consulting services. Now in third phase, the company is focusing on products and platforms business to increase the non-linear business while doing its regular business. Hence, the company is adapting itself with time and creating new growth opportunities while maintaining its relevance to its clients. Similar is the story with the other Indian IT giants.

So, would Indian IT story and the future of companies like Infosys and TCS fizz out in 8-10 years? We definitely do not think so.