India sourcing threat not so great

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The political backlash against offshore sourcing to India is inconsistent with the impact it is having on the local job market, according to research from analyst firm Gartner.

Indian IT services companies have snared only two per cent of the Australian sourcing market for software development and integration services, according to Gartner.

Five of India's service providers, Tata Consulting Services, Satyam, Infosys Technologies, Pentasoft and three companies in the HCL group, won most of the Australian business outsourced to India in 2002.

Some of those firms grew as much as 36 per cent, leveraging their low-cost business models by fulfilling contracts in India as well as using Australian developers, Gartner's Asia-Pacific vice-president for research, Rolf Jester said.

Given the survey's findings, Jester said, Australia is witnessing only the beginning of a political backlash against offshore sourcing because it is seen to threaten the jobs of local software developers.

"These companies can be pleased with this achievement as their competitors are all registering single-digit growth," he said. "However in the scheme of things, this is a small share of the market. Certainly, it is disproportionate to the large amount of opposition to offshore sourcing that has been expressed in Australia in the last few months."

"Indian companies are just starting to penetrate the Australian market. However, the others are fighting back by establishing software operations in low-cost regional centres and adopting differentiated strategies," he said.

"Opposition will eventually die away as Australian companies take advantage of the quality and cost benefits and realise there is more to be gained economically by embracing, not resisting, the global delivery model," Jester said.

Australia's software development and integration sector was worth more than AU$3.58 billion in 2002, according to Gartner's survey. The top 10 players in the Australian software development and integration sector, led by IBM GSA, dominated, capturing 46 percent of the market. IBM GSA recently announced it would establish a sourcing centre in Ballarat, Victoria, while others now had operations in Adelaide, New Zealand and even India.

Gartner also predicted Business Process Outsourcing (BPO), which they claim is a strength of India's IT industry, will grow 11 percent worldwide this year.


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