The future of IT Professional Services

Big Blue Wields the Knife Again

In a very good post talking about IBM Services business, Steve Hamm provides some interesting observations about the evolution of IT Services.

IBM remains the #1 services firm with a $48 billion/year business, but it's quickly loosing ground to the Indian competitors. Indian companies are delivering 30-40% quarterly growth while they maintain operating profits in the region of 25%.

The Indian model looks very robust and, according to analysts their exports in this industry will grow from $31b last year to around $60b in 2010.

How are other companies approaching the growth of Indian Services firms? An interesting one is the deal between EMC and Wipro by which "EMC also intends to help certify more than 1,000 Wipro practice resources on EMC technologies to support pre-sales, delivery, and solution development".

Is there a strategic alternative for Western IT services firms? Or is the cost factor so powerful that it will continue to press down margins of Western competitors until they are eliminated from the market?