Is the world really flattening? A question like that may seem terribly out of place as the opening sentence of an analysis of Indian IT services exportsthe very phenomenon that gave the idea of flat world to Tom Friedman. Yet, "something" somewhere says probably the flattening forces are quite content with leveling the developing and developed worlds; they have not yet touched the Indian IT services industry. That sounds ironic, but then as they say, there is your side of the story; there is my side of the story; and then, there are facts.

And here are the factssome pointers to that "something" which forces us to play the Doubting Thomas. In FY 07, the IT services exports from India grew 37.2% to reach Rs 103647 crorethat is more than a trillion rupees! In dollar terms, this is a little more than $23 bn. Excellent by all standards.

But the big seem to be getting far bigger than the rest. The Top 20 exporters grew 44.2%much faster than the industry average. In other words, the gap between top players and the next tier is widening.

Call it the Offshore Divide if you like, this trend is noticeable within the Top 20 list itself. While the Big Three are growing at close to 40%, other offshore companies like Satyam, Patni, Syntel, Hexaware, MphasiS and SISL are all growing at less than 35%; of course, not counting IBM, HP, Capgemini, Perot and the like, whose India exports may not tell their entire story.

This is not an entirely new observation. The tier 2 offshore companies are experiencing the heat for the last three to four years, struggling to keep pace in revenue growth and more importantly in margins. Incidentally, this has been a period in which the top threeTCS, Infosys and Wiprohave clearly moved into the big league in global IT services market, competing more as equals with the traditional leaders in North America, and of late, in Europe.

While the top three companies have now started competing on their specific strengths, not to mention their proven ability to scale up; low-cost (often euphemized as the India advantage) is still the major selling point for most of the tier 2/3 companies. The me-too strategy, which works fairly well during the hype phase, is difficult to sustain in the long run. And offshoring is no more hype; it is the mainstream outsourcing strategy for corporations globally.

While there has been a lot of concern and a fair bit of analysismost of these companies are listedon the slowing down of the next tier IT services firms, this years Top 20 analysis does throw a heartening new trend-Differentiation, at least of one kindfocused playis actually paying off for companies which are pursuing it in an undiluted fashion. Take all the three IT services companies in the DQ Top 200 list that have had a three digit growth, namely, Tech Mahindra, Tata Technologies, and GlobalLogic. They have very little commonality, be it in size, growth strategies, or the kind of things that they do. But one thing puts them in one category: they are completely focused on what they do. For Tech Mahindra, it is a vertical: telecom; for Tata Technologies, it is a service line: engineering services; and for GlobalLogic: it is both: product engineering for the ISVs.

Others who have grown impressively (anywhere between 50-90%) are Geometric Software, Infotech Enterprises, Sasken, Subex, and Helios & Mathesonall share the same philosophy: undiluted focus. Yes, many of them have grown by inorganic means, but that option was available to others too, and many others have exercised that as well, but have not been able to match these focused companies in terms of growth, even with the acquisitions.

It is difficult to say if focus alone will sustain the growth momentum for these companies in the long run. But for the time being, it surely is paying off. The IT services exports landscape in India is far from flat. In fact, these few companies with impressive performance, distributed throughout the list suggest that the Indian IT services exports landscape is actually spiky!

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