September 25, 2009. BusinessWeek

Over the last 30 years, the Indian IT outsourcing industry has gone through two stages. The first wave was characterized by staff augmentation—"body shopping," as it was then called—and established that Indian IT professionals were as good as their Western counterparts. The second wave saw the establishment of offshore development centers. Started during the 1990s to fix the Y2K bug, these centers evolved to deliver software maintenance and incremental developmental services for a fraction of the cost U.S. companies would pay for similar work at home. Second-wave firms now also deliver ERP implementation and maintenance, infrastructure management, and testing services. Today, India exports more than $25 billion of IT outsourcing services and is the mainstream destination for offshore programming. It commands more than a 70% share of the global offshore outsourcing market.

Over the last few years, we have seen a third wave emerge: a growing reliance on outsourcing companies for high-end strategic work.
Indian firms (have won a significant portion & leading the Third Wave) also have been partners in major consortiums delivering large, greenfield government programs. For example, both Tata Consultancy Services and my company, Mastek, have been involved in Connecting for Health, a multibillion-dollar health-care IT program for Britain's National Health Service. Specializing in large and complex applications for government clients, Mastek has delivered solutions for the London Congestion Charging scheme through its British partner, Capita (CPI.L), and is now involved in an air movement logistics application for the British Defense Ministry in partnership with Thales (TCFP.PA).

Leveraging Third-Wave Indian IT Companies

Third Wave Indian firms recognize this need for multiskilled teams. They have strong domain experts and subject matter experts in the countries where they operate, supplementing the technical resources from India. They recognize that the Second Wave approach of working to a customer-given specification will work for application maintenance and minor enhancements, but will fail in large-scale transformation programs. These firms bring in deep domain expertise and are committed to co-creating the application vision in collaboration with their customers. They work side by side, in an iterative fashion, to develop and deliver the ultimate solutions.

In summary, it is imperative for large U.S. and European financial institutions to modernize their legacy IT infrastructure in order to survive, innovate, and flourish in the coming years. The costs and risks associated with embarking on such major transformation programs locally may be prohibitive. Third Wave Indian firms offer a more attractive alternative to deliver these programs successfully.

Reference:
Businessweek.com