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Outsourcing 2.0: Which IT Service Firms Are Ready?

Tata, Wipro, and Infosys should maintain their industry positioning as the industry evolves, says Morningstar's Andrew Lange.

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We recently published an IT-services-related report that looks into the next era of outsourcing for the three major Indian IT service vendors--Tata Consulting (TCS), Wipro (WIT), and Infosys (INFY). For these vendors, the past decade or so has been characterized by hypergrowth, which has been driven by advantages in labor arbitrage and a lower-cost delivery model. But we believe the market is fundamentally changing. From this point, we believe these vendors will no longer be able to rely solely on their low-cost positions for outsized revenue growth in the future.

Importantly, developments surrounding automation as well as social, mobile, analytics, and cloud (or SMAC) technologies are expected to usher in a new era of outsourcing, in a movement that we call "Outsourcing 2.0." Here, we believe clients will demand more than just cost savings alone; instead, they will increasingly seek consulting partners that offer technologically differentiated services based around new technology platforms and tools.

Andrew Lange does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.