For India's service companies, perhaps the most natural expansion is the consulting business. Outsourcing stalwarts such as Tata, Wipro and Infosys Technologies have begun significant consulting operations as outgrowths of their outsourcing work. Each of these "Big Three" companies has seen revenue grow in the 30 to 50 percent range every year for the last five years — a period in which Western companies saw revenue flatten or decline.
Most of their consulting engagements largely address how best to implement services already provided by these companies. But they are nevertheless long-term commitments that will pit them against the formidable white-collar armies at large US companies for years to come.
"We are not McKinsey. We do not want to hand over the report and run away," Tata's Ijari said. "Our competitors are Accenture and IBM."
The new competition on many fronts from India has prompted US companies to increase their presence in the country. Western companies such as Sun and HP have set up shop in India as part of the outsourcing trend, to keep engineering labour costs in line with those of their competitors. But US companies face a problem: Other types of employees, such as managers and sales executives, also have relatively low salaries — meaning they cost Indian rivals less.
Such concerns explain why US venture capitalists are increasingly insisting that any US start-up seeking funds maintain a presence in India. A company might cost $50m to $70m to build in the United States but, with relatively inexpensive labour overseas, might cost $12m to $20m in India.
US-Indian businesses can take all manner of hybrid forms. Some were conceived in the US and have built research and engineering departments in India. Others were born in India but have located high-level executives in America. Still others, such as Tejas and Telsima, are founded and based in India.
Whatever the mix, functions often monopolised by Silicon Valley in the past are now spreading overseas. To lure new investment, for instance, Silicon Valley Bank brought a number of American venture capitalists to India in September 2003 and subsequently opened offices that it lends to visiting VCs and their budding start-ups.
"Before, India was an afterthought," said Ash Lilani, head of global sales and marketing at Silicon Valley Bank. "Now it is thought of at birth."
