The critical success factor in this sector will continue to be the ability of companies to offer a guaranteed level of service for a competitive price. A growing desire for customers to fix their budgets for up to 10 years means that IT directors worldwide are now looking to put more of their long-term contracts out to tender. Where previously these large contracts were contested only by the big western players, they are increasingly being won by the Indian firms able to back up their cost effectiveness with levels of quality, customer service and security. That said, escalating wages in India and an appreciating Rupee are putting pressure on the margins of IT companies, forcing them to move away from the traditional ‘body shop’ model, which was mainly dependent on cheap labour for profits, to software-assisted services which retain ownership of any software developed and charge the client on a pay-per-use basis.

As for innovation per se, few see any of the firms being particularly innovative in the traditional sense, but the way that these firms use the range of HR tools at their disposal to recruit and retain the best employees will drive innovation in working practices and HR management. However, within some of the leading firms such as Infosys and Genpact, the recent establishment of new process innovation labs indicates significant interest in modifying the business models through which such firms apply to the management of some long-term, more risky contracts.