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Perspective19 Strengthening India’soffshoring industry India’stechnologyandbusinessservices industrycandefendandevenexpand itsglobalmarketshare,butonlyifitlearns toinnovate. TheglobaleconomicdownturnhasslowedthegrowthofIndia’stechnology andbusinessservicesindustry,butbeyondthecurrentcrisistheindustry facesachangingglobalenvironmentthatwillprobablycutintothecountry’s NoshirKakaworldwidemarketshare. McKinseyanalysissuggeststhatthereislittleimmediaterisktoIndia’s dominanceofthemarketforoffshoretechnologyandbusinessservices.But thecountry’ssharecouldsinkto40percentby2020,fromjustover50per- centattheendof2008,primarilyasaresultofincreasedcompetitionfrom othercountries,talentandinfrastructureconstraints,andanunhelpful regulatoryenvironment.Butchangesintheglobalmarketcouldalsogive Indiaopportunities,especiallyifitscompaniesbecomemoreinnovative andrelylessonlowlaborcosts. TherevenuesofIndia’sbusinessandtechnologyservicescompanieshave growntoabout$58billionattheendof2008(includingabout$46billionin exports),from$4billionin1998.In2005,India’sNationalAssociationof NoshirKaka(Noshir_ Kaka@McKinsey.com)SoftwareandServicesCompanies(Nasscom)suggestedthatexportrevenues isadirectorinMcKinsey’scouldreach$60billionayearby2010,buttheglobaldownturnwillprob- Mumbaioffice.ablydelaytheachievementofthisgoalbythreeorfourquarters. 20McKinseyonBusinessTechnologyNumber16,Summer2009 Lookingpasttheimmediatesituation,McKinseyexpectstheglobalmarket foroffshorebusinessandtechnologyservicestogrowtoabout$500bil- lionby2020,fromthecurrent$80billionayear.Evenwiththismorethan sixfoldgrowth,theindustrywillservelessthanathirdofthepotential market,whichMcKinseyestimatesat$1.65trillionto$1.80trillionin2020. Severalfactorswillcontributetothisglobalgrowth.Coremarkets—forinstance, largefinancial-servicesandtelecommunicationscompaniesindeveloped economies—shouldcontinuetoexpandalongwiththeglobaleconomy,once growthreturns.Thepaceofgrowthcouldslowdown,however,ifprocesses areautomatedandstandardizedmoreq