Latest market trends reveal that the Indian IT sector is moving up the value chain. IT giants, Infosys, TCS and Wipro have seen an increase in the share of some of the high--end services such as package implementation and systems integration, while recording a drop in the revenue share of application, maintenance and development (AMD) services, for the year ended June 2006.

Services that require specialised skills such as domain expertise and special application knowledge comprise high-end services in the IT value chain and attract better pricing and thereby better margins for software companies.

There is also a growing need to introduce new high-end services to further penetrate the global market. Wipro, for instance, has introduced new service lines including total outsourcing, consulting and testing in the past couple of years in order to address the global market.

Even though systems integration, package implementation and product development are among the high-margin revenue generators; AMD services continue to garner a major share of revenues for most Indian IT companies.

This is due to the difficulty faced in building skills and industry vertical experience. Moreover, Indian companies have to overcome the market mindset of being ‘cheap offshore providers’ says Mr Sudin Apte, country manager-India, Forrester Research.