Bangalore: When the Indian IT vendors look for overseas contracts, a big chunk of domestic IT deals are being snatched away by foreign technology majors.

In the last couple of years, IBM won a major contract from Bharti Enterprises, soon after came the FMCG major Dabur's deal with Accenture and Bank of India's and Britannia's deal with HP which confirmed the fact that the global players are ruling the domestic market. Today these multinational players deal with prestigious Indian enterprises and institutions like the Idea Cellular, DLF, Apollo Group, Syndicate Bank, Ashok Leyland, Andhra Bank, and Vysya Bank amongst others.

On the Indian scene, barring Wipro Infotech and TCS for that matter, not many realized the potential hidden in their own backyard in the race to win mega deals in the Western countries. For them India was never a focus area until a few years back.

As per the reports the total domestic IT software and services market in India increased from $6.7 billion in FY 2006 to $8.2 billion in FY 2007 and the Indian players seem to have missed the bus when it comes to deals at home. According to a research by Gartner, the domestic IT services market is pegged to grow to $10.73 billion by 2011 at a five-year compounded annual growth rate (CAGR) of 23.2 percent.

"The Indian IT services firms realized only a year or two back that the Indian domestic market is itself a huge market and the U.S. market might flatten out," says Ranjit Tinaikar, Partner, McKinsey & Company. The Indian players were always focused on the Western market, especially the U.S. "The U.S. market was a matured market where the companies knew the advantages and the value IT could bring to their business. But Indian market was a relatively evolving market. Though the Indian companies knew about Information Technology they were reluctant to spend as their U.S. counterparts did, as they were not aware of the power of technology. Hence they chose to focus on the U.S. market," explains Rajdeep Sherawat, Vice President, Nascomm.

Another factor that unfavorably hurts the Indian companies now is that the service model of Indian companies is focused on labor centric services like application development services and maintenance and in some cases process operations. Today most clients are looking beyond this. "For the users in the outsourcing services market in India, operational efficiency and business agility are the major factors they consider during IT services engagements, contrary to the popular notion that cost is the primary parameter to them," says Arup Roy, Senior Analyst, Gartner.

The Indian domestic IT services market has been outpacing the overall Asia Pacific growth, as it grew by 18 per cent in 2007. "Due to the huge surge in the economic activity and relatively low legacy, the Indian market has its own challenges. Customers expect high speed and lower costs. The ROI question has to be answered right from the word 'go'. The integrated project management is another big expectation of the customers in India, as customers want to depend less on vendors for their output," explains Anil Jain Vice-President, Corporate Business Unit, Wipro.