Bangalore: India’s second largest software services company, Infosys Technologies Ltd, will work with partners such as Wipro Infotech, the local unit of rival software firm Wipro Ltd, and Hewlett-Packard Co. (HP), to bid for contracts within the country.

Customers in India, predominantly the government, opt for information technology (IT) vendors who implement projects and provide both hardware and software, unlike firms in the US and Europe, where they award contracts just for software services.

“India is more of a system integration market and less of pure-play software business,” said V. Balakrishnan, chief financial officer of Infosys. “We will go as a consortium.” System integrators provide hardware and software and make them work together.

“The domestic IT market is largely driven by hardware (suppliers). Companies such as IBM (and) HP have a strong hardware play,” said Arup Roy, senior analyst at Gartner Inc., a technology research and advisory firm.

Multinational vendors such as IBM Corp., Accenture and HP, have typically won more contracts from local customers than Indian vendors such as Wipro and HCL Infosystems Ltd. “We have just started a business unit focusing on the domestic market and we have to work with partners,” said Balakrishnan.

On whether Infosys was late in identifying the potential of the Indian market, he said: “In India, there is no entry barrier. If you want to get in, you can get in at any time. We have better credibility in this market.”

Infosys already works with Wipro Infotech and HP to implement its banking solution, Finacle, for local banks. Infosys earned only about 1% of its Rs4,106 crore revenues for the quarter ended September from local customers.

The Indian IT services market stood at $3.7 billion (Rs17,175 crore then) in 2006 and is expected to grow at a compounded annual growth rate of 23.2% to reach $10.7 billion by 2011, according to Gartner.

Pure-play software companies, such as Infosys, had largely kept out of the Indian market due to lower billing rates and absence of cost advantage that they leverage from overseas customers working from a low-cost country. Still, “you have to take the right deals, run it tight and make them work to get better margins”, Balakrishnan said.

Infosys said it expects more technology spending from organizations such as the Indian Railways and the Reserve Bank of India, followed by firms in telecom, banking, financial services and retail sectors.

vishwanath.k@livemint.com