When large IT companies grow on to bigger-sized projects, small and mid-sized companies find a growth opportunity for themselves. While moving forward, larger IT companies are therefore creating an ecosystem for sustenance of SMEs in terms of knowledge build-up, adding niche capabilities, promoting entrepreneurship, increasing standards, and building capability through inter-firm competition for higher quality output.

More importantly, this is creating a competency build up for the long run that will help SMEs to take over non-core processes as well as niche specialised functions that are crucial to deliver complex projects and can be shared across organisations. This not only boosts the IT industry as a whole but also helps the value-chain from small to large. For many small companies, the environment matters in order to expand the scope of their business and in building credibility in the industry.

Ahmedabad-based Chirag Patel, CEO of Net4nuts.com says, "With TCS coming up in Gandhinagar a few years ago a supportive environment has been created for small companies like us. We've gained significant knowledge inputs from their software engineers through interactions and personal meetings. Moreover, our delivery models and outlook for growth have upgraded for the best."

Patel is getting help from the software giant in pitching for complex projects for overseas clients. When the state's IT policy was being framed, Patel made suggested bringing in more IT biggies, since this would evolve a pool of talent across the state and build a knowledge-transfer environment for smaller companies.

"Working with major IT companies has definitely helped us learn more, hone our skills and understand product development to the extent that we now have evolved our own software product development maturity model. We are now perceived as technology leaders and we are in a position to offer premium and high-end technology and architecture consulting services to our clients," says Rachana Salgia, VP-engineering, R&D at Impetus Technologies based in Noida. The company makes software for a range of industries.

Salgia explains that larger companies provide opportunities to SMEs by means of sharing their experiences at various platforms and by helping create brand equity and building credibility for the industry.

ARM, a $500 million UK-based company plans to scale up its Bangalore operations through teaming up with small players. "We are spending $2 million on research, and collaborating with the biggest companies and also with small and medium businesses, like Moschip in Hyderabad," says Atul Arora, president commercial operations, ARM. Moschip will soon be able to design on its own, as a result of such collaborations-and ARM microprocessors will be powering them.

Large IT companies are increasingly bringing in SMEs at the lower-end of project-execution to make them understand the processes involved. According to Crisil, Indian IT services will continue to grow at CAGR of 26% from $13.2 billion in 2005-06 to $33.7 billion in 2009-10.

This will increase India's share of the global IT services market from 3% to 6.1%. The IT and ITES industry together clocked double-digit growth as well with a CAGR of 28% and revenues exceeded $36 billion in 2005-06. Companies in this sector have seen rapid transformation from being involved in low-value activities such as application development to high-end activities like system integration and packaged software implementation.