"The trend of MNCs setting up their own subsidiary for handling entire operations are competing with the domestic outsourcing phenomenon," Partha Iyengar, vice president, IT consultancy firm Gartner India Research & Advisory Services Pvt Ltd said on Monday.

MNCs, including HSBC and Standard Chartered Bank, are setting up own subsidiary and outsourcing facilities, which would dampen the business prospects of domestic outsourcing companies, he said.

Iyengar said the business process outsourcing services has been primarily "contact-centre" centric in India today and the country has to gear up for taking higher-end BPO services by upgrading the skills.

"Indian companies tend to buy from global IT providers due to the perceived quality and technological capability of their solutions. Locally developed products, for the most part are used in tactical low-risk projects," Iyengar said.

He said that if Indian service providers continue to pursue the export market at the expense of the local market opportunity,

He said that if Indian service providers continue to pursue the export market at the expense of the local market opportunity, it would have a detrimental long-term impact on the overall information and communication technology export business.

"If Indian vendors have no standing in the local market and do not compete for higher-end (transformation oriented) deal domestically, it will hamper their prospects in pursuing similar deals in international markets," he added.