Companies like IBM have boosted their India presence significantly especially since Hurricane Katrina destroyed a large number of systems at the company's US headquarters. 

Such calamities have strengthened the case for companies to have a strong offshore presence. Today India is IBM's biggest centre by headcount outside the US, with more than 53,000 employees.

IBM is not alone in realising the importance of offshore operations, especially the value of having a strong India presence. Global IT consulting major Accenture is set to draw generously from the Indian employee pool, making the biggest recruitment by the company in any country so far.

Capgemini, the European leader in IT consultancy will follow suit by making India its biggest human resource pool in the next couple of years.

The surge in global interest in the Indian IT market is noteworthy as its emergence is fairly recent. It all started with Indian companies providing solid back-up to western firms for the Y2K bug at a fraction of the cost.

That signaled the ability of Indian IT firms to provide software development and outsourcing services at very economical rates. Indian companies such as Tata Consultancy Services [Get Quote], Wipro [Get Quote] and Infosys [Get Quote] capitalized on this opportunity increasing their footprint across the globe by developing software for industries ranging from banking to retail.

However, these companies now find the game suddenly shifting to their home turf. Global giants whom they were fighting by being lean, mean and aggressive have themselves chosen to set-shop here to draw from the Indian IT talent pool.

The game for control of the country's $1500 billion IT and ITES industry is throwing up challenges for domestic companies even as it attracts global IT majors. The stakes are high not only for individual companies but also for the Indian economy, for which the IT and IT-enabled services are a crucial driver.

As per Nasscom figures, this segment generated approximately $48 billion in revenues in 2006.

Accenture that started its India operations in 1985 was the first among foreign companies to set shop here. It has recently started taking on Indian companies by providing low-cost project work to foreign clients.

IBM although a late entrant into this game has recruited aggressively in India, while acquiring a BPO unit and a network management business. Most of IBM's global business divisions have an Indian presence, while it also has a strong research division that focuses on enhancing its global delivery model for outsourcing.

While these may look like ominous signs for Indian IT companies, some observers remain skeptical about the global giants' ability to play the local game. They point out that while Indian companies started with low-cost and are moving up the value chain, the global majors are coming from a high cost to low cost domain.

Their recruitment of expensive consultants and high-salaried professionals are also a weak link for them, point out observers.

Indian companies are still small compared to the global consultancy giants. For instance TCS, had annual sales of $4.3 billion last financial year, slightly less than Accenture's quarterly sales.

Furthermore, the market share of Indian companies is just 5 per cent of the global market. However, the share has grown fivefold and therein lies the key to any future scenario say Indian industry sources.

According to them, the key driver is growth momentum and new business models as opposed to old ones. On the other hand, western consultancies point out that Indian firms do not have a presence in the high-end strategic consultancy segment, which is the biggest revenue grosser.

While the debate continues, the possibility of mergers between the two types of entities seems a logical corollary, though that has not happened yet.