Therefore it is essential for Semantix to review the current model and maximise its chances to reach the clients very close and deliver the service at expected standards.  Issues concerning to alter the model are discussed after determining the strategies of Semantix competitors operating from the same region in the next phase of the study.

When analyzed the industry by using Porter’s five-force’s model for Semantix, the author found threat of substitutes has greater influence, nevertheless Semantix has lot of scope to penetrate into the market with strategic direction due to the growth prospects of  domestic and global IT market mentioned in the earlier part of the report.

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Entry Barrier

The entry barrier for Semantix is low for several key reasons; on the other hand Indian government is providing significant support and incentives such as tax reduction for firms getting into IT outsourcing business. Software service firms are in a human intensive business, their initial investments are small and government of India have goals to make BPO–ITES as a strategic competitive advantage for the country which lessens Semantix entry barrier.


Bargaining Power of Supplier 

In India the labour force market for IT business are expanding and their quality is improving as the number of technology universities and software firms increased proportionate to the market requirement. Semantix has been successful in bonding with top technology of local universities of India to employ top talents for system design, programming, and managerial positions.


Bargaining Power of Buyer

Bargaining power of buyers is likely to remain moderate, especially with the increase in the number of clients who come to understand that offshore outsourcing is a proven concept with many best practices. There is a significant trend for potential clients not only to reduce cost but also to shift lower value work to 3rd party and maintain their own competitiveness.


Threat of Substitutes (High) 

The substitute for the overseas are in-house or onshore development centres, despite cost, speed, and flexibility disadvantages of in-house and onshore development centres, clients may still opt for in-house strategy for reasons including better security, control, cultural fit and communication, all of which adds up to reduced risk.

The level of how substitutes can be a threat depends on factors such as the nature of the service demands whether it has high business operation impact, sensitive to intellectual property risk, project is less labour intensive but more architectural system design and also the outsourcing maturity and experiences of buyers.

Nevertheless, the high quality and the many existing onshore providers located next or very close to the clients will always have distinct advantages over the companies who are providing offshore services.

The suggested strategy for Semantix to minimize the threats is to strengthen local capabilities at customer touch points, such as establishing its own office’s at abroad Eg: USA and UK, and hire onsite local business relation managers, project leaders stationed at customer sites, extending its services through Hybrid Delivery Model complementing them to make Semantix competitive.


Rivalry

First, the competition comes from the market’s attractiveness; according to NASSCOM the industry is estimated to touch a size of USD 21-24 billion by 2008. Second, clients are able to switch outsourcing firms without significant expenses. Third, the industry is very fragmented, with many small firms.

Semantix in this case have to generally compete with each other not only in acquiring new clients, but also maintaining its existing clients, while competing for capital resources, However Rivalry is not considered as intense for Semantix due to the significant growth of IT Outsourcing market and spontaneous government support to improve BPO-ITES sector and availability of venture capitalists are no scarce for this industry in India.