arge offshore Indian vendors of IT services continue to make gains and have begun to pose a serious threat to the top global players, according to research firms IDC and Forrester Research Inc.

Offshore providers have gotten more competitive as they strengthen their onshore presence, develop relationships higher up in the food chain within customer organizations, utilize new technologies and invest in developing hosting infrastructures, according to a study released today by IDC.

Meanwhile, a study this month by Forrester Research Inc. said that major global service providers continue to lose ground to large Indian firms, especially in the application services market.

Framingham, Mass.-based IDC stressed that offshore vendors are aggressively pursuing outsourcing deals that go beyond application maintenance engagements. It predicted that offshore IT services vendors will capture $29.4 billion in worldwide customer spending by 2010, with little sign of a market slowdown.

In the year that ended March 31, India's IT exports amounted to $13.3 billion, according to the National Association of Software and Service Companies in Delhi. That figure is mainly for services.

Indian firms will continue to grow, and not just because they are a lower-cost option, according to Cambridge, Mass.-based Forrester. These firms have made a fundamental and structural change in the relationship between service provider and client, and offshore providers have taught clients to expect transparency, efficiency and accountability in service delivery, Forrester said.

Indian outsourcers in the second quarter posted revenue and profit growth rates that were far higher than those of their global competitors, according to Forrester.

A number of multinational services companies, including IBM and Electronic Data Systems Corp., are expanding their services delivery in India through acquisitions and by setting up their own facilities.

Most global majors do not understand or properly execute the global delivery model, according to Forrester. The connection between local offices and offshore low-cost delivery centers is anything but seamless. Rather, these relationships often take the form of the local vendor team subcontracting to the teams in India, according to Forrester. This tends to make projects more expensive and less successful. Flying a client executive to Bangalore in first-class once a month to babysit underperforming client projects is expensive and an indication that remote outsourcing is not working for the customer, Forrester said.

However, some multinational companies are competing with Indian outsourcing companies on price, taking advantage of their lower-cost delivery centers in India, according to sourcing consultancy firm Technology Partners International Inc. (TPI) in Houston. Some of the multinational companies are even bidding on smaller projects that they did not earlier address, said Siddharth Pai, a partner at TPI.

Pai said some of the bids by multinational companies may be entry pricing -- pricing low to make headway with a new customer or to retain a shaky customer. But Indian companies do not have the flexibility to price any lower because investors' expectations of revenue and profit growth for Indian companies are far higher than for multinational companies, he added.