Offshore software development in India has evolved as software developers move up the value chain to offer custom software development. India emerged as a software service exporter in the late 1980s and early 1990s with the country's transition from centralized planning to a market-oriented economy. Today Indian companies have the lion's share in the global outsourcing market and compete with leading multinational suppliers across the IT solutions spectrum.
As the software sector has evolved so has the cost advantage, which is decreasing. Though software development is still carried out at a fraction of what it is in the US and several other countries, employee costs have risen considerably. This is likely to affect margins and consequently profitability.