This paper looks at the current challenges faced by the SME's in the Indian IT industry and formulates hypotheses on how an intermediary can create an ecosystem to ensure the sustenance and evolution of these firms. The play out in the industry is expected to such that the larger companies in the Indian IT sector will move up the value chain and as they do so they will increasingly move out of the body shopping mode that constitutes the lower end of the outsourcing spectrum. This creates an opportunity and a necessity for the emerging companies and SME's to fill the void.