International Business Machines (IBM) plans to invest nearly $6 billion (€4.67 billion) in India over the next three years, the country's biggest inward technology investment to date as the US group builds its presence in the world's biggest offshore technology services market.

The investment illustrates how seriously IBM is taking the emerging rivalry of Indian information technology companies, whose lower-cost model is challenging the big western companies.

"I am not going to miss the opportunity," Sam Palmisano, IBM's chief executive, told a gathering of 10,000 IBM staff in Bangalore yesterday.

IBM's proposed investment is triple the sum already invested by the company so far in India and exceeds a combined $3.9 billion of investments recently announced by Microsoft, Intel and Cisco. Each has been recruiting heavily in India, pushed by customers demanding Indian costs and expertise.

IBM already employs 42,000 people at more than a dozen centres in India. Before yesterday's announcement, IBM had been widely mentioned as a potential buyer of Sayam, India's fourth-biggest IT services company, based in Hyderabad.

The $6 billion investment will be aimed at strengthening IBM's global and domestic software and business services operations in India, and the creation of a new telecoms research unit.

Mr Palmisano made no mention of Indian rivals but, as analysts noted, India's IT groups pose a growing threat to the global status quo. As services have become more standardised, big clients have split large IT outsourcing contracts.

IBM is competing with an Indian rival for a $100 million mandate from a US Fortune 100 manufacturer, and last year three Indian companies shared a $2.2 billion outsourcing contract from ABN Amro with IBM and Accenture.