Of course, the command line parameters have to be adapted as well.
Which one to use depends on your needs. I use MiKTeX, but presuming in TeX Live the commands are the same, then the parameters for MakeIndex are "%tm.idx" -t "%tm.ilg" -o "%tm.ind".
Both -t and -o can be preserved, but I guess you need to add a language option -L and/or one or more module options -M and perhaps -C for the codepage. Not to forget: "%tm.idx" must come in last position.
Also, if you’d rather use texindy then pure xindy the needed parameters may be slightly different.
Compare some answers here on TeX.SX: egreg’s answer to Sorting index entries with accented words or the answers to How to use xindy with XeTeX/LuaTeX?.
On the other hand you could consider in using the package imakeidx or switching to arara.
"%tm.idx" -t "%tm.ilg" -o "%tm.ind". – Dirk Apr 10 '13 at 09:11