Ad Code

Four big contracts coming Indian IT's way

Four IT contracts — from Unilever, Procter & Gamble, American Express, and Bank of America — each valued close to $8 billion are coming up for renewal this year, says global research and strategic consulting firm Pierre Audoin Consultants in a recent report. These are expected to draw fresh battle lines between Indian IT service providers and incumbent MNCs servicing the deals since they were signed in 2003-04.

Indian firms like TCS and Infosys will face MNCs including IBM and Accenture in such renewal deals spread across ten years. Firms are expected to compete on value propositions as clients are increasingly looking at rigid lock-ins and specific business goals.

Indian IT outsourcers have more than doubled their share in total worldwide IT spends over the past six years, and the bigger Indian IT companies have outpaced their MNC counterparts. So they stand a good chance of bagging sizable portions of these contracts.

"The large Indian IT vendors can compete on almost any value proposition with their global rivals. They have also built up envious cash reserves and have global scale and presence that can match their rivals," Pierre Audoin Consultants says.

Indian IT companies accounted for $31 billion, or 4.8%, of the worldwide IT spending of $641 billion in 2006-07. This year, it is estimated to be $77 billion, or 9.8%, of the global spending of $785 billion, according to research by brokerage firm Angel Broking.

The ongoing shift in outsourcing patterns to shorter engagements, cost savings and operational efficiencies has put Indian IT firms on the radar of big clients. IT advisory firm ISG's Outsourcing Index finds that the TCV (total contract value) for Indian IT companies increased 13% between 2009 and 2012, while the same for MNCs dropped 7% during the same period.

"Indian IT companies have demonstrated flexibility in structuring their model from effort-linked to outcome-based. The stability of the model coupled with strong risk management practices, privacy and pricing flexibility are big pluses over and above the cost arbitrage," said Pankaj Kapoor of Standard Chartered Equity Research. A 2011 report by the equity research firm had said a pipeline of 1,000 contracts across application, IT and infrastructure outsourcing that are with non-Indian vendors with a combined contract value of $207 billion due for renewal in the 2012-16 period could be an over $25 billion opportunity for Indian players.

"Specialization and a significant onshore or nearshore presence for client-specific projects has instilled great confidence among clients," said Sanjay Dhawan, technology leader in consulting firm PwC.

Post a Comment

0 Comments