Fragmented global deals to help Indian software vendors

Bangalore, Aug 3 | Updated: Aug 4 2005, 06:13am hrs
Prospects for Indian software vendors just got brighter. Global corporations are increasingly fragmenting their massive IT outsourcing deals in order to minimise risks and get better pricing, which in turn pave the way for top tier Indian software exporters to bid for such projects, which till now they could not compete as their smaller size limited bidding efforts.

Large deals like that of General Motors and ABN Amro which are likely to be closed by the end of this calendar year are seen as setting the trend of compartmentalising the entire outsourcing effort, either according to technology requirements or in time capsules.

This seems favourable for Indian players as they can compete for this smaller pies of the larger chunk, a technology analyst with a European brokerage said.

Earlier, even the top tier Indian software vendors could not compete with global biggies like Accenture and IBM on several deals that stipulated bidders to be minimum $1 billion revenue companies. Hence, most of the local firms ended up as sub-contractors for the primary vendor as piece-meal projects kept coming on their way.

But now things are about to change. This is evident with Wipro joining hands with Accenture in its bid for the GM deal. Two years ago Wipro had initiated efforts to jointly bid for a major Pepsico deal two years ago with EDS, but nothing evolved out of it. Similarly, Infosys is gunning alone for the ABN-Amro pie.

We see this trend creeping in the market as companies in the West with a large outsourcing budget finds it a winner if they hand out to multiple vendors, another analyst with a top domestic brokerage noted. Such an arrangement helps in compressing costs and reduced delivery hassles for the client. Moreover, the vendors get manageable-size contracts at fair prices and are able to deliver better quality services on-time, he added.

Most of the GMs and Citis of the world are trying to de-risk their outsourcing efforts by splitting them into a number of vendors and offering packets of work to companies with specialised skill-sets, Dhiraj Sachdev, portfolio manager for ASK Raymond James said.