Mid-sized enterprises in the US, Europe and Africa, which until now never outsourced to India, are looking at offshoring due to cost pressures in the post-recession period.
Many enterprises in the Fortune 500-2000 bracket are in talks or signing deals with smaller Indian IT service providers, which will help boost their revenues in the medium term. IT CEOs hold the view that new outsourcers will add to their company?s volume growth, further strengthening the Indian IT industry?s recovery.
Top officials of IT firms and analysts told FE that the new outsourcers include Unity Bank of Nigeria and First Community Bank (FCB) of Kenya. Unity Bank is one of Nigeria’s leading retail bank with 222 business offices. It is already in JV with 3i Infotech.
A few Indian service providers are believed to be in advanced discussions with an insurance firm in Egypt, and also in talks with New York Commercial Bank, SWIFT, CLS Bank and Deutsche Post, Germany’s postal services provider.
SWIFT is a Belgian firm providing secure financial messaging services while CLS Bank provides multi-currency cash settlement systems. CLS has already partnered with IBM to develop and manage its IT applications and infrastructure.
Confirming the new trend, mid-tier IT firm MindTree said first time outsourcers boosted its June quarter revenues by 1.5%. The firm acquired 31 customers during the period, four of which were new ones. Sonata Software added nine clients during the quarter, two of them being first time outsourcers. 3i Infotech spoke of a strong pipeline from enterprises which were once off-shoring shy. The firm is pursuing three deals in the UK and five in the US.
?Mid-sized enterprises who have survived the recession believe they need to drive more efficiency. Lot of first time offshorers are coming to India and they are a lot more comfortable working with mid-tier IT players,? CEO & MD of MindTree Krishnakumar Natarajan said.
Companies in Germany and France are under cost pressures, said Som Sarma, global IT services head of 3i Infotech and former European operations chief of Satyam. ?Traditional German firms have outsourced some work but have not taken the advantage of offshoring in a big way. Language was a major factor. These firms are now realising that their existence will be sustainable if they come up to global cost capabilities,? he said.
?We are seeing first time outsourcers in the Outsourced Product Development (OPD) space. A customer wanted to modernise his product offerings and start addressing adjacent spaces. They had a change in management and recruited a new CTO who was familiar with outsourcing. That made them look at India,? said B Ramaswamy, president and MD, Sonata Software. He expects first time outsourcers to drive growth at mid-tier IT firms at least in the short to medium term.