IT COS GAIN AS SMALLER WESTERN COS TOO SEND WORK TO INDIA

Indian IT companies have found a silver lining in the midst of the global economic turmoil. The number of clients that are outsourcing their technological requirements has seen an increase in the last few months. This comes on the back of the companies? need to curb costs and yet remain competitive with their global peers.

Those adopting the outsourcing practice are a handful of small companies located in the US and also some based in continental Europe. These companies, which earlier preferred only local IT vendors, are now shifting their IT needs to Indian players like Wipro, Cognizant, Mindtree, Syntel and WNS.

?Mid-scale companies with revenues below $5 billion are now outsourcing as most have realised that Indian IT service providers can offer a larger services portfolio at an affordable cost,? said Ernst & Young Partner (technology practice) Milan Sheth. These companies mainly outsource maintenance work and a little bit of application development with these being of a 3-5 year duration.

Due to their competitive pricing, mid-sized IT and ITES companies tend to be major beneficiaries. Mumbai based BPO WNS recently bagged a fiveyear finance and accounting deal from a large entertainment company in the US. In the last two quarters, WNS has got at least four contracts from first time outsourcers in the BPO space.

Mid-sized IT firm Mindtree too has seen more deals coming from the first time outsourcers in the US and Europe despite a financial turmoil in these regions. It has signed four such deals in the banking, manufacturing, travel and transport and telecom segments. ?We have seen a fairly good traction across the US and Europe. The companies start by outsourcing work related to payroll and insurance claims. Most of these are fixed priced contracts,? said Mindtree VP (application maintenance services) Ramesh Arun.

Most projects start off on a small scale and are gradually extended. ?Maintenance projects are typically 2-3 years in duration with a contract value of $3-$5 million. Development projects are usually 6-12 months long and $1-$2 million in size,? said Syntel CEO Keshav Murugesh. The KPO relationships are longer (5-7 years) with contract values varying based on the number of processes and transaction volumes.

A few years ago, most firms adopted a cautious approach by offshoring the low-risk parts of their businesses. Today, however, clients are pursuing offshoring more aggressively. ?In continental Europe, there are many first time offshorers. The real business volume in this region, therefore, continues to remain healthy and we are benefiting from it,? said Cognizant president and MD R Chandrasekaran.

 

Source: The Economic Times