Unisys Corp., one of the world’s top 10 software services companies, aims to improve its operating margins, which were near zero in the second quarter ended 30 June, to around 8-10% in the rest of 2008 by sending more infrastructure management and back-office projects to its Indian operations.
Unisys, which competes with IBM Corp. and Accenture Ltd, has narrowed its losses to $65.5 million (Rs264 crore) for the quarter ended June from $194.6 million in the year-ago period. The Blue Bell, Pennsylvania-based company is aiming to improve its fortunes even more by having more than a fifth of its around 30,000 global workforce in low-cost locations such as India and China by 2008.
Apart from India, where the company plans to have more than 4,000 workers by 2008, more jobs will be outsourced to China, Brazil and Poland. “With new facilities in India, Unisys is clearly betting the future on the success of its global delivery model,” said Forrester Research Inc.’s Paul Roehrig in a report released on 14 June.
Since the beginning of 2006, Unisys has laid off around 7,000 workers in relatively high-cost locations in Europe and the US, which included a headcount reduction of 550 in the second quarter.
The restructuring programme will generate cost savings of more than $340 million starting in the second half of this year and more than $365 million by the first half of 2008, the company said in a statement on 24 July. “The most satisfying part of this whole story is that we are now making Unisys win some of the contracts, which could not have been possible without a centre in Bangalore,” said Mukul Agrawal, managing director of Unisys India.
Agrawal, who joined Unisys in April 2004, has seen the operations grow from serving around four clients to delivering projects for more than 40 customers. Unisys manages information technology infrastructure for customers such as the UK-based Royal & Sun Alliance and the Royal Bank of Scotland.
Of around 2,000 professionals currently employed at the Unisys centre on Residency Road in Bangalore, almost 1,200 are devoted to remote infrastructure management services, a segment that now accounts for almost 50% of the company’s global revenues. “Earlier, we could not match the price offered by other competitors for executing such projects,” Agrawal said.
Unisys is also considering expanding into other cities such as Hyderabad, Pune and Chennai within the next six months. “India not only allows us to scale our operations, but enables us to add new capabilities faster,” said Agrawal.
Unisys will also ship more projects around payment and cheque processing outsourcing, apart from looking at doing application development and maintenance in India.
Unisys has been under tremendous pressure to deliver infrastructure management from offshore locations, “with IBM officially opening up a dedicated centre in India almost six months ago,” said Avinash Vashishtha, chairman and chief executive of offshore advisory firm Tholons.
London-based pharma major AstraZeneca Plc. outsourced its information technology infrastructure management to IBM as part of a seven-year, $1.4 billion contract earlier this month, with offshore delivery being an important component of the entire deal.
In a recent study, Forrester found that vendors such as IBM, Electronic Data Systems Corp. and Accenture are offering remote and on-site support services for about 15 million desktops and more than one million servers, apart from providing helpdesk services to nearly 18 million end-users globally.
These vendors make around $70 billion in revenues annually from information technology infrastructure management.
Unisys subcontracts application development projects from its clients to tier-II Indian vendors such as the Keane unit of Caritor Inc., Tech Mahindra Ltd and Hexaware Ltd, but it may look at doing these projects at own centres gradually.
Being a late entrant to the offshore game, Unisys forged an alliance with India’s third largest software firm Wipro Ltd in 2006 to bid jointly for large outsourcing deals.
“While Unisys takes the infrastructure management part of the contract, Wipro manages application development and maintenance for customers,” said Agrawal. The strategy has paid off for Unisys, with the duo bagging at least two contracts in six months, each worth $30-40 million.
However, being a late entrant in building offshore presence, “mere organic growth may not help Unisys and the company will have to look at acquisition in India for scaling faster,” said Sabyasachi S. Satyaprasad, senior director at Bangalore-based offshore advisory neoIT. Agrawal of Unisys said that while acquiring an Indian company could be an option for the future, there are no immediate plans.