Leading Indian software services vendorsTata Consultancy Services, Infosys Technologies, Wipro and Cognizant Solutions are vying for $4.5 billion tech-outsourcing contracts to be awarded by European banks such as Deutsche Bank before end-March.
The January-March quarter is a crucial one for Indian tech-service vendors because it is projected to be the strongest three months for outsourcing contracts in the year, according to consultant Technology Partners International, or TPI.
While global IT majors such as IBM, CSC, Cap Gemini and Atos Origin are favourites for the infrastructure piece of outsourcing, which is worth around $2.45 billion, Indian companies will be strong contenders for around $1.1-billion worth application development work, primarily in the areas of retail banking, insurance and financial accounting. Several European organizations are also looking to outsource deployment of business software and maintenance work.
The business process outsourcing opportunity for the vendors is being pegged at more than a quarter of the $4.5 billion outsourcing pie.
Apart from Deutsche Bank, large financial services groups from France and the Netherlands are looking to outsource their technology needs as well, sources said. “Having seen the success of the ABN Amro outsourcing deal, these firms are now looking to outsource,” said Salil Parekh, executive chairman of Capgemini India, which has 13,000 software professionals across six cities in India.
In September 2005, ABN Amro, a Dutch financial powerhouse, outsourced $400 million worth of application development work to TCS, Infosys and Patni Computers.
A European oil and natural gas firm will also finalize outsourcing contracts this quarter.
“European clients are expected to take a ‘portfolio’ approach to outsourcing by giving the infrastructure management piece to one set of vendors, and engaging with smaller vendors for application development,” Dennis McGuire, TPI chairman, told Mint during a tech industry event, Nasscom 2007.
The deals parcelled to Indian vendors are likely to be in smaller lots, analysts said. “I see a lot of application management and development deals in the range of $100 million to $200 million going to India as customers such as General Motors, ABN Amro, Kimberly Clark and Nissan have demonstrated their multi-sourcing strategy in the earlier deals,” said Julio C. Quinteros, vice-president of global investment research atGoldman Sachs.
European firms are increasingly looking to outsource to reducing cost of operations and to access new skills, following their US counterparts, which have been shipping work to lower-cost locations for years.