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Krishnan Thiagarajan
Bharat Kumar

Chennai , Sept. 1

THE ABN-Amro IT offshoring deal, the largest deal in recent times, has made industry watchers sit up and take notice. TPI, a global sourcing advisory firm, has advised ABN-Amro on the deal. Business Line spoke to Mr Siddharth A Pai, partner in TPI's global service delivery group. Excerpts:

This deal is said to be `transformational' for the Indian offshore industry. Is this a vindication that unbundling of deals can happen and this could be just the beginning?

The answer to that is two-fold. One, there are significant number of deals that are coming in the marketplace that are going to multiple vendors as opposed to just one vendor. From that perspective, there is unbundling of deals.

Of course, it is also the largest and unique deal ever to come to India from Europe. The ABN-Amro deal will give a significant strategic push, not only from the cost savings perspective, but also through creating a global IT platform. It is a first direct deal to offshore vendors, involving both application support and development, with development going to five preferred vendors.

The corollary to that is, the Indian vendors have come up and they are winning bigger deals. But the mega deal, in excess of $1 billion has not died. Many Indian players cannot function in that space because a) they are not as global as some of their counterparts and b) because they are unwilling to take on the risk of taking on assets and people, since many such deals still have large components of asset-takeovers.

Will this usher in more deals of this kind?

One of the things that we are seeing is that a lot of this first or second generational deals that were done in the late nineties are now being restructured and coming up for renegotiations.

In fact, part of the reason for the slowdown in the new deal demand is also because quite a few of these deals are being restructured. Primary reason for this was that six or seven years ago, there were no offshore players. Most of these deals were done at $120-130 per hour price point. Now that we have an offshore answer, those blended deals can come down significantly for those clients. So, restructuring is large and we will see lot of it.

Has the bank spread itself too thin on application development by giving it to five vendors?

This is a three-way sort of deal. They have given one piece to IBM and the offshore piece to Infosys and TCS. It is large and there are several deals like this in the offing.

Will development deals be entirely discretionary?

Much of the deal will turn out to be through master services agreements. It allows for continued competition among vendors when they actually bid on these deals for the bank.

What are the learnings for the Indian IT industry from this deal?

The important learning for the Indian industry is that multinationals have a truly global footprint that Indians do not. And they are able to come back to clients with a portfolio of global locations rather than a single location for India.

The likes of IBM and Accenture have solutions from multiple locations, in addition to coming with a large India-based solution.

Indian firms will have to quickly globalise by having different cost models across the globe as opposed to holding a bench in India, which is what they do today.

Are the Indian companies taking over any employees in this deal?

In Europe, there is something called the ARD (Acquired Right Directive). The European Union has as a law for European workers. These companies have to show that they are compliant with the ARD directives.

It says that if you have a job with company X that in future gets substantially outsourced to company Y and you lose your job as a result, you have recourse under the law to come back to the employer and ask for certain types of compensation. This will be applicable only to the European part.

Given this directive, I really do not know where they (Indian companies) will eventually end up (in terms of taking over employees).

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