• Investment World
• eWorld
• Brand Line
• Mentor
• Life
• Brand Quest
• The New Manager
• Smartbuy

Stocks

• Quotes
• SE Diary
• Scoreboard
• Open-End Mutual Fund

Cross Currency

• Rates
  
  

Shipping

• Ports
  
  

Archives

• Yesterday
• Datewise
• Resources
• In Focus
• In Depth
• Events 2007

Group Sites

• The Hindu
• The Hindu ePaper
• Business Line
• Business Line ePaper
• Sportstar
• Frontline
• The Hindu eBooks
• The Hindu Images

Shamik Paul

Bangalore, Aug. 14 With Indian IT vendors vying for a larger share of the offshoring pie, and their clients trying to cut costs, vendor consolidation is increasingly becoming more popular.

Unlike in the past, where a company would split work between multiple IT service providers, the trend now is clearly to have one vendor for a function.

Most of the clients, when they are under pressure, try to consolidate vendors because nobody wants to work with some 10 different vendors, said Mr V. Balakrishnan, Chief Financial Officer, Infosys Technologies Ltd.

They want to work with a few vendors where they see value, where they can consolidate spending, and where they can get maximum benefit from what they can spend, he added.

Consolidation is also linked to the increasing maturity of the Indian service providers. The Indian vendors have now matured and can handle bigger contracts, said Mr Avinash Vashistha, Chairman and Chief Executive, Tholons, an offshore advisory company.

He said when companies in the US outsourced work to domestic vendors, they gave it to one company. When offshoring started, it was new and so they split the work between multiple vendors.

Now companies are looking at offshoring critical work, bigger task, and are looking at one vendor per function, Mr Vashistha added.

He said clients of companies such as Infosys, TCS, HCL and Satyam are doing vendor consolidation significantly. Also, so are clients of niche players such as Tech Mahindra or Patni.

It reduces the governance and management costs. Also, clients are offshoring more than one function, and integration issues crop up. The productivity, quality and cost get impacted as well, he added.

It is not only the clients, but also the IT services providers who are pushing for vendor consolidation.

There is a push and pull factor says, Mr Chandramouli, Engagement Manager, Zinnov Management Consulting Pvt Ltd.

He said now the service companies are trying to grow their account with existing clients, rather than acquiring new clients. They are trying to cross-sell their services.

Tech Mahindra Ltd, provider of IT services and telecommunication solutions, said its clients’ response to its vendor rationalising proposal has been positive, and it is one of the topline/bottomline enablers for the company.

Three of their clients have agreed to vendor rationalisation, said Mr L. Ravichandran, Executive Vice President and Chief operating Officer.

Tech Mahindra’s largest client British Telecom has done some vendor rationalisation. Mr Ravichandran said the application support function is handled only by Tech Mahindra and HCL. Fifty-five per cent to 60 per cent of the work is done by Tech Mahindra, he added.

Cost savings to a client would be between 5 and 10 per cent, but the major benefit is savings in the management overhead of managing multiple vendors, he said.

More Stories on : Software | Trends | Off-shore Development

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Copyright © 2008, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line