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Vishwanath Kulkarni

Europe is thawing to the idea of outsourcing work to India. A prominent travel group shows the way.

WHEN it comes to outsourcing non-core activities, American companies are ahead of their European counterparts.

This is because European companies are conservative by nature. However, increasing competition and the pressure to maintain profit margins are making them warm up to the idea of outsourcing and also off-shoring their functions.

Travel firm TUI UK is among the few European enterprises that have taken the lead to outsource services.

TUI UK is a part of TUI AG, Europe's largest travel group, which owns brands including Thomson Holidays, Britannia Airways and Hapag-Lloyd Express. It employs around 10,000 people, 7,000 of whom work overseas in around 40 holiday destinations around the world.

TUI UK signed multi-million, multi-year deals with two Indian software services vendors, Wipro Technologies and Sonata Software recently.

The engagement with Wipro covers the entire gamut of infrastructure support and management. Sonata is developing e-business solutions for it. It is also looking to provide application management services and helping in the development and implementation of Oracle applications for TUI UK.

Wipro's remote infrastructure service practice will provide support for around 10,000 desktops, 300 servers and level 1 and level 2 help desk, and monitoring and messaging services across 800 locations in the UK for TUI UK.

Keith Newman, IT Director, TUI UK, says his company did a detailed evaluation for over a year before choosing Wipro and Sonata.

"We liked to test initially. Once we got good results from the pilots, we finalised the deal."

"The key for Wipro being chosen as our preferred partner was its experience and execution capability in the IT infrastructure space to manage complex and large projects," he says.

Similarly, Sonata was selected because of technical expertise.Logica CMG is another vendor for Britannia Airways carrying out application development and maintenance work, some of which is executed from its Indian operations.

TUI UK gave outsourcing serious thought as it planned to transform itself by leveraging information technology.

Cost was the key driver to outsource, Newman says, adding "the availability of expertise and high-end skill-sets in India, the delivery capabilities, made us offshore."

Outsourcing and offshoring seemed inevitable as competitors were getting aggressive in a market where profitability was an issue.

"We are planning to outsource some more of our services and IT functions," says Newman. Data centre operations is among them. "We are still exploring options to buy services of data centres based on demand," he says.

"By the middle of 2006, over 60 per cent of our services will be outsourced," Newman says. The company is already in talks with existing vendors.

"We expect to save about 20-30 per cent on services by outsourcing and offshoring."

The company expects to rationalise and let go some 900 people by mid-2006. It also plans to outsource its back office functions and is currently running a pilot with BPO services provider WNS in Mumbai.

Although UK companies are slightly behind the curve compared to their US counterparts when it comes to outsourcing, the takeoff will be much faster over the next 12-24 months, he says.

vishwa@thehindu.co.in

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