Outsourcing to domestic cos growing incrementally

While deal sizes for Indian IT outsourcing firms can be as big as a few hundred million dollars or more from foreign companies, their size shrinks significantly when the same happens between two domestic companies.

It also happens in incremental fashion and in bits and pieces but, over a period of time, the engagement with the domestic client becomes deeper.

According to Mr Anurag Mehrotra, Vice-President - Client Relationship Group, Wipro Ltd, clients who initially begin by outsourcing bits and pieces tend to outsource more and more as they develop trust. “Clients outsource assets and services, and later outsource even the accountability to bring about transformation. At the highest level, entire IT is outsourced,” Mr Mehrotra told Business Line. Outsourcing within India by Indian companies — Aircel and Uninor outsourcing everything pertaining to IT to Wipro — is expected to touch $3.5 billion by 2015 and outsourcing by Indian government entities to Indian companies — Infosys setting up a BPO unit for the income tax department — could account for up to 40 to 50 per cent of this figure and thereby account for $1.5 billion, according to Mr Gaurav Gupta, Managing Partner, Everest Group.

While the Everest Group has brought out a report that talks about Indian outsourcing in areas such as HR and payroll, technology is also a big thing that is getting outsourced — and this is leading to interesting synergies. For example, recently, data centre services provider Tulip Telecom announced that it had partnered with IBM to set up a 9-lakh sq.ft data centre in Bangalore. “Customers will host from a professionally managed centre rather than create their own,” said Mr Shailesh Agarwal, Vice-President - Infrastructure Services Sales, IBM India/South Asia.

While IBM will just build and hand over the data centre, there are capabilities for synergies in the future. Mr Agarwal pointed out that IBM offers managed services and Tulip offers data centres, so if IBM's clients need data centres or if Tulip's customers need managed services, they would recommend these customers to each other.

While vendors are planning such synergies, users are also changing tack and are not insisting on cost cutting, long the cornerstone of outsourcing. “Companies are saying, ‘keep my costs neutral, but give me other benefits, like the ability to ramp up or ramp down volumes'. They want best practices from BPO companies. They have realised that outsourcing cannot be only about cost,” said Mr Gupta.

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