Financial Daily from THE HINDU group of publications
Friday, Nov 26, 2004
Info-Tech - Outsourcing
Now, IT's entire process outsourcing
New Delhi , Nov. 25
WITH the issue of outsourcing coming under heavy fire in the US and Europe, more and more Indian companies - including the likes of Infosys and Wipro - are now turning to the `more acceptable' employee acquisition route to take on assignments from overseas clients.
This entails Indian companies taking over an entire department of an overseas company, mostly non-core activities like IT or HR functions, and then streamlining operations in a more efficient way while utilising the existing staff of the client.
Infosys, for instance, is in talks with some European banks and Japanese auto majors for taking over their IT functions as a whole, industry sources said.
The company is likely to ink a deal with Nissan Motors of Japan for taking over the auto major's IT functions.
The concept of `entire-process outsourcing' is fast gaining acceptance in the West, with players like IBM, Hewlett Packard and Accenture already active in the sphere of employee outsourcing.
Last year, P&G had awarded a 10-year $400-million HR outsourcing contract to IBM's Consulting Services unit.
According to industry players, the employee acquisition route is a low-margin business, since the existing high-paid employees of the client have to be retained.
This, however, allows the service provider to retain existing expertise and knowledge, with the risk of the project for the service providers being considerably reduced.
There is also the assurance that further business can be outsourced back to India.
But it's not just one-way traffic. In April this year, IBM had taken over the IT operations of Bharti Tele-Ventures for 10 years in a deal worth almost $750 million.
Under the arrangement, Bharti has outsourced all of its hardware, software and services to IBM and 200 Bharti employees became employees of IBM.
The employees would, however, continue to work exclusively on the IT requirements for Bharti.
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