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GM outsourcing deal decision seen delayed

Vishwanath Kulkarni
Krishnan Thiagarajan

Bangalore/Chennai , Dec. 21

CONTRARY to initial expectations, General Motors (GM) is likely to finalise its mega IT outsourcing contract only by the first or second quarter of calendar 2006, according to market sources. In October, it was expected that GM would take a decision on a part of the deal sometime by the end of December.

Wipro Technologies is said to be a front-runner among Indian vendors for portions of the mega outsourcing deal. GM is an existing customer of Wipro.

In an analysts' conference call following the second-quarter earnings performance, the senior management of Wipro had indicated that it expected GM to finalise the contract sometime in second or third week of December for a few request for proposals (RFPs).

"GM continues to be a strategic customer of us and as far as the 2006 RFP is concerned, the process is still on," said Mr Sudip Banerjee, President (Enterprise Solutions Division), Wipro, during the post-earnings call.

However, when contacted on Wednesday, Mr Banerjee refused to offer any comments or updates to the GM's RFP process.

GM is planning to sign up IT vendors ahead of June 2006, when its 10-year master service agreement with EDS expires.

Spelling out the contours of the deal, the Wipro management in the earnings call had said: "They (GM) have issued a total of 43 RFPs, which covers their complete spend, and that spend is $2.5-3 billion a year; so, out of those RFPs, a few are going to be decided in December is the indication that we have."

These RFPs are said to span a host of services ranging from consulting, infrastructure services, application maintenance and development to testing services.

Market sources speculate that that the ongoing restructuring process at GM could have contributed to the delay in finalising the contract.

GM recently announced that it would shut down 12 manufacturing plants and lay off some 30,000 employees globally as part of restructuring its operations.

The automobile major has been struggling with competition from foreign rivals such as Toyota, slowing sales of sports utility vehicles - its key profit earner - and high healthcare and raw materials costs.

Apart from global majors such as EDS, IBM, Accenture, and HP, other major Indian vendors said to be in the fray for part of the GM deal include TCS, Infosys, and Satyam.

This is expected to yet another large deal that will be unbundled and offered to multiple vendors, just like the $2.2-billion (or 1.8-billion euro) deal announced by ABN Amro in early September.

TCS and Infosys had bagged $400-million five-year application support contracts, besides being two of the five preferred vendors for application development in that deal.

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