The Hindu Business Line : Multi-vendor sourcing facilitates larger deals

New trend
A recent survey found that multi-vendor sourcing is moving from a country-specific approach to a more global approach.
Large 5 India IT service providers account for about $12 billion of outsourcing revenues
Out of the $100 billion outsourcing opportunity, a big chunk is coming up for renewal.

Hyderabad , Dec. 3

If it was vendor consolidation after 9/11, which meant pressure on IT investments and major deals for big five enterprise solutions providers, it is now time to source from multiple vendors who slice up large deals and offer them to several vendors.

Significantly, this move has meant that some of the deals such as the one offered by Qantas to TCS and Satyam, and ABN Amro late last year are pointers towards a trend wherein a large deal is segmented and sourced from more than one vendor.

It is here one finds top five IT services firms — TCS, Infosys, Wipro, Satyam and HCL — making inroads with $50 to $150 million deals.

Recently, the Chief Executive Officer of Satyam Computer Services, Mr B. Rama Raju, after winning the Qantas deal, told Business Line how the nature and scope of engagements was deepening down under where they work with some of the major banking and financial institutions.

On the rise

A recent survey of Chief Information Officers by Patni Computer alluded to multi-vendor sourcing that is on the rise.

The survey found that multi-vendor sourcing is gaining within the industry and is moving from a country-specific approach to a more global approach.

Exploring opportunities

Most of the clients, who have worked with Indian IT service providers over the years, are now exploring opportunities for deepening engagements.

This means competition with the likes of IBM, EDS and Accenture in some of the deals for the Indian service providers. Having tasted success and quality, and with Indian service providers scaling up significantly, they are now open to such deals.

Indicators

As larger outsourcing deals come up for renewal, trends point towards preference for a solutions approach that proactively suggests how customers could further improve their existing systems and bring in higher cost savings.

Even though India is seen to be garnering a larger share of the IT outsourcing pie, collectively large five India IT service providers account for about $12 billion in revenues and of them larger deals are just beginning to happen.

Service providers such as TCS and Satyam have created dedicated teams to scout for larger deals, which is paying off.

An IDC report indicated the number of deals between $500 million and $1 billion were declining and smaller contracts of less than $200-$250 million were on the rise. Indian service providers have struck it rich here.

Out of the $100 billion outsourcing opportunity, a big chunk is coming up for renewal. While this could possibly mean continuing with the same vendor/vendors, it could also potentially open up for new players.

Interestingly, domestic banking and financial institutions, and telecom players like Bharti too have begun to outsource with multi-year contracts.

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