Renault-Nissan may outsource $500 m IT spend

Indian vendors and MNCs with Indian footprint vying for major chunk

The Renault-Nissan alliance is seeking to make up for lost time by plunging into IT outsourcing (it is a late starter) so as to both cut costs and improve quality.

By the end of next year the combine will, in all likelihood, be outsourcing half a billion dollars worth of IT spend covering both technology and infrastructure in order to save around 20 per cent in costs. According to industry insiders, the process is likely to begin by the end of the current year.

This rapid upscaling in outsourcing is being driven from the top and CEO Carlos Ghosn, CEO of Nissan Motor who straddles the alliance, has been in India to see things for himself and meet top Indian vendors like TCS, Wipro and Infosys in Mumbai and Bangalore.

None of the vendors are revealing any details but the tightlipped attitude indicates the seriousness of the interactions.

Industry experts indicated that a major chunk of this outsourcing deal, which will be global, is likely to come to India but it is still wide open how the deal will be apportioned out between the top Indian vendors and multinationals such as Accenture and IBM which now have substantial Indian capacities.

The global character of the deal is dictated by the unique nature of the Nissan-Renault alliance which has independent entities and business units operating in Europe, Japan and the US. And these operations have different preferences and requirements.

"Not all that is outsourced will be offshored (some of it will be near shored) and the geographical claimants for the total pie are Eastern Europe (Czech Republic and Hungary), East and Southeast Asia (China and the Philippines) and India," and industry insider said.

The US arm is most comfortable offshoring to India, the Japanese arm wants something in China and the Philippines and the European operations are eyeing the Czech Republic and Hungary which are now part of the European Union.

"As things stand, the most sensitive and multilingual work is likely to be near shored (go to Europe), some of the outsourcing from Japan is likely to go to East and Southeast Asia and a major chunk is likely to come to India. But what is still wide open is how the Indian part of the cake will be divided," the industry source added.