Indian IT biggies losing out to MNCs

Indian IT majors are far behind their MNC counterparts when it comes to striking big deals in the domestic arena, primarily because they currently do not offer a suite of services (includes storage, database, servers, PCs, software and infrastructure management) which the big 6 big six service providers -- Accenture, ACS, CSC, EDS, HP, IBM do.

Besides, they are not as aggressive as the MNCs and are mostly restricted to the application, development and maintenance (ADM) and financial accounting space rather than infrastructure management.

This even as strategic outsourcing in the domestic IT sector, especially the Indian telecom space, is assuming bigger proportions with the just-signed $600-800 million deal between Idea Cellular and IBM and the earlier almost $1 billion deal (including the IBM Daksh one) between Bharti Airtel and IBM. The only big deal ($250 million over 5 years) was in 2005 when Tata Teleservices had announced strategic outsourcing of its entire IT infrastructure management to Tata Consultancy Services (TCS). However, it this case, both companies belong to the same group.

"Indian IT companies still don't seem to be waking up. And they do not put their best foot forward when it comes to pitching for domestic deals. It will be only a matter of time before the global majors lap up all the Indian bluechip deals across verticals (Bharti-IBM, Dabur-Accenture and Bank of India-Hewlett Packard)," rues Partha Iyengar, research vice-president, Gartner, adding: "The only worry is by the time Indian IT companies realise the importance of the local market, it should not be too late."

The Indian domestic outsourcing market, of deal sizes above $50 million, is estimated to be around $2.2 billion. Wipro, with its deals with a few banks in its client list, appears to have made domestic inroads. HCL and TCS are making slow progress and Satyam, Infosys are just about starting up. "Indian players are getting into it but they need to scale up that part (infrastructure management) of the business to compete with the likes of IBM and HP," says Global partner in-charge, sourcing advisory, KPMG, Pradeep Udhas. He adds that deals of this size involve risks and responsibilities.

Alok Shende, Director IT, Frost & Sullivan, concurs: "To do deals like this, you need a strong balance sheet. Indian companies are very silo-based in their approach. They're more likely to concentrate on project-based activities in India."

Even globally, the big six of outsourcing still dominate the offshore outsourcing market. However, a TPI research report notes Indian companies now account for seven per cent of the global outsourcing market, while the big six service providers have seen their market share fall from 71 per cent in 2002 to 46 per cent in 2006. In the biggest outsourcing deal coming out of Europe ever, when ABN Amro Bank awarded its $2.2 billion outsourcing contract in September last year, about $400 million worth of contracts were awarded to TCS ($260 million) and Infosys ($140 million), besides old-timers like IBM and Accenture.

"It's still a young market. Indian firms are trying to build a suite of services. Given them a year or two and they will get there," says Siddharth Pai, Siddharth Pai, leader of TPI's Global Service Delivery group. One hopes Indian IT firms are taking the cue.