Euro 400-mn project underscores market potential
Indian software services firms Wipro and HCL Technologies will join global firms IBM, HP and CSC in a bid to snare an IT consolidation project of ArcelorMittal, the world’s largest steelmaker. The deal is expected to be worth up to euro 400 million (around Rs 2,360 crore).
The project, which aims to consolidate ArcelorMittal’s IT infrastructure across Europe, has the potential to be one of the largest in the region for the Indian software sector. It could also provide a firm foothold in a market that is receiving greater attention from domestic outsourcing companies.
According to sources, Brussels-based global sourcing advisory Quantum Step is advising ArcelorMittal on the deal. However, when contacted, a spokesperson for Quantum Step declined to comment. An email sent to ArcelorMittal’s India office did not elicit any response. Calls to its UK office went unanswered.
“ArcelorMittal has not so far outsourced any of its IT projects. It was only earlier this year that Bangalore-based Wipro won a five-year engagement with the company to consolidate its messaging systems. This shows the potential that IT vendors have to tap the European market,” said an analyst on condition of anonymity.
| RIGHT REGION |
| * ArcelorMittal hasn’t so far outsourced IT projects |
| * Quantum Step is advising the company on the deal |
| * Wipro has a 5-year deal for messaging system |
| * TCS recently reconfirmed £600-mn NEST projec |
| * Outsourcing market in Europe is seen at $30 bn |
As an incumbent vendor, Wipro could have an edge. The company will help ArcelorMittal consolidate and migrate its messaging systems to the Microsoft Exchange 2010 platform, hosted at six data centres spanning North America, Latin America, East and West Europe and Asia.
Deals such as this reflect not only the growing need of European companies to outsource work, but also the growing focus on the European region by Indian outsourcing firms. Recently, India’s largest IT services provider, Tata Consultancy Services, was reconfirmed a £600-million project to administer the National Employee Savings Trust by UK’s NEST Corporation.
According to a recent study by Everest Group, the European global outsourcing market is estimated to be worth $26-30 billion, or just under a third of the global market. So far, Europe’s contribution to Indian IT services revenues is 25-30 per cent.
“However, the potential of the European sourcing opportunity by 2020 is estimated to be $250-300 billion, which is 10 to 11 times the current size. So far, it has been an untapped region, with service providers, including Indian players, focusing more on the UK and some other regions,” said H Karthik, vice-president, Everest Group.
The Everest report also stated that of Europe’s $26-30-billion outsourcing market, IT accounts for the largest chunk, 61 per cent, followed by business process outsourcing at 39 per cent. Karthik points out that by 2020 markets like the UK, Germany and France will constitute 55 per cent of the European sourcing market, followed by Nordic countries, Italy and Benelux.
