Source: www.vnunet.com

The strongest impression at Indian outsourcer HCL’s New Delhi conference last week was of the offshoring sector trying to reposition itself as a corporate partnership option rather than just a cut-price commodity provider.

As the sub-continent’s economy continues its explosive growth, the price advantage that its businesses exploit is eroding. And Indian suppliers are increasingly facing the same issues as top-tier technology consultancies across the world.

Some big-name HCL customers are already endorsing the shift in focus.

Carphone Warehouse operations director Pete Schofield said major organisations are already looking at their outsourcing deals as an opportunity for innovation as well as expenditure reduction.

“Our contract with HCL has been an initiative to improve our IT capability rather than just strip cost,” he said.

For Deutsche Bank, the offshoring decision was largely the result of the availability of appropriate skills, according to global head of investment banking Tony McCarthy.

“We have expanded in India because it is the largest resource pool in the world,” said McCarthy.

“And forces such as power consumption and the sub-prime mortgage crisis have made us look at collaboration to minimise the disruption of these events,” he said.

The fact is, Indian outsourcers are no longer the new kids on the block. According to Forrester Research, the biggest players are now “leaders”, still behind giants such as EDS and IBM, but ahead of global names such as LogicaCMG and Atos Origin.

And the trend shows little sign of slowing as customer requirements increasingly dovetail with outsourcers’ core capabilities. Remote infrastructure management (Rim) contracts, for example ­ where hardware remains in the client’s data centre but is operated remotely by the service provider ­ are up by 30 per cent in the past year

The Rim model is perfect for Indian firms, according to Mark Kobayashi-Hillary, director of the National Outsourcing Association.

“These contracts play to offshore companies’ strengths because the expertise can be anywhere in the world,” he said.

“And the growing importance of the green agenda means these types of contracts will be more common.”

But along with maturity comes the need for a new competitive pitch for the Indian IT sector.

As major global players such as Accenture, Cisco and Oracle move large parts of their operations to India, salaries rise and skills become more scarce.

And the booming economy is strengthening the rupee, putting further pressure on competitive pricing deals.

“There is already starting to be an IT skills shortage and Indian firms can no longer play the cost reduction card,” said Gartner analyst Ian Marriott.

Changing the business model is the only way to compete.

“These companies must break away from the more-demand-equals-more-staff approach, towards the more automated asset-based approach that others use,” said Marriott.

Cost-competitive offshoring is still available but it is moving elsewhere.

China and Brazil are both on the rise. And Ukraine is tipped as a genuine competitor to India in the coming years ­ not least because the country’s non-EU status keeps salaries and migration down. In 2006, the former Soviet republic’s technology outsourcing market grew 47 per cent to a value of $246m (£118m), and 30,000 IT graduates enter the workforce annually.

Indian outsourcers are right to focus on performance as well as cost. But competing for global contracts with well-entrenched companies is not easy.

“Global IT consultants have excellent corporate contacts that it takes some time to build up,” said Marriott.

“Indian firms will have to prove they can deliver consistently. Keeping projects profitable and dealing with subcontractors effectively will be key.”

Indian summer for sub-continental outsourcers

While the rest of the world feels the bite of the global credit crunch, Indian IT service providers all reported strong second-quarter results last month.

*HCL Technologies’ revenue rose 43 per cent to $429m (£211m). Income rose 42 per cent to $77.4m (£38m).

*Tata Consultancy Services posted a 45 per cent revenue jump to $1.42bn (£700m) and added 12,000 staff to become the first Indian IT firm with more than 100,000 employees.

*Infosys saw revenue climb to $1.02bn (£500m), with year-on-year growth of 37 per cent, 48 new clients and 4,500 new employees.

*Wipro’s quarterly profits went up 17 per cent to 8.1bn rupees (£100m) thanks to several large deals including one valued at $275m (£134m).

Source: www.informationweek.com

Travel agency Thomas Cook has signed a $400 million outsourcing contract with Accenture for management of software applications and technology infrastructure, plus finance, accounting, and human resources services.

Accenture will perform services for the $17-billion-a-year travel company through a shared services center in the United Kingdom, but also will use personnel in other countries throughout the world. Much of that will likely come from India, which Accenture expects to be its largest geographical unit by year’s end. Bermuda-based Accenture announced earlier this year plans to increase its India-based head count by 8,000 people to 35,000 by 2008, compared with 30,000 people in the U.S.

The $400 million contract replaces an earlier one that the companies signed in 2002. The new contract was structured to help Thomas Cook integrate a range of MyTravel.com functions, which it acquired in June, to its existing outsourced operations.

The new contract calls for Accenture to manage Thomas Cook’s SAP (NYSE: SAP) ERP system, its network and technical services, handle accounts payable and receivable, and administer HR and payroll services to Thomas Cook’s U.K. employees.

Further details of the contract weren’t released. But in a recent interview with InformationWeek, Pankaj Vaish, a managing partner at Accenture who’s based in India, said there’s a growing trend in contracts for accounting and HR services to include both the savings from lower-cost labor plus a performance measure. That’s leading to outsourcing contracts based less on the input — number of hours worked — and more on the output.

So if Accenture is handling bill collections for a customer, for example, the contract might include a percentage based on driving the typical accounts receivable cycle from 30 days to 25 days and on the resulting improved cash flow, he said.