A Bit Of Good News
“The world’s 11th largest bank ABN Amro on Thursday announced a $2.2 billion (1.8 billion euro), 5-year deal to outsource IT services to three companies, including two Indian companies TCS and Infosys.
The biggest chunk of this deal (1.5 billion euro) has been cornered by IBM. TCS has bagged a contract worth $260 million — biggest ever outsourced to an Indian IT company. Infosys has got a $140 million contract — its single largest order till date.
Another Indian company Patni Computer and Accenture have been chosen as “preferred vendors” who have to compete with others for what ABN Amro calls “discretionery spend” on application development services like migration to new software.
For India, the TCS and Infosys deals mark a major breakthrough into the $100-million plus deals which have so far eluded domestic IT companies despite the aura around India’s IT prowess. “(source)
I think there has been some engagements in the past where Indian IT companies eventually made more than $100 million out of a single relationship. But this might be the first outsourcing deal for an Indian IT company where over $100 million has been committed to the vendor upfront. Lex (subscription only) has a more realistic take:
The contract is spread over five years, however, and works out at around $50m a year for TCS and just under $30m for Infosys hardly life-changing given annual revenues of $2bn each. Instead, the biggest winner is globalisation itself. India’s software consultancies are reaching ever further afield: TCS recently signed a Chinese outsourcing joint venture with Microsoft. Meanwhile, more international companies are setting up their own offshore bases in India. IBM already has almost 25,000 staff there. Some of these may well help clear trades from a Dutch broker buying Brazilian shares for a Boston investor.
The other implication of this deal? ABN’s key back office operations will move offshore, regardless of the outsourcing partners. Until now these functions were managed by over 5,000 employees at ABN’s offices worldwide. IBM is already ramping up its India workforce to over 39,000 & Accenture announced that it will add 30,000 staff, almost 70% in India. The ratio to keep in mind is 80:20. Indian IT majors have made it clear that they’re aggressively going with an 80:20 offshore/ onshore mix & anyone that doesn’t offer this mix will be at a competitive disadvantage.
Current status: IBM total workforce 320,000, in India 40,000; Accenture 105,000, in India 33,000 (projected)
Sanjay
Comment by Sanjay — September 2, 2005 @ 9:45 pm