The Indian Information Technology companies are targeting outsourcing contracts worth USD 19.5 billion from multinational corporations in the west. This opportunity has come up because of their move of renewing their technology outsourcing contracts.
Statistics show that about 686 IT outsourcing contracts worth at least USD 25 million or more will expire in 2012. Out of the total contracts that will be renewed about 78 of them are worth USD 250 million each. There is an increasing trend among the organizations in the west, where they select at least one Indian IT firm as their IT service provider. Another trend that is observed is that about 30 per cent of the contract renewals are going to new players, replacing the existing service providers.
Recently HCL bagged contracts with AstraZeneca, a leading player in the pharma industry; another deal with Stratoil, a leading player in the oil and gas industry and with telecommunications giant UOPM. These deals were as a part of renewing contracts by the firms and existing IT service providers were replaced with HCL.
TCS, leading service provider in India too have successfully bagged contract by replacing existing global service providers. For instance, TCS has signed outsourcing contract with TDC, replacing CSC. Even though the exact worth of the contract is not known, industry sources believe that it will amount to USD 200 million at the least. The players in the industry believe that the contract renewal will create opportunities for the Indian IT service providers.
The Indian IT service providers are well known for their expertise in Application Development and Maintenance (ADM). The most encouraging part of the contract renewals is that 30 per cent of them are in the area of ADM. The other areas that will be a part of the renewal are BI, social media and mobility applications.
An important trend in outsourcing is the splitting of larger contracts into smaller ones. As a result the number of outsourcing contracts will go up, but not total outsourcing. This is a good move that will benefit the service providers in India.
Most of the large organizations prefer to employ multiple service vendors. But in the case of organizations with larger service portfolio, global IT players have an advantage over Indian IT service providers. The India firms are not competent enough to fight with player like IBM and Accenture in the case of large deals.
Most of the contract renewals are happening in Europe, where India service providers are not able to gain a decent market share, except for UK.