IT outsourcing renewal contracts worth $250 million up for grabs

Indian Information Technology service providers are preparing for a tough competition with global IT players as large business organizations in the United States and Europe are about to renew technology outsourcing contracts. The total value of renewal is estimated to be USD 19.5 billion.

According to information provided by Information Service Group (ISG), there are about 686 Information Technology outsourcing contract that will expire on 2012. ISG is a market research firm that operates in the technology domain which owns TPI, leading outsourcing advisory. The data from ISG also shows that about 78 of the contracts are worth USD 250 million each.

Paul Reynolds who heads the research for Information Service Group observes that the number of contracts and the combined value will set new records. Leading global IT service vendors such as IBM and Accenture enjoys 37 per cent- by value- of the deals that are about to expire in 2012. This is a good opportunity for the India Information Technology service providers, as most of the large companies in the west have displayed a trend of selecting at least one India IT service provider as one of their IT service provider.

There has been a huge shift in the behavior of the firms in the west that outsource their IT function. Earlier the contracts were continued with the same service provider for a long duration as it was difficult to switch vendors due to costs. In the present day, about 30 per cent of the contracts are signed with different service providers.

A recent report by Standard Chartered indicates that the worth of the deals that will be renewed will be about USD 47 billion. The report also says that Indian IT vendors will have the opportunity to bag at least USD 6 billion. A senior executive from HCL says that with 30 per cent new vendors, the amount will go up to USD 12 billion. Out of the total deals, 50 per cent will be from the European region.

The renewal of contracts will help India players to improve their market share and it will be a key differentiator among the service providers in the country.

The continuing economic instability will force more organizations to outsource in an attempt to reduce cost. However the volume of outsourcing is not yet clear.

The Indian Outsourcing industry is expected to cross the USD 100 billion mark this March.

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