Indian Outsources Hail New Victory

The worst-kept secret in India’s normally reticent technology services industry has been “the ABN Amro deal,” which has finally emerged [...]

October 1 2005 by Khozem Merchant


The worst-kept secret in India’s normally reticent technology services industry has been “the ABN Amro deal,” which has finally emerged now that the Dutch financial services group announced a record $2.24 billion outsourcing contract.

 

After more than nine months of negotiations, the deal is the largest of its kind involving Indian information technology companies. “This deal is a tipping point for Indian IT,” says Nandan Nilekani, chief executive of Infosys Technologies, one of the companies that clinched a role.

Industry executives in Mumbai say several strategic messages emerge from ABN’s decision to outsource large layers of its IT services. One is that the transaction marks a decisive shift by customers, from outsourcing their IT infrastructures to one or at most two vendors, to multiple vendors.

 

In the ABN deal, Tata Consultancy Services and Patni Computer Systems will share the work on the Indian side with Infosys. Sharing the spoils also are IBM and Accenture. This approach helps make clients less vulnerable to business or geopolitical risk by allowing the selection of various vendors that are leaders in their respective areas of expertise. “It’s a way of de-risking, but it also allows a client to attract the best of breed,” says Nilekani.

ABN’s decision to bundle Indian companies alongside IBM and Accenture also sends a definitive “message of trust” about Indian capability on contracts of global scale. “The deal demonstrates that financial services groups, which have led the way with offshore outsourcing, now view Indian companies in the same league as traditional giants,” says Ramesh Venkataraman, head of the technology and telecoms unit at McKinsey in Mumbai.