This is so hard to decipher — Indian code writers are quite the toast of the world, but rarely, if ever, does a billion-dollar information technology deal make it to India.
The IBMs and Accentures of the world still corner all the mega contracts, or those valued above $1 billion.
In fact, in 2010, none of the Indian heritage service providers landed even one mega contract, though they did bag 30% of the contracts ranging from $25 million to $199 million.
“In the space where deals are less than $50 million, Indian IT players are dominant. The story is completely different when it comes to deals which are more than $500 million in size,” said Sid Pai, managing director, TPI, a global sourcing advisory firm.
Typically, the larger deals involve infrastructure outsourcing. And here, though Indian companies have lately made progress in the remote infrastructure management space, they are still miles off the standards set by their western counterparts, say experts.
Indian IT companies have so far followed an asset-light model — they do not own IT infrastructure or the people required for this service — mainly because most lack the balance sheet size it takes to acquire assets.
“Unlike HP, IBM or Accenture, Indian IT companies do not own any hardware. They have been late entrants in this space and hence lack the expertise,” Karthik Ananth, director, Zinnov, said, adding that clients prefer the experienced lot when it comes to mega deals.
“IBM is a 100-year-old company. Even HP was formed in 1939. Their experience is unmatched. The overall Indian IT industry is only 20 years old. Hence, it is difficult for clients to overlook these companies as they have built a strong relationship over the years,” said Ananth.
Another reason Indian companies have avoided an asset-heavy model is that it affects the margins.
“India is still known for its low labour cost. This is where it scores points over others. However, if they have to invest in assets, it would mean sacrificing margins as their capital will get locked up. Also, when it comes to cost of hardware, there are no price advantages involved,” said an expert who did not wish to be named.
According to TPI’s Pai, Indian companies need to expand their presence globally if they want to bag these mega-size deals. “They have been slow when it comes to international expansion. By this I mean having delivery capability in geographies outside India. Companies need to be locally present in UK and Australia, which are high-cost destinations. Though they have been increasing local presence, the pace has been slow… Only when you are a truly global player will clients start trusting you with big deals.”
Zinnov’s Ananth suggests Indian players forge partnerships while pitching for deals. “More than global expansion, I feel the ability to build deep CEO relationship with clients is very important. India can no longer afford to ignore this area. Apart from this, their overall risk taking appetite should increase. So, if for example Infosys and TCS need to get into a strategic partnership while competing for a mega contract with Accenture or IBM, they should not hesitate in doing that. They should build their appetite for risk.”
Positively, the local players have started showing a hunger for mega deals, say experts.
“India has realised that asset-heavy deals are a necessity to win large contracts and increase market share. At least now they have started participating in 50% of these deals. Whether they win it or not is a different story, but they have realised that they need to participate.
Source:http://www.dnaindia.com/money/report_on-software-st-billion-dollar-deals-still-the-holy-grail_1619172
