Thursday, 25 September 2008

TCS making a mark with infrastructure outsourcing

I’ve just got back from a fascinating session at TCS where they talked about what they are doing in the UK with Infrastructure Management (IM). Globally, TCS generated some $400m from IM these past 12 months and the service line is one of its fastest growing, at over 60% yoy. The UK is TCS’s largest market for IM outside of the US and I reckon they’ll break the £100m barrier here this year. OK, still small fry compared to the likes of EDS, IBM and CSC, but at those growth rates it may not take TCS too long to catch up.

Just a few years ago, most people doubted that Indian SIs would ever be able to make a mark in traditional infrastructure outsourcing. After all, “they won’t take on assets or people, and customers don’t want their kit operated from India”. Wrong on all points. Here in the UK, TCS will sometimes take on assets (or help the customer get them off the books) and nearly always takes on customer staff, of course under the UK’s stringent TUPE regulations. As a result, TCS has won a string of modest-sized deals with some well known brands such as Centrica, VW (UK) and Somerfield. TCS’s sweet spot is for IM deals between, say, £3m-£12m p.a. but don’t forget this is at blended (offshore/onshore) rates. Given that typically 70% of IM services can be delivered offshore – and for some activities, even 100% - you could argue that these deals would have been worth £5m-£50m for a traditional onshore vendor. This strikes at the very heartland of the big US and European players.

Of course, most of the usual suspects have built their own offshore and nearshore delivery centres, and compete vigorously for this business. TCS’s Indian peers are also firmly in the frame, and it’s a moot question whether TCS or Wipro has the highest IM market share in the UK among the major Indian SIs. But TCS’s long-standing relationships in the UK (they’ve been here 20 years) is proving fertile ground. With few of its UK accounts yet to take its IM services, we think TCS will move up the UK’s leading infrastructure outsourcer rankings sooner rather than later.

And now for a competition!

Here’s how one of TCS’s UK clients described the various responses to its very detailed RFP to take over its IT operations (a deal which TCS won, you may presume). See if you can guess which vendor the client might be referring to in each instance:

(1) “they had all the energy of a dead parrot”
(2) “they wanted to see the CEO”
(3) “they wanted to do an investigation so they could tell us what we really wanted”
(4) “they nearly had a stand-up fight with their UK bid partner
(5) “they couldn’t even match our in-house costs let alone show any savings”

A mention in despatches for the winner – but don’t expect us to publish the right answers too!

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