Sunday, 25 January 2009

Tech Mahindra still confident on BT business

(By Anthony Miller). Just a day after BT announced it had slipped further down the yawning chasm that is BT Global Services’ (BTGS) losses (see BT warns - shares slide), its primary offshore services supplier, Tech Mahindra, still seemed confident it would reap the rewards of the £500m/5 year deal it signed with BT back in July last year. Announcing 3Q09 results (see here), Tech Mahindra CEO Vineet Nayyar reported “significant progress” with the BT deal, and expects to earn 60% of the £350m net incremental revenues in the first three years. BT, which holds a 31% stake in Tech Mahindra, generated 57% of Tech Mahindra’s 3Q09 revenues (c. £85m), broadly flat over the past few quarters.

BT is an old hand at offshoring, using Indian partners for IT services work for some 20 years and about 6-7 years for BPO (notably HCL). The relationship between BT and Tech Mahindra is all the more interesting as BTGS is potentially as much a competitor as a customer. Tech Mahindra also provides offshore services for other BT units, as do most of the other top tier Indian SIs. Indeed, BT is Infosys’ largest customer too, spending nearly £50m in the recent quarter, though this is only 6% of Infosys’ total revenues.

Clearly offshore is not a pancea to BTGS’ problems but will undoubtedly remain part of the solution. But it all comes down to the point we keep on making – BT first needs to decide what BTGS is for.

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