Indian IT cos bid against MNC rivals for $1-bn BP deals

India’s offshore outsourcing firms, including TCS, Infosys, Wipro and Mahindra Satyam, have locked horns with MNC rivals IBM and Accenture for up to $1 billion worth of outsourcing contracts to be awarded in August by British Petroleum (BP).

BP, which currently outsources a majority of its application development, system integration and infrastructure management projects to almost 30 suppliers including IBM, Accenture, Mahindra Satyam and Infosys, wants to bring down its IT costs by up to 30% by working with fewer vendors handling more work, at lower rates.

“Every BP business unit at BP was running its IT operations separately, with a different set of suppliers. This led to complexity and a higher cost of operations. With this consolidation, BP now wants to work with not more than six vendors globally,” said a UK-based expert familiar with BP’s sourcing strategy. He requested anonymity as he is not authorised to comment about the contracts.

When contacted by ET last week, a BP spokesman confirmed that the supplier review is nearing its end. “Yes, we have been reviewing our strategic IT providers, and are getting close to the end of that process, but I can’t confirm numbers of the current or possible future providers,” said spokesman Robert Wine.

Sridhar Vedala, MD of sourcing advisory firm Quantum Step, says customers are now breaking down their requirements into infrastructure management, application development and maintenance, and are selecting vendors according to their competencies. “A few years ago, ABN Amro undertook a similar exercise,” he added.

While customers in the US, the top market for Indian companies, are scaling back on outsourcing, British firms will spend around $15.6 billion this year, according to research firm Ovum-Datamonitor.

While Mahindra Satyam counts BP as one of its $40-50 million customers, Accenture and IBM currently have a lion’s share of the outsourcing pie, estimated to be anywhere between $300 million and $400 million.