Infosys eyes $250 mn BP deal as BT revenues shrink

At a time when revenues from its top customer BT are dwindling, Infosys is chasing new contracts worth $100-250 million from another existing customer-British Petroleum (BP), as the company seeks to grow its revenues from almost $15 billion outsourcing market in the UK.

Europe’s third-biggest oil company-BP, which started outsourcing its back office functions many years ago, is currently fleshing out new contracts for outsourcing business application maintenance, development and support, as the oil major plans to bring down its operational costs and ensure better focus on its core business.

“BP is now engaged in discussions with outsourcing consultants in order to define the scope of new outsourcing contracts,” a UK-based person familiar with BP’s outsourcing strategy told ET on conditions of anonymity.

“BP is not entirely new to outsourcing. It currently works with Infosys apart from several others,” he added. When contacted by ET, a BP spokesman confirmed that Infosys is an existing vendor for the company, but declined to provide any more details. “Yes, Infosys is one of the number of companies in India that carries out support work for BP, but we don’t comment on any future plans,” said BP press officer Robert Wine.

In a year when customers in India’s top market of US are scaling back on outsourcing decisions, British firms will spend around $15.6 billion on IT outsourcing this year, according to research firm Ovum-Datamonitor. Meanwhile, top outsourcing customers such as BT are currently under tremendous pressure to cope with falling demand for enterprise and consumer services in the UK market, and are cutting back IT investments.

However, enterprises such as BP continue to invest in new technologies for making their business processes more efficient. “Companies in the oil sector obviously have more available funds, and they have also been among the early movers when it comes to outsourcing,” said John O’Brien, an analyst with UK-based research firm Ovum-Datamonitor.

“We find that many customers are breaking bigger, mega outsourcing contracts into smaller ones,” he said. When contacted by ET on Monday, an Infosys spokeswoman declined to comment on any specific customer. Infosys could see revenues from its top customers BT, go down from around $381 million last year to almost $300-322 million this financial year, as the UK’s largest phone company restructures its operations and scales down information technology spend in order to cope better with the recession.

According to Mr O’Brien, private sector UK companies are increasingly looking to award outsourcing contracts worth $10-50 million. “Recession is causing customers to think about driving costs out through outsourcing specific activities such as application development and remote infrastructure management,” Mr O’Brien added.

While BT continues to be the top customer for Infosys, future revenues from the phone firm has been a concern for many analysts tracking the company. “We believe that BT Global Services’ performance could have significant impact on Infosys’ growth expectations for the account in FY10,” Diviya Nagarajan, analyst at Mumbai-based JM Financial wrote in her report earlier this year.

BT, which accounted for almost 9.1% of Infosys’ revenues last year, will contribute around 6.9% of the company’s business this year, down over 2%, Ms Nagarajan said in her report.
Source: TheEconomicTimes