INFOSYS EYES ON UK'S GOVT CONTRACT

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BANGALORE:
Infosys is
evaluating options
to tap into UK’s
multi-billion government
outsourcing market, as it seeks
to compete better with larger
domestic rival Tata Consultancy
Services by increasing its share
of revenues from public sector
departments looking to cut costs.
So far, India’s second-biggest
software exporter has stayed
away from addressing the UK’s
government outsourcing market.
In contrast, rivals TCS and Wipro
have established subsidiaries
and won several deals, including
from the country’s pension
management authority and tax
department.“We are studying
the market. But there are
contractual and liability
challenges,” said BG Srinivas,
Senior Vice-President ,
manufacturing , product
engineering, product lifecycle
and engineering solutions
businesses.
Infosys recently announced a
new subsidiary in the US to focus
exclusively on public sector
projects. Srinivas, however, ruled
out a separate subsidiary for this
business in the UK. Several UK
government departments have
already started sending IT jobs
overseas to cut cost of
operations and cope with a local
shortage of skills. For instance,
the UK’s tax authority, HM
Revenue & Customs , is
beginning an offshore
outsourcing pilot in India with
technology vendor Capgemini.
The 18-24 month pilot, being
launched with the European
vendor, is part of HMRC’s 5-year ,
$84-million outsourcing contract
for tracking the agency’s imports
and exports. Among Indian
vendors, TCS has won sizeable
projects from the UK public
sector including the £600 million
contract from the UK Personal
Accounts Delivery Authority. The
combined IT services market in
the UK and Ireland is estimated
to grow to over £32 billion by
2013, says a report by advisory
firm Ovum, of which the public
sector will account for a third.
The public sector market ,
however, is seen as getting more
complicated as the government
unveils greater spending cuts to
tackle budget deficit. The Indian
IT industry , which derives nearly
18% of its business from the UK,
started gaining more
government outsourcing
business after Tata Consultancy
Services won a contract worth
over $600 million to administer
the country's new national
pension scheme earlier this year.
The UK government has
announced measures like putting
a cap on IT projects over £100
million, protecting its in-house IT
capabilities and greater scrutiny
on projects being awarded.“The
UK government has articulated
that outsourcing will continue
but they will be cost conscious,”
Srinivas said. Europe accounts for
over 20% of Infosys’ $6-billion
revenues, of which over 50%
comes from the UK.
Infosys has also identified
France, Germany, Switzerland,
Netherlands , Belgium and Poland
as its core markets in Europe and
the company has seen revenue
from these regions grow faster
than the UK in the past two
years. UK’s contribution to
revenue has come down from
over 60% two years ago to
about 50%.
France and Germany have
traditionally been slow to
outsource , but clients are
opening up to the opportunity.
“Structural challenges are still
there, companies have large
inbuilt IT capabilities that they
cannot do away with. But they
are outsourcing new projects. It
is a medium-to-long term
opportunity ,” Srinivas said.
Europe has been slow to bounce
back from the global downturn
compared to the US. Worries
around the euro, large deficits
and the impact of the Middle-East
crisis still remain. Srinivas said
the demand for IT services was
slow but steady