Do Indian outsourcing vendors have capabilities to win US/UK Government outsourcing markets ?
DATE: Dec 13th, 2009
Infosys recently announced that they are setting up a wholly owned company headquarters in Dallas, Texas to bid for US state government and federal contracts (LINK). These contracts have been typically the domain of Accenture, IBM, Deloitte and numerous other small and mid size firms who vie for the $50 billion dollar plus IT contracting market from the federal and state governments.
In the European markets, Indian vendors have had had some success in winning government contracts. TCS recently announced a # of deals in the UK where they have won government contracts (http://coreadvisor.com/globalwise/2009/11/05/cardiff-city-council-signs-up-tcs-for-it-deal/).
Some of these contracts are projected more as partnerships rather than offshoring. The recently announced Cardiff contract with TCS explicitly states that the deal does not involve any job displacements and Cardiff is looking to leverage TCS eGovernment capabilities to augment their resources.
A number of the Indian vendors are also competing for domestic Indian government contracts. Interestingly the top domestic outsourcing firm in India are the multi nationals , IBM,Accenture although TCS, Infosys and other are also servicing domestic government contracts in India.
This is also coming at a time when the state government and federal governments in the US as well as UK are struggling with very tight budgets and facing high unemployment rate in their states. Attached link gives you some idea of the large number of states which are in red in the US. (http://money.cnn.com/news/storysupplement/economy/gapmap/index.htm).
Indian vendors have typically been very strong in building and operating centers in India with it’s unique challenges around people, delivery, infrastructure. Most of the lessons learnt by Indian vendors as they have built operating capabilities are skills which are very relevant in Indian markets. A majority of these firms continue to be lead by Indian leadership. A number of Indian vendors have set up ‘token’ super centers in the US primarily driven by client needs but are still fairly small and operating in a limited sandbox.
Infosys in the past has tried to set up a consulting practice in the US which has taken longer to fully ramp up and still does not play in the big leagues when it comes to consulting.
Government contracting process is a fairly stringent process and requires a distinct service skill set. It will be interesting to see how Indian outsourcing vendors whose core skills and competency has been to operate global centers and delivery locations in low cost locations, will compete with a low margin but very competitive Government contracting space where majority of the delivery has to happen within the geographical proximity to the clients. Indian firms also have to manage brand stigma and perception as firms taking jobs away from these countries to low cost locations. Federal Government and State Government have to deal with a similar challenge to where they have reduced budgets to manage ever growing services to their constituents which responsibility providing tax dollars to create local jobs.
The strategy for a number of global firms looking to service the government sector has to be something other than offering low cost global operating centers solution. It has to be driven by cost effective expertise and service delivery with local operating capabilities and local talent acquisition.
Stay tuned as we continue to track how the new business models for globalization continue to change.
Mohit Sharma is the CEO of Corrystone Global Partners. Corrystone is a knowledge based outsourcing firm providing consulting, staffing and training services to companies going global. We work with firms which are exploring India or low cost US locations for IT, Business Process work or have established IT/operations in India and US and are looking at ways to further optimize cost and manage operational risk. Contact us at info@corrystone.com to learn more about how we could help you with your globalization initiatives.
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