ExxonMobil to Consolidate $1b in Outsourcing Contracts

India's biggest offshore vendors and information technology companies are in a race for a $1-billion IT outsourcing contract from ExxonMobil.

According to The Economic Times of India, leading Indian offshore companies L&T Infotech and HCL Technologies were in talks with the world's biggest oil firm for up to $1- billion worth of IT contracts.

An official from Exxonmobil who declined to be identified said that their company wants to consolidate their IT spend and deal with fewer large- and medium-sized vendors at lower costs. However, he said that discussions are still in the early stages.

If ExxonMobil finalizes the deal with these offshore vendors, it would follow the move by British Petroleum (BP), which recently awarded more than $1.5-billion worth of outsourcing contracts to IT firms in India- TCS, Infosys and Wipro together with IBM and Accenture.

ExxonMobil uses the SAP ERP platform in over 200 countries where the firm's chemical and oil businesses are located. ExxonMobil employs almost 80,000 people globally.

Major oil and gas companies have been outsourcing and offshoring ERP maintenance and support in the midst of demands to cut operational costs. Multifaceted ERP software from SAP and Oracle power a range of business processes by oil and gas firms, including Royal Dutch Shell, Chevron, BP and ExxonMobil. The down economic environment and volatile commodity prices are factors triggering the company's decision to outsource ERP systems and services.

On the other hand oil and gas firms are not strangers to offshore outsourcing. ExxonMobil has numerous contracts where 70% of the work is done offshore. This new consolidation and offshore focus could drive some contracts to 90% offshore.