Large India Firms Compete with US Companies for BP Contracts

The major Indian outsourcers - TCS, Wipro, Infosys, and Mahindra Satyam - are in stiff competition with Accenture and IBM for outsourcing contracts worth close to a billion dollars; the contracts are to be issued by British Petroleum in August.

Currently, BP outsources most of its global application development, infrastructure management and system integration projects to nearly thirty different suppliers . These suppliers include Accenture, IBM, Infosys and Mahindra Satyam. The oil giant is now looking to slash its costs linked to IT services by up to a third. It plans to do this by consolidating its spend with few providers which typically reduces costs via economies of scale, easier vendor management and heightened vendor competition for the larger contracts.

One UK-based analysts close to the story told The Economic Times, "Every BP business unit at BP was running its IT operations separately, with a different set of suppliers." Subsequently, operations costs have sky-rocketed. BP is now looking to consolidate and seeking to collaborate with less than 7 global vendors of IT services.

The U.K.-based petroleum firm said in a statement that it is bringing its supplier review to an 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," spokesman Robert Wine was quoted as saying by the The Economic Times.

Chief of consulting firm Quantum Step, Sridhar Vedala, commented that buyers have started segmenting their IT requirements into application development, infrastructure management, and maintenance. As a result, vendors are then chosen for their competencies rather than awarding contracts as a total IT package deal.

IBM and Accenture have the bulk of the IT outsourcing contracts which exceed $300 million. Mahindra Satyam is estimated to have over $40 million in revenue from BP.

Research from Ovum-Datamonitor reveals that U.K. firms are expected to spend approximately $15.6 billion in 2009 toward offshore outsourcing to India. This comes amid cutbacks from U.S. firms - the biggest clientele for Indian IT firms. U.S. companies are reportedly scaling back on offshore outsourcing as a looming recession has worsened unemployment in the country.