Infosys, Wipro to fund impoverished client projects

Bangalore: Infosys and Wipro have now decided to get into vendor financing with the help of the reserves accumulated over years to invest in software platforms that run activities like payroll processing. The Indian outsourcing industry has been maintaining the IT systems of companies in U.S. at lower costs by writing software application codes in India and now it is worth $50 billion.

Companies like JPMorgan, Philips and Citibank are now asking vendors to invest in building systems and to link payment to the number of transactions as they are making an attempt to cope with lower IT budgets by avoiding expensive licensed software. "We will have to bite the bullet now. If we wait, there may be no option left for us to have such conversations with customers later," said Subhash Dhar, Global Head of Sales and Marketing, Infosys.

This type of investment is considered to be different from usual vendor financing as Infosys and many other companies are not offering credit to their customers. "It is a distinct shift from selling software to users and, at least to some extent, is similar to that of companies like IBM, which bundle computer hardware, software and services together in large outsourcing contracts," said a consultant.

"The IBM issue was really around freeing up cash during hard times, and the overall value to the company was getting cash while over the long term, IBM probably made a return on the financing they did for that specific customer," said Rodney Nelsestuen, Senior Research Director at TowerGroup.

The investments ranges between $1 million and $10 million which is not so large but it depends on the number of user licenses to be bought and the extent to which the software has to be tweaked for individual users. Indian vendors are buying licences from business software makers such as SAP and Oracle, and are developing a ready stack of solutions that can be offered on a pay-as-you-go basis.