MNCs use Indian units to broker outsourcing deals

By siliconindia   |   Wednesday, 23 September 2009, 15:56 IST   |    1 Comments
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MNCs use Indian units to broker outsourcing deals
Mumbai: Many overseas companies with their units in India are using the management expertise to broker outsourcing deals, reports Economic Times. As in many cases, the final contract is done between the third party vendor and the Indian captive, rather than with the multinational parent and the third party. "There is an increasing understanding that it is better to outsource some tasks to a third party vendor rather than do it at their own captives because it results in higher levels of efficiency. At the same time, firms want to keep their captives for high end tasks that are sensitive and typically cannot be outsourced. These firms are also tapping the talent at their captives to ink deals with third party vendors because they have a better understanding of the local market," said Peter Bendor-Samuel, Founder and CEO, Everest Group. Everest Group was the advisor to Royal Philips Electronics during the sale of its finance and accounting captive to IT major Infosys. The companies like JP Morgan, Goldman Sachs and Bank of America are among the MNCs that are following this process. The larger captive units with staff strength of 5,000-8,000 have enough talent at the top to negotiate such contracts. There are compelling benefits. "If it is originating from India, the contract which is priced at $20-25 per hour can be negotiated at $15-18 an hour," said a consultant. The global economic slowdown could be one reason for such deals, as the global sourcing advisor TPI, which is involved in about a quarter of the world's outsourcing deals, informed that there has been a rise in such contracts, referring to 121 such contracts or India to India contracts. "Earlier Indian vendors were not very keen on these contracts since there were no tax benefits. That has changed now with most of the older facilities not being eligible anymore for STPI benefits. This means that the vendors are more open to take on these contracts. Multinational captives have a fair number of senior executives who can take decisions on outsourcing," said Siddharath Pai, Partner and Managing Director, TPI India.

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