UK's financial struggle benefits Indian IT firms

Mumbai: Britain's swelling deficit spells opportunity for Indian information technology (IT) firms as Prime Minister Gordon Brown's government in UK struggles to save money by outsourcing non-core activities and better managing existing IT infrastructure.

Both the government and the companies chasing business worth around 10 billion pounds (around 76,800 crore) are, however, trying to make sure they avoid being tainted with the notion that local jobs are being sent overseas. Trimming the deficit is a key task, according to Mint. Excluding financial sector interventions in the wake of the economic crisis, the UK's net public sector debt was 681.1 billion pounds (48.7 percent of GDP) at September-end, against 562.4 billion pounds (39.2 percent of GDP) at the end of September 2008.

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The fear of jobs being lost, a political storm this close to an election, is not easy to overcome, as the Cardiff Council found after awarding a $150 million contract recently to Tata Consultancy Services (TCS). The "reports in the media are very disappointing and completely inaccurate as we have been very specific since this contract was signed that there will be no job transfers," the council said in a release, reacting to local media stories that the contract would lead to job losses.

Industry observers consider TCS' Cardiff win as a significant advance for the company as well as for Indian service providers in general. To avoid adding to the perception of job losses, the government is adopting a language that emphasizes "partnership" with technology firms to improve the delivery of government services to citizens. TCS, which won the contract, has also been careful to use the language of partnership rather than sensitive terms such as offshoring or even outsourcing.

As part of the effort to trim the deficit, a British government cost-cutting initiative called the operational efficiency programme (OEP) is targeting savings of nearly 35 billion pounds in public spending by 2013. Between July 2008 and May, OEP undertook extensive evaluation of UK public sector spending and made recommendations to the treasury department.

Savings of around seven billion pounds a year are being targeted through restructuring IT and back-office operations by various government departments, including local government bodies. The savings can be achieved by "increased momentum for shared services and outsourcing," the OEP study recommended.

Indian IT industry body Nasscom estimates that Indian IT firms earned $50 billion in 2009 with a little more than 17 percent of that, or $8.5 billion, coming from the UK market. However, only a negligible portion of the UK revenue comes from the government sector.