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Indian IT Firms see Demand for High-value Apps

ST Team
Thursday, October 1, 2009
ST Team
Indian IT firms are experiencing more demand for building high-value applications from customers for upgrading or maintaining their business software. To meet this demand, the firms have started acquiring ERP (Enterprise Resource Planning) capabilities in the recent years to enter the league of companies such as International Business Machines (IBM) and Accenture.

Infosys Technologies and HCL fought a bid last year to buy the British ERP implementation and consulting firm Axon Group. With the market showing signs of revival, firms such as the British oil explorer BP and power equipment maker ABB Group have started upgrading their business applications but prefer outsourcing the work to firms in low-cost countries such as India. “Clients are becoming more open to discretionary IT spending, especially in areas such asERP, in which deep spending cuts have already happened,” says Harmendra Gandhi and Pinku Pappan, Analysts, Nomura Financial Advisory and Securities.

The shift to Indian firms was also motivated by price increases at their regular vendors. Germany’s SAP raised its annual support costs of the license fee from 17 to 22 percent last year, describing that this would bring down the total cost of ownership of the license for the customers. “Firms had not factored in a hike in maintenance fee during the recession and are exploring outsourcing to Indian vendors, who can do it at half the cost, but with the risk of losing support on upgrades from the vendor,” says Asheesh Raina, Principal Research Analyst, Gartner.

Firms such as Wipro, HCL, Cognizant, and even smaller companies such as Defiance Technologies and the IT services unit of the Hinduja Group say that customers want to improve efficiency and integrate their business software with their core processes, not just to cut costs. It does help that Indian ERP firms are cheaper by at least a third than Accenture or IBM.
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