Boeing to set up IT arm in India, invest $5 million

By SiliconIndia   |   Tuesday, 28 October 2003, 08:00 Hrs
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MUMBAI: Boeing International Corporation is setting up a wholly owned information technology subsidiary company in India.

The company will also provide marketing, sales and support services to the Chicago-based aerospace major. A proposal, involving a foreign equity investment of $4.8m, was cleared by the foreign investments promotion board (FIPB), earlier this month. The India company will assist Boeing in fulfilling counter trade obligations in the country.

The investments will be made over a period of four years. The company will support Boeing’s interests in the commercial airplane business as well as space and communication, finance, defence, information technology areas.

This will be done by providing services like formulation of ‘system of systems’ solutions, advanced information and communication systems, according to the proposal cleared by the FIPB. Boeing International will hold 99% of the equity while Boeing Operations will hold 1%. Boeing currently outsources some of its engineering services to Indian offshore software and services player Infosys Technologies. Aircraft deals in many markets are accompanied by offset agreements whereby the manufacturers provide business to the country that buys from them. Boeing has made an offer for a 30% offset in case Air-India decides to buy its aircraft. This means, business worth 30% the value of the deal, will be done with Indian companies.

The Bangalore-based public sector company Hindustan Aeronautics (HAL) is already making overwing exit doors for B757 aircraft, bulk cargo doors for B767 (640 doors have been shipped) and the landing gear uplock box for the Boeing 777.

In the software segment, a modest $1m worth of software development, part of an earlier offset programme — for Air India’s purchase of the 747-400 — has been done with HAL besides about $20m worth of software development business transacted with companies like Infosys, Satyam, Wipro, and Tata Consultancy Services last year.

Boeing officials had announced at the Bangalore air-show this year that the company is evaluating India, among other countries, for outsourcing BPO functions for its 1,86,000 employees dealing with 145 customers located in 60 countries. It remains to be seen how much of this outsourcing is done through the new vehicle.

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