Outsourcing deals worth $1.5 Billion hit funds barrier

By siliconindia   |   Monday, 17 November 2008, 16:52 IST   |    3 Comments
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Outsourcing deals worth $1.5 Billion hit funds barrier
Bangalore: Outsourcing deals from new telecom service providers Datacom Solutions and Unitech Wireless would get delayed, as these companies struggle to raise funds and yet to launch their services. Both companies have been in discussion with several out sourcing vendors including IBM, EDS, Wipro and TCS to settle deals for outsourcing of back office and other IT functions worth a total of $1.5 billion (7,300 crore). Senior officials related with the negotiations told Economic Times that the outsourcing contracts are worth around $750 million each, to be implemented over five or more years. Indian mobile phone market is one of the most profitable markets in the world with a subscriber base of around 242 million. Mobile phone firms in India outsource IT contracts to focus on their core business better. "We are worried about these companies' fund-raising prospects," said a senior official at one of the technology vendors. "It's not that we are completely walking out of these contracts, but the momentum is missing and there is ambiguity about when actually they will launch services," he added. He opined that he outsourcing contracts were originally expected to be signed before September this year but the discussions could stretch up to the second quarter of 2009. According to Prashant Singhal, a leader of the telecom industry program at Ernst & Young, the new entrants look forward to ensure that they have a strategic partner in place before finalizing any outsourcing deals. "A partner may have a different perspective on procurement; they might want to go with their preferred vendors," he pointed out. A Unitech spokesperson noted that the delays were in the past, when its alliance with Norway's Telenor was being finalized, and that discussions will move faster now. Unitech has already received radio spectrum to offer phone services in 13 telecom circles and is expected to launch its operation in some of the service areas by June next year. The company has also received funding by bringing in Telenor as a majority shareholder. Meanwhile, Datacom is still in discussion with several potential partners. A person similar to the development said that the management is not releasing funds to procure equipment and move forward with the outsourcing arrangements. "Datacom IT outsourcing deal was originally scheduled to be finalized in September, but the company has slowed down deliberations since then," he added.

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