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Offshore Firms Target IT Infrastructure Outsourcing

Indian vendors report big workforce gains, look to expand into new areas

January 23, 2006 12:00 PM ET

Computerworld - For most U.S. companies, a 30% year-over-year increase in employees without a major acquisition might make the national news. But in India, that kind of growth is becoming routine for IT services firms.

For example, Wipro Ltd. in Bangalore, India, said in its latest quarterly earnings report last week that its workforce had reached 51,000 employees as of Dec. 31—up 30% from the start of 2005.

It's a similar, or even better, story at Bangalore-based Infosys Technologies Ltd., which said earlier this month that it had 49,400 workers as of Dec. 31. That amounts to a 40% year-over-year increase.

Those gains come as offshore firms and the Indian operations of U.S. vendors are seeking to expand into relatively new areas, such as IT infrastructure outsourcing.

Last month, Dallas-based Perot Systems Corp. started offering infrastructure management services from its facilities in India, where 6,000 of the company's 17,000 employees are based.

Mike McClaskey, CIO of Perot Systems Corp.
Mike McClaskey, CIO of Perot Systems Corp.

Mike McClaskey, Perot's CIO, said last week that the infrastructure work is a small part of the firm's business and that the Indian unit will provide the management services remotely. There's no cost advantage for a U.S.-based vendor to move servers to India, he said. Moreover, India still lacks the third-party disaster recovery facilities that are available in the U.S., McClaskey said.

But most of Perot's employee growth in recent years has been in India, according to Mc-Claskey. He said he isn't worried that the rapid workforce growth will affect his ability to keep wages from rising too quickly or prevent him from finding people with the right skills in India.

Bangalore, where one of Perot's facilities is located, is India's equivalent of Silicon Valley, but the company also has an office in Noida, a suburb of Delhi. And McClaskey said there are several hundred other cities in India with the required skill levels and educational facilities, as well as a wage advantage over Bangalore.

'Labor Arbitrage'

"I think we are going to see labor arbitrage in India for a long, long time, and I think it's going to move around geographies inside of India," said McClaskey, referring to the practice of reducing costs through the use of lower-cost labor.

Wipro is also offering remote infrastructure-management services. Sridhar Ramasubbu, general manager of Wipro's financials and investor relations office in India, said infrastructure management now accounts for about 7% of the company's revenue, which totaled $617 million in the quarter that ended Dec. 31.

Pavan Chahal, managing director of NeoIT Inc., a consulting firm in San Ramon, Calif., that provides advice on using offshore services,

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