Will Microsoft challenge IBM in the services market?

Microsoft just signed a deal in which India-based Infosys will handle all of Microsoft's internal IT services. On the face of it, this seems a cost-saving move. But could it be a first step towards a Microsoft acquisition of the company as a way to become a big player in the global services market? It's not as far-fetched as you might think.

Under the three-year deal with Microsoft, Infosys will manage Microsoft's internal IT services, including, according to an Infosys press release:

IT help desk, desk-side services, and infrastructure and application support from multiple global centers. Infosys will manage Microsoft's internal IT services for applications, devices, and databases in 450 locations across 104 countries.

As you might guess, this is a big-money deal. The Times of India reports that it may run more than $100 million.  

Microsoft claims that this is essentially business as usual, and told TechFlash that the deal

"...is simply a consolidation of work that used to be provided by multiple vendors to a single provider, Infosys. As you know, we have had a concentrated effort to be more efficient and save money. This was a major area where we could do this. This new contract will not impact our internal resources. And it won’t affect the usual internal exercises we do."

The New York Times Bits blog says that there's a chance that the deal is essentially a tryout for Infosys. If it passes the test, Microsoft may buy the company, and use it to launch a global services division. The blog says:

As Microsoft increasingly becomes an enterprise business, catering to corporate customers, there has been a lot of industry commentary and speculation that it might well make a big push into services --- perhaps even buying a big technology services company like Accenture or one of the India outsourcers like, say, Infosys.

Moving into the global services market would make a good deal of sense for Microsoft. The high-growth days of the company seem behind it. It has fallen far behind Google in search, one growth area, and its languishing in mobile, another growth area, even though the launch of Windows Phone 7 later this year may change that.

So where can the company look for growth? Services is clearly one area, because of its deep connections into enterprises worldwide. Buying Infosys would give it a ready-made division.

We won't know whether this is the case for quite some time. In the meantime, Microsoft employees will be in the same boat as the rest of us, it seems: going offshore when you call the Help Desk.

Copyright © 2010 IDG Communications, Inc.

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