IT majors bag $1.5-billion outsourcing deal from BP

TCS, Infy, Wipro among those that have bagged a five-year deal.

Ending a long drought of major outsourcing deals, especially from the recession-struck UK, Indian IT majors Tata Consultancy Services (TCS), Infosys Technologies and Wipro Ltd, besides global IT giants IBM and Accenture, have bagged a five-year $1.5-billion outsourcing deal from BP (British Petroleum), the world’s third-largest petroleum refining company in the world.

BP told Business Standard that it chosen six partners in all for its $1.5-billion contract from among 40 suppliers “...who had, between them, 82 contracts”.

“We carried out a 12-month tender process looking at potential partners and those we work with... We feel the six contractors we have chosen have the scale and global reach to meet our IT demands,” said a BP spokesperson, adding that the company had issued a tender of around $2 billion (over five years) of projected third-party spend.

While BP did not comment on individual deals, it is understood that each of these players received outsourcing contracts worth $100 million (around Rs 490 crore) from BP. The company, said the spokesperson, will manage to save around $500 million (around Rs 2,450 crore) over five years because of these part deals.

TCS, Infosys, Wipro and Satyam (rebranded Mahindra Satyam) have been BP’s four largest outsourcing partners. The petroleum major is also among the top 10 clients for TCS, Wipro and Mahindra Satyam, whereas is one of the top 20 customers for Infosys.

Among the contracts that each of these firms have bagged, Infosys will manage integrated supply & trading and exploration & production businesses, and operate a large portion of business systems for BP. TCS has been selected for engagements in refining, manufacturing and corporate IT with opportunities across the Fuels Value Chain, including upstream and trading processes. Wipro, on its part, will provide IT Applications Development and Maintenance (ADM) services for BP’s Fuels Value Chain and corporate businesses globally.

“This announcement is in line with BP’s outsourcing strategy. BP has been a strong offshore services user for five to seven years. So far, around 2,000 jobs have been outsourced to India,” said Sudin Apte, senior analyst, Forrester Research.

Over the last 12 months, BP has undertaken a programme to consolidate its IT vendors for ADM work. BP was working with about 30 suppliers for this, including IBM, Accenture, Mahindra Satyam (erstwhile Satyam) and Infosys, who were all in the fray for the contract other than TCS and Wipro.

“Vendor risk diversification has become quite important with scams in the recent past — clients tend to diversify their outsourcing contracts across the top vendors in order to reduce exposure and risk concentration to one vendor,” said Sabyasachi Satpathy, Partner, Tholons.

He added that though the deal is going to impact less than a couple of per cent of BP’s revenues, it was significant and strategic for Indian vendors. The deal, which covers three Indian vendors for pure-play ADM and IBM for enterprise application, shows that Indian vendors are yet to match up with MNCs on the enterprise application, integration and infrastructure services.