IT majors vie for $500-million Danish pension fund contract

Denmark’s largest pension fund company, ATP, has expressed a desire to outsource its internal information technology (IT) management and back-office works to Indian service providers.

It is understood to have issued request for proposals (RFPs) for technology upgrade and support works worth over $500 million (Rs 2,300 crore). Most Indian IT outsourcing companies, including Tata Consultancy Services (TCS), Infosys Technologies, Wipro, HCL and L&T Infotech, have responded, according to sources privy to the development.

The contract, according to the sources, include two different components — one for mainframe and IT infrastructure support and management, which includes setting up and managing of data centres, and the second one is for hosting SAP services, with complete maintenance and environmental support. It is understood that ATP was already working with a leading global tier-I supplier (not from India) for its IT infrastructure management and support. However, they decided to cancel the contract and go for a fresh bid, not being satisfied with the services from the existing vendor.

“The RFPs had gone to 18-20 companies, of which they are in the process of finalising the final names. They are expected to finalise the names in the next couple of weeks,” a highly-placed industry sources told Business Standard.

Even though ATP has initially decided to float the contract through the government (Denmark) channel, they had to open it due to European Union (EU) guidelines. Since the contract mandated setting up of huge data centres in Denmark and Copenhagen, a lot of Danish players have also participated in it. Indian IT services companies, including TCS, Wipro and HCL, run huge data centres for their clients in most European countries, including the Nordic region.

It is also understood that Nordea, a financial services group headquartered out of Copenhagen, is also looking at outsourcing to Indian software vendors. The company is in the process of finalising multi-year IT outsourcing contracts, which will fetch a revenue of $70 million per annum.

The IT services market in the Nordics is estimated to be $10-12 billion and is growing at a compunded annual rate of 5 per cent. The Nordic region, according to a recent study by PricewaterhouseCoopers, is witnessing high ICT adoption and R&D investments, and is gradually opening up to offshoring as a means of sustaining organisational competitiveness.

Due to high-cost structures, enterprises in most of the Nordic countries, including Denmark, Finland and Sweden, are looking at low cost destinations like India. This gives them a cost advantage in the range of 30-40 per cent, says industry sources. They add that Indian IT outsourcing services’ providers are finding the financial services space in Europe and Nordic region a lucrative proposition.

“Last quarter alone, we are seeing a very good traction in terms of deal outflow from leading European banks. We are expected to see a flurry of activities in the financial services and insurance space in Europe, in areas such as mutual fund, hedge fund and private equity,” said an analyst working with a leading consulting company.