Total Banking

One of the real big deals about Wipro Infotech's recent
outsourcing contract with HDFC Bank is the fact that the company has
consistently been able to outplay non-Indian multinationals in the domestic
market.

In the last 18 months, Wipro Infotech has bagged five
talked about deals-that of Yes Bank, Sanmar, Optimix, a large global oil
exploration company that is based out of Chennai-and now, HDFC Bank. The
latest one marks a departure from the mid-sized outsourcing deals, the company
has been getting. Valued as it is at Rs 360 crore or $80 mn, over a period of 10
years, it is the biggest deal in the IT outsourcing space for Wipro Infotech.

The company's strong service delivery, an equally sturdy
governance framework, its product agnostic approach, and reach has ensured that
it cashes-in on the strong outsourcing momentum in the country, as enterprises,
many in BFSI and telecom, look for business, technology, and service
transformation. Another reason why Indian enterprises prefer Indian vendors is
perhaps their reasonable, flexible stance on contracting issues. Non-Indian
companies are extremely rigid at times, when one-year down the line, for
instance, enterprises make out a gap between expectation and delivery and demand
changes in the contract.

Realizing the value proposition and the huge market, Wipro
Infotech carved out 'Total Outsourcing' as an independent business line in
2004 from Managed Services. The company now defines total outsourcing as deals
where the client outsources a large percentage of his IT
requirements-infrastructure, application, assets, and in some cases
people-in managed services, the customer usually owns the assets.

In HDFC's case, there is no transfer of people or
infrastructure take over. The bank is outsourcing the branch
infrastructure-PCs, servers, routers, switches, which typically go into a
branch to make it operational. As part of its license agreement, HDFC has to
have 25% of its branches in semi-urban areas. Wipro will be provisioning
infrastructure for all its new and exiting branches (about 530 in numbers), as
and when they come up for refresh. The provisioning of technology is on a pay
and use basis; therefore, the bank will not own the technology.

“The major benefits will be cost take-outs in terms of
overall cost of ownership. We would have incurred if we had purchased all this
technology and used it ourselves versus giving it to somebody who owns these
assets and gives us the right to use,” says CN Ram, head of IT with HDFC Bank.
What also tilted the scale in Wipro's favor (the company is rumored to have
edged out HP and IBM) is the fact that the bank had done a facilities management
deal with the Indian vendor some years back.

But for a relatively straightforward deal, Wipro had to
contest for a long period of time-the negotiations went through many ups and
downs before they closed it recently. Currently, the services are being rendered
out of the bank's premises in Mumbai. One transformation the vendor is looking
at is to move it to a remote delivery model. Remote delivery here would mean the
company's Mysore center. “It will be large. We would manage 15,000 desktops
and about 100 servers among others. We will be deploying around 300 people at
their premises in Mumbai and all the branches across the country. If moved
offsite, this number will go down because of shared resources. Therefore, some
amount of cost saving and lesser attrition issues,” tells Anand Sankaran, VP,
Total Outsourcing, Wipro.

"We would have incurred heavy costs if we had purchased all this technology and used it ourselves instead of giving it to somebody who owns these assets and gives us the right to use."           -CN Ram, head of IT, HDFC Bank		"We are looking at a remote delivery model, which would mean our Mysore Center. By moving there we can share our resources, and also check attrition."   -Anand Sankaran, VP, Total Outsourcing, Wipro

Wipro's program management office, which governs large
contracts and has a set of dedicated people and a set of shared people, will
manage the deal from a governance perspective, responsible as they are for
service delivery management (transition management, risk management, SLA etc),
transformation management, finance, and contract management.

Focusing on the core business and outsourcing IT
requirements will have a cost advantage in the long term. Sanmar, for example,
had implemented an ERP, but found its utilization to be below expectation.
Improving the utilization of ERP from what they are currently to a higher level
is business transformation. Technology transformation could also mean optimizing
the technology-I have 50 exchange servers, can I do with 10? If it can be
done, there are significant cost advantages. That's why most total outsourcing
deals are for five years or more.

Goutam Das

goutamd@cybermedia.co.in