- Smart Healthcare, Wednesday 1 April 2009 09.00 BST
Pointer to the future: Indian outsourcing firms are expanding in other countries, which may help deal with concerns about data security. Photo: jiunlimited.com
Recent media reports have suggested that Indian outsourcing companies will be making a concerted effort to win business from the UK public sector over the coming months, and in particular, from the NHS.
Several of the large outsourcing companies – such at Tata Consulting Services (TCS), which provides a patient record system in the Indian state of Gujarat – have built up extensive capabilities in their home country.
Collectively, the Indian companies have been lobbying Parliament, through an all-party group promoting trade links with the UK, to bolster their share of British public sector contracts.
"The Indian outsourcing firms, like many other firms in the current
climate, view the UK public sector as an attractive market place," says Michael Larner, a senior analyst at Kable.
"The healthcare market is a particular target given not only the scale, the budgets involved and the adverse relationships with incumbents; but also they often can demonstrate expertise in this market on the back of their work with the Indian government."
The Indian companies have also been bolstering their "nearshore" capabilities which, Larner says, should make them more attractive as suppliers in sensitive areas such as healthcare.
In fact, several of the large and mid-tier Indian outsourcing companies are already heavily involved in NHS projects, but often as subcontractors.
TCS was part of the Fujitsu Services-led local service provider contract for the Southern cluster: the firm provided clinical application implementation and data migration in a contract reported to be worth £120m.
The Southern cluster contract was terminated last May, but TCS remains listed by NHS Connecting for Health as a supplier under the organisation's Enterprise Wide Arrangements, which guarantees that suppliers will offer the NHS the best possible price for future work.
Mastek, another Indian outsourcer, is part of the BT-led Spine project under a 10-year deal valued at £35m, primarily for application development and support.
Such experience is no doubt invaluable to the outsourcing firms themselves, as well as to the NHS. However, the transition from subcontractor to lead contractor in an organisation as complex as the NHS remains a significant hurdle, especially for companies with a more limited UK workforce.
Matching ambitions and capabilities
When it comes to picking an IT contractor, capabilities and experience are likely to matter more than geographical origin, however.
The term "Indian" is used rather loosely when it comes to IT services companies. By no means all Indian firms undertake classical outsourcing, with staff transferring from the client to the supplier. Many are focused on specific IT functions such as remote management, software development and customisation, and testing.
Such contracts need not involve the transfer of patient data, so the supplier's geographical location is less of a consideration. Many such tasks involve working with generic business services or "back office" applications, where specific knowledge of the NHS might matter less than a solid understanding of the application software or the development environment.
At the same time, the larger "Indian" companies, in particular TCS, Wipro and Infosys, have global ambitions and an increasingly international workforce. Gartner predicts that these "India-3" vendors will overtake IBM Global Services, Accenture and EDS (now part of HP) as the leading IT services companies by revenue.
Whilst the India-3 have expanded their capabilities outside the sub-continent, so the US and European services firms have increased their investments there. Several of the large IT service firms now have significantly more staff in India than they do in the UK.
"There is now very little difference between the large Indian companies and any other large IT player," says Alex Blues, a member of the management group at PA Consulting. "They are now global players. There is a difference between using them, and going offshore. If you contract with TCS, to use one example, it doesn't necessarily follow that the work will be offshore."
Deciding whether to give work to a second-tier contracting company, where the work is more likely to go offshore, is more politically charged, according to Blues. However, if political or privacy considerations make offshoring unacceptable, that will apply to contractors whether they are based in India, Japan, the United States or Australia.
But, as Blues points out, finding the appropriate skills at the right costs is likely to be more important than geography. "For some IT tasks it [location] is practically irrelevant, for example in remote infrastructure management. They are accessing the data in this country.
"It is different, for business process outsourcing, where transactions might be carried out in India," he adds. "But it is also a myth that it is much cheaper to go offshore. The difference in costs between Newcastle and Mumbai is less than the difference in costs between London and Newcastle."
