Premji, who is currently in Europe visiting prospective customers, told ComputerWire that large companies are moving towards a multi-vendor strategy, because of the way in which vendors have structured such deals. There is a global trend which we’ve seen over the last six to nine months away from mega deals, and to split them into different areas so that they get expertise in each area, he said.
He said the way in which vendors have structured mega deals has caused customers to rethink outsourcing. Customers have forced the issue, as they realize that in these mega deals, they are locked in for a very long time, and after they’ve signed they realize that the customer is always the loser, as the vendor builds in so many safety nets into the contract. It’s not just what we have seen, it is what we are experiencing. Customers are splitting up their contracts, and this will cause problems for the likes of IBM and EDS.
There is mounting evidence that mega deals are becoming more rare. Last month IBM Global Services and EDS Corp both announced a drop in the value of new contracts they won in the fourth quarter of the year. Although cost-reduction remains a priority for many enterprises, clients are increasingly using consortia of best-of-breed suppliers to source IT management and support skills. Clients are increasingly likely to choose three different vendors to handle their applications, their hardware infrastructure, and their networks. This is due to CIOs’ increased experience of managing outsourcing deals, a highly competitive supplier market, and client skepticism over the benefit of large, single-supplier deals.
Naturally, Premji believes that Wipro is well-placed to take advantage, because it specializes in offshore application development work and typically signs smaller deals of up to $50m.
EDS is having to recompete for its contracts with former General Motors, its former parent. Sources have told ComputerWire that Wipro is bidding on GM contracts worth around $150m. GM is one of our biggest customers and a strategic partner. EDS contracts with GM are up for renewal and we are participating in that process, said Premji.
