Outsourcer HCL Wins Large Indian Contract

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Indian outsourcer HCL Technologies has bagged a US$76 million contract from the country's National Insurance Company, reflecting the growing importance of the domestic market for Indian services companies.

IT spending in India is forecast to increase by 5.52 percent this year, even as IT budgets are expected to be flat in North America and Europe with slight increases in Latin America and a small decrease in the Asia-Pacific region, research firm Gartner said in February.

Growth in IT spending in India was higher at 13 percent last year, according to Gartner.

Until the recession started shrinking markets in the U.S. and Europe, the Indian market did not offer such high revenue and margins to Indian outsourcers as did other markets, analysts said.

The seven-year contract from National Insurance covers 1,034 branches across the country. It involves business process re-engineering, the roll-out of 19 applications, systems integration and management services, provisioning business continuity services and the physical hosting of a data center, HCL said on Tuesday

Indian services companies compete for domestic business with multinational services firms like IBM. Of the US$4.8 billion market for IT services last year, IBM had a 10.8 percent share followed by Indian outsourcers Wipro at 8.7 percent and Tata Consultancy Services (TCS) at 6.1 percent, according to research firm Springboard Research.

Revenue from the local market however accounts for a very small part of the revenue of Indian outsourcers, who get most of their revenue from markets like the U.S. and Europe.

For TCS, for example, revenue from India was 9.4 percent of total revenue in the fourth quarter of last year, up from 7.8 percent in the previous quarter. But the share of the domestic market was lower than that of North America which accounted for 49.5 percent of total revenue, and the U.K. which accounted for 19.4 percent of revenue in the fourth quarter.

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