TCS Leads Race for Huge Sony Outsourcing Deal

Indian software exporter TCS is looking to win a desktop and server outsourcing contract from Sony worth $60 million to $100 million

India's largest software exporter TCS is leading the race to win an outsourcing contract worth $60-100 million from Sony, the Japanese electronics giant struggling under huge losses and a high cost operating structure.

"As part of its attempts to reduce cost of managing IT operations, Sony is discussing a contract to manage its desktops and servers over 3-5 years," a person familiar with the discussions told ET on condition of anonymity.

While ET could not independently verify the details of this contract, at least two people familiar with the development confirmed that Sony is evaluating vendors. When contacted on Thursday, a TCS spokesperson said the company would not comment on specific customer contracts yet to be awarded.

This is the first in a series of IT contracts—valued at over $250 million—to be awarded by the world's second-largest electronics maker over the next two years. With this, Sony joins other global biggies like Citi, GE, BT and BoA, which are expected to award around $4-billion worth of new outsourcing

contracts this year.

TCS is seen as a frontrunner because of its existing relationship with the electronics maker. "Sony also works with Satyam for SAP development and maintenance. However, current developments at the scandal-hit company are not going to help it win new projects," said a senior executive at a top Indian tech firm requesting anonymity.

Tokyo-based Sony announced last week that the company would make savings of over $2 billion by reducing operational costs at its electronics unit, apart from undertaking several restructuring measures, including outsourcing. Sony projected a full-year operating loss of around $2.9 billion for 2009, the company's first loss in 14 years. TCS shares inched up 0.45% to Rs 509 on Thursday. The stock has gained 2.58% over the week and 6.74% over the month.

"Companies, which have not leveraged outsourcing beyond application development and maintenance, will expand their global outsourcing in terms of scale and scope," said founder of Mindplex Consulting Sabyasachi Satyaprasad.

Customers such as Sony, with around $40 million offshore IT spend, are likely to outsource newer projects of infrastructure management and back-office work, as they derive cost benefits from their ongoing engagements.

Infrastructure management is going to be the next growth engine for Indian outsourcing companies, as more customers seek to outsource management of their IT infrastructure, including desktops and servers.

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