Wal-Mart to Start Outsourcing More to India
Wal-Mart Stores has shortlisted top Indian tech firms, including TCS, Infosys and Wipro, for an outsourcing contract potentially worth up to $500 million over next few years, as the retailer seeks to award multiple contracts for managing its business applications and other back office activities.
At least two people familiar with Wal-Mart's outsourcing strategy told ET on conditions of anonymity that the retailer is expected to start outsourcing more to India within six months.
"Wal-Mart has been testing the waters by outsourcing smaller projects to companies such as Infosys, TCS and Wipro. Now, the retailer wants to flesh out a more comprehensive outsourcing strategy and has shortlisted these tech vendors," said a senior executive of one of the tech firms exploring business opportunities with Wal-Mart. He requested anonymity because he is not authorised to speak to media.
When contacted by ET last week, Wal-Mart spokesman John Simley confirmed his company is in discussions with several service providers, but declined to elaborate any further. "Certainly, we feel our company has a lot to offer India and we hope to grow our business there. We are always in discussions with potential service providers, but we have nothing to announce at this time," he said.
However, unlike many other companies seeking to outsource in order to bring down costs, Wal-Mart's outsourcing is more about globalising its information technology sourcing initiatives. At a time when most companies are struggling to grow their business, Wal-Mart announced $15 billion share buy-back program earlier this month, as the retailer continues to woo more customers. Officials at Wipro, TCS and Infosys declined to offer any comments about the Wal-Mart contract.
Some of the world's top retailers, including UK's Tesco and American speciality retailer Home Depot, have been outsourcing projects to Indian third party service providers, including TCS and Infosys, apart from their own captive centres in order to support their existing IT systems and also develop newer applications. Tesco for instance, saves over $60 million every year by outsourcing its IT projects to India.
Wal-Mart, which has, so far, been depending upon its large in-house IT team is now seeking to globalise its IT operations, especially since the retailer is now actively planning to grow its business from emerging markets such as India. With almost $400 billion in annual revenues, the retailer also continues to look at establishing a captive technology centre in India, however, this could not be confirmed.
"Wal-Mart already has a sourcing operation in the country, apart from its Bharti joint venture, it's natural for the retailer to explore various ways of leveraging its Indian presence," another person familiar with the company's sourcing strategy told ET on conditions of anonymity.
Meanwhile, Wal-Mart's outsourcing of IT and back office projects is not expected to impact local US jobs, as the retailer is very sensitive about rising unemployment in the country. In fact, Wal-Mart said earlier this month that it will add around 22,000 new jobs in the US by adding over 150 new stores to its existing network of around 7,900 retail outlets.