Media and information services giant Nielsen has awarded a $1.2bn, ten-year outsourcing contract to Tata Consultancy Services, India’s largest IT services exporter.
The deal is one of the biggest to be awarded to a specialist Indian services vendor, and is also one of the largest of any kind to be awarded in 2007, which has been a relatively quiet year for mega-deals. The award tops TCS’s landmark 480m-pound ($960m) win with Pearl Assurance in October 2005.
But perhaps the most interesting feature of the contract is the breadth of its scope. TCS’s bread-and-butter is taking the cost out of its clients’ application development and maintenance functions by running them out of low-cost centers in India, and it will be providing these services to Nielsen’s worldwide operations.
Like all of the big Indian services providers, TCS is broadening its portfolio beyond the increasingly price-competitive applications space, and it is keen to highlight that it will also be providing consulting, IT infrastructure, and business process outsourcing services to Neilsen.
TCS will take over responsibility for some of Nielsen’s human resources such as workforce administration, global reporting and payroll, and finance and accounting functions including accounts receivable and payable, billing, and credit and collections. TCS will standardize these processes on an SAP platform.
This is not Nielsen’s first use of global sourcing and it will transfer to TCS a team of staff it has based in Baroda, Gujarat who provide information management for Nielsen’s retail measurement services. TCS said the move would boost its knowledge process outsourcing activities.
Mitchell Habib, the head of Nielsen’s Global Business Services operation, said the deal was designed to streamline its applications, infrastructure and back-office processes, which he said would give it greater flexibility to respond quickly to changes in the marketplace.
Habib formerly held the CIO position within several divisions at global sourcing pioneer GE, and joined Nielsen earlier this year after leaving the CIO post at Citigroup’s North American consumer business.
This is a significant award on several counts.
TCS and its peers have been winning bigger and longer deals over the last five years as global delivery models gained wide acceptance in the US and western Europe, but most of the big awards to date have been focused on applications services. The deal with Nielsen is precisely the sort of multi-service, broad-scope engagement that would have historically only been awarded to a handful of big western players: IBM, EDS, and Accenture.
It is also interesting that Nielsen has decided to engage with a single partner. There has been a lot of evidence in the last few years to suggest that clients were increasingly shifting toward a multi-sourcing model where they outsource to several, best-of-breed suppliers, rather than throw everything over the fence to a single partner. Nielsen’s move suggests that the single-source model still carries credibility in the client community.
TCS’s win marks the second major win for India’s top services suppliers this week, after Patni Computer Systems captured a $200m contract with UK mobile phone retailer Carphone Warehouse. There has been a lot of suggestion that the Indian vendors’ dominance of global sourcing would diminish due to escalating salary costs, rupee appreciation, and the challenge of China. But the largely positive results this week from TCS and Infosys, plus these major contract wins shows that they have yet to reach their peak.
One of the reasons for this is that they have successfully diversified their delivery operations beyond India in order to gain access to low-cost labor and a wider range of language support skills in other regions. As an example of this, TCS plans to support the Nielsen contract in part from a facility in eastern Europe.