US IT cos walk away with plum e-governance deals

Indian IT service providers are only just readying to tap the US government market but US IT and consultancy firms are already getting lucrative deals from India’s booming e-governance spends.

For instance, IBM, which has landed marquee contracts such as Bharti Airtel’s total outsourcing IT deal, is also a signficant player in the government projects. It is one of the vendors in the `2,000 crore Tax Net project being implemented by the Central Board of Direct Taxes, while its US rival Accenture has landed one of the contracts in the prestigious Unique ID (UID) project.

IBM, along with Hewlett Packard, is also competing with home- grown Indian service providers such as Tata Consultancy Services, Wipro, Infosys Technologies for another `2,000- crore contract, which is part of the UID project.

Microsoft is involved with the Citizen Service Centre project, while Intel is involved with the WiMax programme. Even smaller projects like LIC’s `50-crore CRM project has been awarded to IBM. But an interesting fact is that most strategic planning for e-governance in India is also done by US consulting firms, though HCL, Wipro, Infosys and TCS have consulting arms.

“US IT coompany’s get almost 80% of the consulting assignments. Any e-governance contract we execute the first two questions asked are that how will you secure the data and how will you ensure that strategic control rests with the government. But almost all consulting work is awarded to US firms which creates a security issue and which is almost always structured in a manner to benefit them in the long-run,” said an e-governance business head of a tier I IT company.

While Ernst &Young is a consultant in the Unique ID programme, PwC consults the central government on the nation’s e-governance programmes. Accenture has devised the strategy of India’s department of posts programme. “We even invite US companies to participate and look forward to them,” said a top e-governance official at the ministry of IT & communication.

IBM is one of the vendors in the `2,000-crore Income Tax Network project being implemented by the Central Board of Direct Taxes, while its US rival Accenture has landed one of the `200-crore biometric solutions contracts in the prestigious Unique ID (UID) project.

“Over 50% of the budget in e-governance projects goes towards US IT companies, even if we (Indian IT company) win an e-governance contract,” says an official involved in e-governance tendering and contracts. “That’s because most product companies like HP, Intel, AMD, Microsoft, EMC, Cisco, Red Hat are US based,” he explains.

The US government IT market is on the other hand a $77-billion untapped potential. Still none of the Indian IT companies feel that US firms should be disallowed from participating. “Nobody likes a closed market. Markets have to open. Only then we can do business. We must not do anything like this because the government of India is entitled to best service. Only by keeping our markets open can we force other markets to be open,” said TV Mohandas Pai, director HR at Infosys Technologies.

A top e-governance official at the ministry of IT & communication, who overlooks the $- billion NeGP IT spending says that Ohio ban is a discriminatory decision. “We even invite US companies to participate and look forward to them. On the other hand they have taken a drastic measure”. Regarding a possible ban of US IT companies from participating in critical e-governance tenders, he says ministry of commerce has the right to decide if they want to take it as a reciprocator measure. “Ministry of IT cannot take a policy decision on it,” he said.

Analysts also claim that the Ohio-ban is a loss of potential business opportunity for Indian IT providers in the long-term as state governments in US take a projectionist stance. “Smaller IT offshoring companies would find it more challenging as they will now have to work onshore, which might become a survival issue,” said Arup Roy, research analyst at Gartner.

Commenting on the ban, Nasscom also felt that US states should reciprocate. “The issue here is that when India doesn’t discriminate between American and Indian firms when doling out billion dollar e-governance contracts, US should also reciprocate. This is about services, but state governments in India do not discriminate too, when procuring products like IT hardware between Indian or American firms,” a Nasscom spokeswoman had told ET earlier.
“The volume of outsourcing business done by US-based companies in India is far less than the total business being done by Indian companies in the US. A counter ban could infact have negative effects on the Indian IT companies only, who depend heavily on clients in the US,” says Kumar Parakala, head IT Advisory at KPMG.

But international trade experts say that India cannot technically take up the issue under WTO rules, because the Ohio ban is against all foreign offshore providers and not against a single nation.

MindTree, which is interestingly headquaratered in New Jersey also feels that India should not react. “To be honest, the cost of this has to be decided on business sense. This is political gimmickry. At the end of the day, if you look at the last job creation data in the US, the government jobs have gone down and they should be addressing that. US reacting to this situation does not make sense,” said Krishnakumar Natarajan, CEO and MD, Mindtree.

http://economictimes.indiatimes.com/tech/ites/US-IT-cos-walk-away-with-plum-e-governance-deals/articleshow/6527303.cms