50% of Fortune 500 companies to have centres in India by 2015

by CXOtoday News Desk    Apr 09, 2013

IT Office

By 2015, it is estimated that close to 50 percent of the Fortune 500 companies will have their centres in India. Currently, India is the IT/ ITeS hub for about 125 of the Fortune 500 companies.

This was reported in the whitepaper released by Zinnov, a globalization and market expansion Advisory firm, on the next wave of growth for MNC centres in India.

Talking about the landscape, it read that today, India is home to about 200 wholly owned IT / ITeS centres of Multi-National Companies (MNCs), thus making it the most-preferred offshore destination as compared to 120 other offshoring locations across the globe.

Focusing on the new centres, the paper noted that there has been resurgence over the last two years with about 10 new IT / ITeS centers of large MNCs getting established in India in 2011 and 2012. Companies from U.S. continue to lead in globalization followed by European majors. Amongst the Indian cities, Bangalore garnered the lion’s share in terms of new centre set ups.

Banking and Financial Services companies leverage India the most for their IT and ITeS operations and there are close to about 45 large BFSI MNC centres in India as of 2012. This is an increase of about 10 percent from 2010. Healthcare and life sciences are emerging as a large category amongst the MNC centres that deliver IT and ITeS services.

Large healthcare/ life Sciences companies like Royal DSM and Sigma Aldrich have recently opened their shared service centres with intentions to deliver IT services during the course of time. Whereas, some of the existing players like Novartis and Cerner have been growing their capability from India.

Some of the large corporations, traditionally known for outsourcing multi-year multi-million dollar contracts are also setting up their centres in India. Allstate recently set up its own center in Bangalore and so did Wal-Mart, British Telecom, FICO, State Street etc.

“Two primary reasons for the uptick in insourcing through the MNC centres are (1) The CIOs are refurbishing their entire IT with modern IT and hence want to do it themselves (2) The CIOs want to re-imagine some of the legacy business IT systems which they had historically outsourced so that the legacy systems can regain their competitive edge,” said Sundararaman Viswanathan, Manager, Consulting, Zinnov.

“It is interesting to note that the reason for setting up new centres is far more strategic in nature than the tactical reasons of cost arbitrage and scalability” he added.

Further elaborating on the phenomenon of resurgence and regeneration the report read that these MNC centres are becoming much more strategic, sustainable and a permanent fixture in the enterprise strategy.

As these centres are re-imagining their functions and working towards delivering high end- value added services, they are undertaking large portfolio rationalisation initiatives.  This will indeed result in them franchising significant portions of the work to the service providers in India. And the opportunity arising out of portfolio rationalization in these MNC centres is expected to be $1 billion for the Indian service providers.

On the other hand, the centres that have been operational for over a decade or five years now are undergoing phenomenal transformation as well. There are three key trends amongst the well-established ones:

The centres are actively engaged in the CIO strategy of refurbishing the legacy systems with Modern IT (Social, Mobility, Analytics and Cloud).

Leaders in these centres are taking on more of Global Roles which enables them to become a strategic and permanent fixture in the overall IT / ITeS strategy.

MNC centres are increasingly moving away from the traditional scalable model—where they used to provide flex capacity to the parent—to a platform model where the centres help the parent in expanding the business horizons.