BPOs to see major dent in their revenues

TCS Likely To Suffer The Most

THE catastrophic events overtaking global financial majors will dent the revenues of Indian outsourcing majors, both in terms of the expected business and contracts they have already undertaken. Number one software services vendor, Tata Consultancy Services, is likely to be worse off than its peers because of its significant exposure to Merrill Lynch which, analysts said, ranks among its top five financial services clients. Merrill is also a significant client for Satyam Computer Services. Analysts estimate nearly 2,500 employees at TCS and Satyam work for Merrill.

The bankrupt Lehman Brothers has relationships with a number of top vendors but is not a major outsourcing compared to some of its peers. “Lehman has been the worst outsourcing company among the investment banks. Compared to it, JP Morgan, Merrill Lynch and Morgan Stanley have been outsourcing a lot more aggressively. In 2003, its total outsourcing to vendors in India was only around $100 million,” said an analyst, adding that Wipro and TCS were among its vendors here.

“Lehman Brothers does not account for a significant portion of our revenue and we are in dialogue with them during this difficult period of uncertainty. Wipro is monitoring the US economic situation closely, but we have nothing more specific to communicate,” a statement from the company said. Wipro has around 400 employees working on software services and infrastructure management projects for Lehman. HCL Technologies is also a vendor to Lehman but Premkumar S, who heads HCL financial services business, said its exposure was less than a single integer in percentage terms.

Among the top five IT firms in India, HCL Technologies could possibly be the least hit by the crisis overtaking the global financial giants because of its lower exposure to financial services clients compared to its peers. Traditionally, the company has been strong in engineering services. Apart from Bear Stearns, which was bailed out by JP Morgan, Citigroup is its other major financial services client of note. Analysts were unsure of who the other Indian IT and BPO vendors of Lehman were. They said Satyam and Infosys may also be among its vendors but none of them are were likely to have above $50 million in annual revenues from the bankrupt firm