Retailer Looking To Outsource Back-Office Work To Vendors
WAL-MART, world’s biggest retailer, which until now has been dependent on its inhouse information technology division, is evaluating a contract worth around $300-$500 million to outsource non-core processes of procurement, merchandising, finance, accounting and payroll.
IBM, alongwith TCS, WNS and Wipro are exploring the opportunity, sources familiar with Wal-Mart’s outsourcing decision told ET on conditions of anonymity. “Despite becoming such a case study for global retail, Wal-Mart had not yet looked at BPO or IT outsourcing,” he said. “However, the current economic challenges are making the retailer seek more cost saving options including outsourcing of non-core processes.” This year will see many new outsourcers such as Wal-Mart and Sony offshore work to India, as traditional customers such as Citibank and GE take more time for awarding new contracts.
“We expect Wal-Mart to structure these BPO contracts within 2-3 months. Top officials at the retailer are currently in discussions,” said an outsourcing expert familiar with the development. He also requested anonymity. He added that the retailer wants to support its local and global supply chain by outsourcing to India. While Wal-Mart officials could not respond to an e-mail query sent by ET on Monday, a factsheet available on the company’s website provided details about Wal-Mart’s future IT outsourcing from India.
“Wal-Mart will expand staffing of certain elements of IT application maintenance and development with some of India’s leading information technology firms,” the company said in a statement. “India is one of several countries that the company is targeting as part of its remote sourcing model for IT activities.“
US companies including Wal-Mart, GE and many financial institutions have slashed over 5,00,000 jobs last month alone. By cutting down these local jobs, these companies are expected to outsource their back-office work to vendors in locations such as India, where these could be executed at almost half of the US costs. Retailers such as Tesco have been leveraging outsourcing and offshoring for lowering their operational costs, and focus better on their core processes.
UK’s biggest retailer Tesco for instance, saves over $60 million every year by sending IT projects to India.
According to Forrester Research, the US will have a 34% share of the global market for IT services and outsourcing in 2009 and 2010, just ahead of Western and Central Europe at 27% and Asia Pacific at 23% for 2009.