As Outsourcing Megadeals Slow, Nielsen Makes $1.2 Billion Bet on Indian IT Services
The Nielsen Company's $1.2 billion contract for business and "knowledge processes" with Mumbai-based Tata Consultancy Services may be the biggest deal with an Indian vendor to date. But the news says more about Nielsen's IT leadership than it does about the outsourcing market.
CIO — When Tata Consultancy Services (TCS) announced that it would sign a $1.2 billion IT services contract with The Nielsen Company on Oct. 18, the outsourcing world was atwitter with talk of what this—presumably the first major Indian megadeal—says about the future of IT services. Is it a breakthrough for TCS? Are more billion-dollar deals on the way for Indian providers? Are the IBMs and Accentures of the world losing ground?
But the deal may actually reveal more about the outsourcing customer, Nielsen, and its IT leader, Mitchell Habib, than it does about the larger outsourcing industry. Habib is an IT executive who prides himself on assessing business conditions and leading organizational change with all deliberate speed.
“Nielsen is moving quickly to transform an outstanding group of operating businesses into an integrated, market-focused organization that delivers high-value information services to our clients,” said Habib, executive vice president in charge of Nielsen Global Business Services, in a statement. “This arrangement with TCS will help us streamline and simplify our IT infrastructure and application platforms and operational practices across our businesses, support the development of integrated solutions and give us much greater flexibility to respond quickly to changes in the marketplace.”
On the face of it, the $1.2 billion deal is sizable and falls under the generally accepted parameters of an outsourcing “megadeal” ($1 billion or more). But that total contract value is actually spread out over a decade in this case.
“This could be the largest single contract out of India,” said Dean Davison, vice president of research for NeoIT. “But part of the ‘game of perception’ that is being played is that this is a 10-year deal, making the annual value about $120 million. While any service provider would love to have that size of a contract, it does not make it quite as special.”
TCS isn’t breaking any rules by touting this as a breakthrough. The company simply has adopted another one of the tricks utilized for years by its U.S.-based rivals like IBM and EDS. A $10 billion dollar deal sounds quite impressive, says Davison, less so when you read the fine print.
One reason the Nielsen-TCS deal is so large, however, is because its scope goes beyond IT services to include business process outsourcing (BPO) and knowledge process outsourcing (KPO). According to its announcement, TCS will help Nielsen integrate and centralize multiple systems, technologies and processes globally, and assume responsibility for certain finance and human resource business processes, which will be executed on new BPO platforms built by TCS. The vendor will also set up an “innovation lab” for Nielsen to help it “conceptualize the next generation of business solutions for its end-clients,” says a TCS spokeswoman.
