Wal-Mart may outsource contracts worth $500 mn

BANGALORE: Wal-Mart, the world���s biggest retailer, which has so far been dependent on its in-house IT division, is evaluating a business process outsourcing (BPO) contract worth $300-500 million, as it seeks to outsource non-core processes of procurement, merchandising, finance, accounting and payroll.

IBM, along with TCS, WNS and Wipro are currently exploring this opportunity, a person familiar with Wal-Mart���s outsourcing decision told ET, on conditions of anonymity.

���Despite becoming such a case study for global retail, Wal-Mart has 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.���

The year will see many new outsourcers such as Wal-Mart and Sony offshore work to India, as traditional customers like 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.

An email sent to Wal-Mart did not elicit any response. However, 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 IT firms,��� the company said in a statement. ���India is one of the several countries that the company is targeting as part of its remote sourcing model for IT activities.���

The US companies such as Wal-Mart, GE, apart from many other financial institutions, have slashed over 500,000 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.
pankaj.mishra1@timesgroup.com


Retailers such as Tesco have been leveraging outsourcing and offshoring for lowering their operational costs, and focus better on their core processes. The 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.

���A review of the top 15 country markets for IT goods and services shows the US on top with $573 billion in purchases of IT goods and services in 2009. China moves to second place at $143 billion,��� Forrester analyst Andrew H Bartels said in his January report. ���IT outsourcing will get a small lift from economic slowdown in 2008 as companies turn to vendors that can help cut IT costs,��� he added.

Is there any room for new entrants in the already choked retail chain industry of India?