UK looks to Indian offshore firms for reviving its government it systems

BANGALORE: At a time when the world's biggest IT market US is evaluating protectionist measures against offshoring of IT jobs, Indian companies such as TCS, Infosys and Wipro are preparing to bid for around $2-3 billion worth of outsourcing contracts being fleshed out by Department of Work and Pensions (DWP), HM Revenue and Customs (HMRC) and the Ministry of Justice in the UK.

UK's state-owned departments are seeking help from the Indian offshoring industry for bringing troubled government technology systems back on track and lower the cost of managing government IT systems anywhere between 25-40%, according to several experts ET spoke with last week.

Government IT spending in the UK is estimated to be over $36 billion every year, Bob McDowall, research director at TowerGroup Europe told ET in an interview. Apart from the troubled NHS modernisation program, which needs restructuring, HMRC will also seek to outsource more work as the department plans to make it mandatory for firms employing more than 50 employees to file tax related and other information online by 2011. "UK Government IT projects almost always suffer from scope creep, financial and time overrun of a significant dimension," Mr McDowall said.

One of the reasons for UK's government departments to look for help is the scarcity of competent professionals for transforming the systems. "Internal IT development resources are not of the strongest quality-the good people go to commercial organisations. Those that are outsourced to UK based providers are not always delivered on a more efficient,timely and cost effective basis," he added.

UK's national healthcare modernisation program pegged at almost $9.6 billion is among some of the initiatives that failed to deliver. India's biggest software exporter TCS has also been involved with the National Health Services (NHS) project for past few years.

The NHS project, which had over half a dozen suppliers including BT, Accenture, TCS, CSC and Atos Origin, ran into trouble after an inquiry by the audit department revealed that the program was running over two years behind schedule, and had run into several coordination bottlenecks between vendors and various departments.

"Some projects, including a current health sector project to establish a dynamic health record service for all individual registered with the UK National health service have suffered significant criticism from the UK National Audit body," Mr Mc Dowall said.

While companies such as TCS have already started campaigning with the UK authorities for addressing the public sector offshoring opportunity, there could be political bottlenecks to deal with apart from complexity of these contracts in terms of scope, and scale.

"Even as we pursue these opportunities, we are apprehensive of different public sector dynamics including resistance to change, political pressures and unwarranted interruptions," said a senior executive at one of the top Indian tech firms pursuing these contracts.

However, a good strategy for the Indian tech firms could be to include a substantial onshore component while structuring the contracts. "I see a pragmatic approach for the major Indian outsourcers bidding for Government work is to provide a package which provide on shore and offshore location for the projects supplemented by an offer of relevant IT training for some of the unemployed who would form part of the onshore servicing," Mr McDowall added.

Keeping a major chunk of work onshore will also help the Indian tech firms address concerns around data security, especially since it will involve sensitive citizen data.