Foreign companies are increasingly looking at more than one Indian software company for outsourcing -- or get into 'multi-vendor' relationships, in industry parlance.
The reasons for this range from pursuing a 'horses for courses' policy to risk mitigation and ensuring best bang for the buck.
Sample this: General Motors prefers to work with both Cognizant and Wipro. GM works with Wipro for engineering services, while it chose Cognizant for e-business-related services.
Lehmann Brothers outsourced a $70 million order from both Wipro and TCS in the recent past, while Bank of America has decided to outsource from both, Infosys and TCS.
"There has been a sea-change in the way multinationals perceive offshoring work to Indian companies today. Ten years ago, only big companies with risk taking capacity outsourced work to Indian companies. At that point of time, there were concerns related to intellectual property rights (IPR), quality and infrastructure. These concerns no longer have that much validity today. The economic compulsions today to outsource are higher and hence the multi-vendor approach," points out Sridhar Mitta, chief executive officer, e4e Labs, a $100 million technology holding company.
For companies that outsource, it makes sense to choose multiple vendors especially when the size of a deal is in multiples of millions.
This approach ensures that they can target a "best of breed" approach. This approach means that customers select vendors based on their traditional strength.
Additionally, clients ensure they get better value for their dollars as vendors compete for a bigger share of the outsourced pie.
Says R Chandrasekaran, senior vice-president, Cognizant Technology Solutions, "Multi-vendor offshoring has emerged primarily because customers prefer to partner with the best of breed solution providers and also for de-risking, after they have achieved a certain size and scale in their offshoring programme with a certain vendor."
After selecting multiple vendors, customers very soon identify the primary and secondary vendor and subsequent growth depends on the executional excellence of the vendor, he points out.
Other industry watchers point out that the trend of multi-vendors is restricted to mature segments.
"Multiple-vendors happen only in mature segments such as BFSI (banking and financial services and insurance) and retail. This trend will have to wait to happen in other segments such as utilities where not many software companies in India have the requisite domain expertise," points out Sangita Singh, chief marketing officer, Wipro Technologies.
More from rediff