Will Infosys-Telstra deal cause job losses in India?

Bangalore-based software giant Infosys will pick up most of IBM Global Services’ multi-million dollar applications support contract with Australian software giant Telstra, after the latter’s deal with the former was scrapped following telco reducing its outsourcing partners from four to two.

According to The Australian, the decision to shift from IBM to Infosys could result in hundreds of job losses locally and in Bangalore, where IBM operates outsourcing centres.

IBM GS staff was told the scratching of the vendor’s software support would represent about 50 per cent of its one billion dollar, six-year deal with Telstra, signed in early 2006.

Telstra’s decision to drop IBM was a big surprise to IBM GS staff, who expected the contract to continue until 2012.

The deal was lost not because of performance issues but because Infosys low-balled the IBM offer, sources said.

Telstra has been reviewing its IT outsourcing contracts with Satyam, EDS, IBM GS and Infosys since last year, when the telco announced it would trim its list of major IT suppliers from four to two in an effort to reduce costs and streamline its providers.

Earlier, Telstra had ended one of its information technology outsourcing contracts with International Business Machines Corp (IBM). It has now roped in Infosys Technologies for the same.

IBM Global Services' multimillion dollar applications support contract with Telstra has been scrapped as a result of the telco reducing its outsourcing partners from four to two, as per an Australian media report.

The decision to shift from IBM to Infosys could result in hundreds of job losses locally and in Bangalore, where IBM operates outsourcing centres, the report said.

The Australian reported that IBM staff were told the scrapping of the vendor's software support would represent about 50% of its $1 billion, six-year deal with Telstra, signed in early 2006.

Less than a week ago, Telstra terminated its IT outsourcing contract with fraud-hit Satyam Computer Services. Telstra is the second major Australian company to do so after The National Australia Bank decided in February to suspend future work with the Indian outsourcer since the disgraced Indian outsourcer's accounting scandal came to light.

The IBM India spokesperson could not be reached for comment while the Infosys communication person said, "We are in our silent period and will not be able to comment on the issue."

Agencies