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HP beats Indian rivals to retain Pepsi contract

PepsiCo is close to renewing its data centre management contract with Hewlett-Packard , dealing a blow to Indian rivals.

, ET Bureau|
Updated: Oct 23, 2013, 10.58 AM IST
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PepsiCo is close to renewing its data centre management contract with Hewlett-Packard , dealing a blow to Indian rivals that were hoping to wrest the multimillion dollar contract.
PepsiCo is close to renewing its data centre management contract with Hewlett-Packard , dealing a blow to Indian rivals that were hoping to wrest the multimillion dollar contract.
BANGALORE: Food maker PepsiCo is close to renewing its data centre management contract with Hewlett-Packard , dealing a blow to Indian rivals that were hoping to wrest the multimillion dollar contract.

Indian information technology companies such as Tata Consultancy Services and HCL Technologies have been aggressively pursuing contracts that are coming up for renewal. HP, with its constant senior leadership changes over the past few years, was seen as being the most vulnerable incumbent. About $100 billion (Rs 6.2 lakh crore) worth of IT outsourcing deals are set to expire in 2013, according to Everest Group, a USbased outsourcing advisory and market research firm.

TCS, HCL Technologies and Cognizant were reportedly among the bidders for more than $500-million (about Rs 3,100 crore) deal that PepsiCo is renewing. “I believe all the big guys, including TCS, HCL Technologies and Cognizant were in there (bidding for the deal),” said Peter Bendor-Samuel , founder and CEO of Everest Group. He said the total contract value could be as high as a billion dollar. HP has declined to comment, while emails sent to PepsiCo did not elicit any response.

PepsiCo, whose brands include Lays and Mountain Dew, had in 2006 signed a $100-million (about Rs 620 crore) deal with HP for managing its data centres in the UK, Mexico and Hong Kong. The contract was up for renewal this year. The new deal includes the three data centres as well as others in Europe. “HP (enterprise services) is increasingly facing direct competition from Indian-centric vendors,” said Sarah Burnett, vicepresident of research at IT advisory firm NelsonHall.

Burnett said HP “recently lost a major IT infrastructure outsourcing contract at Anglo American (miner) to HCL.” Last week, the Palo Alto-based HP hosted a team from PepsiCo at its Bangalore centre. Sources said the five-member team held discussions with the offshore delivery team at HP to evaluate the infrastructure and capabilities before signing off on the renewal. “Switching an incumbent is very costly and, therefore, companies try to negotiate their terms with existing vendors,” said Biswajit Banerjee, senior analyst at Pierre Audoin Consultants (PAC).

While data centre management has been a lucrative business for global players, it is only in the past few years that Indian companies have entered the space in a big way. Banerjee said many of the deals coming up for renewal were signed five-10 years ago, when the likes of TCS and HCL — which have emerged the dominant players in the space — were too small to bid.

According to a recent ISG report, the annual contract value of deals from the renewal market for Indian providers grew at a compounded annual rate of 16% between 2009 and 2012, compared with a meager 0.4% for their US counterparts. Sales at TCS’ infrastructure business, under which data centre management falls, grew 39% in the latest quarter. Similarly at HCL Technologies, revenues from the segment rose 42.2% over the year.

Deals, Refurbished

Indian information technology companies have been aggressively pursuing contracts that are coming up for renewal Many of the deals coming up for renewal were signed five-10 years ago, when the likes of TCS and HCL were too small to bid Contract value of deals from the renewal market for Indian providers grew at a compounded annual rate of 16% between 2009 and 2012 In total, about $100 billion (Rs 6.2 lakh crore) worth of IT outsourcing deals will expire in 2013.

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