Wipro, GE pact may open gates for $1-billion deal

India’s third-biggest software exporter Wipro has been empanelled by General Electric as one of the outsourcing vendors as part of a master services agreement (MSA) signed between the companies recently, at least three persons familiar with the transaction told ET last week.

The agreement with GE will allow Wipro to bid for nearly $1 billion worth of outsourcing projects fleshed out by different business units of GE every year, against rivals Tata Consultancy Services (TCS) and Genpact.

“While it does not in any way guarantee assured contracts, GE is a good account to have for long-term, annuity-based revenues because even if the micro environment is bad, one of the GE units would have something to outsource, offshore,” said a senior executive at one of the tech firms currently serving GE. He requested anonymity because he is not authorised to comment about his company’s customers.

Outsourcing experts and officials familiar with GE’s offshoring to Indian vendors said while TCS does nearly $150-200 million worth of projects for GE annually, Genpact and others could together account for over $700 million offshoring. When contacted by ET, a Wipro spokeswoman declined to offer any comments. A GE spokeswoman, too, did not respond to an ET query sent last week.

For Wipro, GE is not entirely a new customer. In fact, when Jack Welch visited India around two decades ago scouting for partners to sell his company’s healthcare products, Wipro’s Azim Premji was one of the first partners for Mr Welch. “They did start healthcare business and an outsourcing alliance later, however, since 2000 Wipro has not been doing any significant outsourcing work for GE - in many ways, this is a great comeback,” said another person familiar with the agreement.

Meanwhile, outsourcing experts such as Siddharth Pai, managing director of TPI’s India office say as customers such as GE come out of recession there would be more Indian tech firms empanelled as a tier one vendor. “If a company is empanelled as a vendor, it has fairly good visibility on the various projects and revenues that may come in. It’s not a commitment for business, but certainly strengthens relationships,” Mr Pai said.

“Of late, Indian companies have realised that they don’t have many annuity-based contracts in their kitty and have to constantly fight for revenues on an ongoing basis whether empanelled or not,” he added.

Gaurav Gupta, principal and country head-India at outsourcing advisory firm Everest Group said Wipro already has the healthcare alliance with GE, which helped. “However, GE is a demanding customer and several tier-1 companies in the past have shied away from doing business with GE as either the terms are perceived to be unfavourable, or GE can become too large a portion of their revenues and therefore create a customer concentration risk,” Mr Gupta said.

Some experts however, do not expect GE to become a large account for Wipro anytime soon. “They could start at around $10-20 million annually, but with so much of competition for the GE business, I am not sure if Wipro would also like it to become big,” a senior executive at one of the rival firms told ET on conditions of anonymity.

“Going by emerging IT industry trends, it’s likely that the company (GE) has reviewed its supplier portfolio and found that there is supplier fragmentation with multiple suppliers across business units and functions and trying to consolidate to a more manageable number,” said Gupta of Everest.

“And given that large customers are in general consolidating their supplier base to drive more value and reduce the risk of fragmentation, Wipro could see more opportunities open up in GE,” he added.