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p&g technology indiaMUMBAI: One of the world's biggest technology spenders is having an outsourcing rethink that may result in some work moving back inhouse when contracts come up for renewal this year. Any decision by Procter & Gamble not to entrust a part of its information technology requirement to software services companies is bound to cause nervousness among Indian and multinational outsourcers. 

P&G, whose products include Tide detergent and Duracell batteries, is contemplating the shape and size of the $3-billion (Rs 16,000-crore) contracts that it awarded in 2003 to EDS, which is now owned by HP. People familiar with the US-based company's plans said the reason for P&G's rethink is that it wants to have direct control over crucial portions of the technology piece with implications for its competitive positioning. 

While P&G's move does not indicate a trend against outsourcing, the fact that a major technology spender is considering such a move is not good news for India's IT industry, which is forecast to grow just 12-14% in 2013-14. 

So far, the part US government-owned 
General Motors and credit card company American Express are the only other big MNCs that have taken outsourced work back inhouse. 

P&G's decision to explore the possibility of reducing outsourcing comes at a time India's $76-billion (Rs 4-lakh crore) 
IT exports sector is facing uncertainties in the US, its biggest market that contributes about 60% of revenues. 

Amount of work to be shifted undecided
"P&G relies on a global network of strategic partnerships. The work evolves regularly to best meet the needs of our business, and ultimately, our consumers. Given the vast and varied relationships, we do not comment or speculate on specific partner contracts or negotiations," a P&G spokeswoman told ET. 

A person familiar with the ongoing contract renewal negotiations - 
Tata Consultancy Services, Infosys and Wipro are in the running for deals - said the final percentage of work to be shifted inhouse is yet to be determined. Only a small portion of finance and accounting-related BPO work had been awarded so far, to EDS. 

Contracts worth nearly $100 billion (nearly Rs 5,40,000 crore) are up for renewal this year, according to outsourcing consultancy Everest Group, and companies such as Tata Consultancy Services, Infosys, Wipro, 
Cognizant and HCL Technologies are hoping to wrest away chunks of the deals from multinational incumbents, including HP, IBM and Accenture. 

A senior sourcing advisory executive said that as the multi-billion dollar technology contracts outsourced in 2000-03 come up for renewal, some companies are not averse to revisiting the 'build versus buy' proposition, especially as enterprise technology is changing rapidly and external service providers too are going through a learning curve. 

"General Motors did it. And now P&G is considering it. There is a rise in this kind of job patriotism over there (in the US). This is the shape of things to come," said a person familiar with the developments through conversations with senior Indian IT industry executives. He spoke on the condition of anonymity. 

General Motors said in January it would hire 10,000 IT professionals over 3-5 years. The company had previously relied heavily on outsourcing, signing about $7 billion worth of contracts in 2003. 

There is a fundamental change underway in the nature of the Indian IT services industry, said Kumar Parakala, head of IT advisory at consulting firm KPMG. To be able to make more persuasive offers to clients, 
Indian IT companies would need more local presence in the US, he observed. 

"If Indian companies want to tap into work that is going to be done inhouse, they need more onshore presence. They need to ramp up teams within the markets and establish themselves as a strong local presence," Parakala said.

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