Outsourcing Contracts: December Begins with an Abundance

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 |  Includes: IBM, INFY, INWK, NAV, NWSA, RIO, RNSDF, SAY, SMG
by: Outsourcing Insider

By Audrey B.

If the first few days of a month can be an indication of how well an industry can perform by the months’ end, then this December ’09 should be a great month for the outsourcing industry – barring any mishap of course. Aside from ushering in the holiday season, several different outsourcing companies have ushered in lucrative agreements since the start of December.

In the US, a procurement agreement was penned between Innerworkings Inc. (NasdaqGS: INWK), a provider of managed print and promotional procurement solutions, and the Scotts Company LLC (NYSE: SMG) which is a subsidiary of the Scotts Miracle-Grow Company, a provider of lawn and garden care. The news release of the agreement was the first for December, with the news hitting the web via the Globe NewsWire at 7am on the 1st of December.

Also on December 1st, in the UK, Interserve [LSE: IRV] and HSBC (HBC) signed a 200M pound contract where Interserve will be in charge of delivering facilities services for HSBC retail sites and offices in and around the UK, Channel Islands and the Isle of Man. This is just one of the many very lucrative deals signed by Interserve this year including a deal with process engineering contractor Costain Oil & Gas Process Ltd for 20 million pounds, and a 110 million pounds contract to design and construct a new prison for the Ministry of Justice in Woolwich, England.

Across the way in Asia, on December 5th, Mahindra Satyam (NYSE: SAY) won an outsourcing contract with Airbus, the world’s largest manufacturer of commercial aircraft and a subsidiary of the The European Aeronautic Defence and Space Company [Euronext: EAD]. The deal, valued at around $20 million, involves Satyam providing technical support for engineering services and maintenance. It’s certainly good news for Satyam, perhaps ensuring a good year-end outlook after the accounting scandal that rocked the company in January of this year.

Meanwhile in Europe last December 7, Capgemini [Euronext: CAP] and Renault (OTC:RNSDF) signed a three year contract, wherein french company Renault will be outsourcing its application management to Capgemini. Renault is currently the world’s fourth largest automaker, thanks in part to its alliance with Japanese automaker, Nissan. Along with the deal, Capgemini received the added prestige of being named a ‘preferred partner’ of Renault. With Capgemini’s global revenue for 2008 finishing up at $8 billion pounds, it is easy to surmise that the company will enjoy très bien earnings for 2009 with this deal in place.

The following day, in the land down under, Optus signed HP Enterprise Services in an outsourcing deal to provide key applications such as costumer billing and data warehousing, underlining the need for innovating customer experience. Optus, a subsidiary of Singtel [SGX: T48] and the second largest telecommunications company in Australia, is perhaps looking for better strategies in order to overtake Telstra [ASX: TLS], which is currently first in Australia. Last 2008, Optus’ revenue was only about a third of Telstra’s revenue, which was around $24.8 billion. Whether or not the move to sign with HP will pay off still remains to be seen although HP, being a brand unto itself may be just the ticket Optus needs to overtake Telstra. It’s not just Optus though that’s signing outsourcing deals in the outback. Multinational mining company, Rio Tinto (NYSE: RTP) signed Infosys (NasdaqGS: INFY) Poland to manage their finances. The deal is believed to be at around $50 million, with Infosys managing finance, accounting and purchasing. The move will ensure the continued growth of Rio Tinto, who has enjoyed substantial earnings in the past five years and has in fact mined 20 million carats of diamonds last year.

The big winners for December though, are the two IT companies who’ve managed to close not just one but two deals in a matter of days. One of these is IT giant IBM (NYSE: IBM). On December 7, Big Blue signed a 7-year contract with Navistar (NYSE: NAV), manufacturer of international brand commercial trucks. The contract involves providing a full range of IT services, including data center relocation, server and storage management, physical database support, and the utilization of IBM server and storage technology. Just a day later and A.P. Moller-Maersk (OMX: MAERSK A) agreed to sign on an extension of their contract with IBM as well, extending their IT services outsourcing contract until 2014. Global technology services comprise a huge chunk of IBM’s revenue, and with these deals in place, it seems the Big Blue has nothing to be blue about.

Another IT giant HCL Technologies (NSE: HCLTECH.NS) entered into a SAP implementation agreement on the 3rd of December with SAPESCO, an Egyptian Oilfield Services Company. Five days later on December 8th, HCL technologies penned another deal, this time it’s a five-year “multi-million pound” order from News International, the UK subsidiary of News Corporation (NASDAQ: NWSA). The deal was signed in an effort to reduce costs, improve end user experience and reduce technology complexity. With the deal in place, the financial outlook for HCL Technologies couldn’t be any brighter. This India based company has received numerous awards for this year alone, including the Golden Peacock Innovation Award just last month, and these have certainly attracted bigger business to sign with the company.

Even with Christmas still weeks away, it seems that numerous companies have already managed to take advantage of a little holiday celebration. December must be the lucky month of signing outsourcing contracts for these companies, and maybe if the luck can rub off, then perhaps it would be a good time to follow up on any deals you may have in the works.

Disclosures: No Position