IBM and Hewlett-Packard are among the finalists for a $700 million outsourcing contract from Microsoft to manage huge portions of its global IT infrastructure, according to a media report from India.Looking to lower its cost of infrastructure and apply more focus to its business of developing software rather than running a massive global IT organization, Microsoft has been reviewing bids for the past few months and has narrowed its list down to HP and IBM, according to an Economic Times of India article:

India's top outsourcing vendors had also bid for this contract, but they lost out to the multinational rivals who have better global footprints and are even ready to take over assets including Microsoft's staff.

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"This was one contract where most of us were bidding hard, especially given the kind of customer we are talking about, but global service providers seem to have taken a lead," said a senior executive at one of the tech firms involved during early stage of bidding.

If accurate, this report about Microsoft's intent to hand over control of most of its global IT infrastructure could provide a big boost for the overall outsourcing business as companies across the globe would see that even Microsoft--one of world's preeminent technology companies, and one that offers products that help to create and manage information from the browser to the data center--is willing to entertain the possibility that it might be better off by handing over to specialists its own IT operations.

At the same time, the report also points to the powerful disparity in capabilities between full-scale global IT services companies like IBM and HP, and the Indian IT-services companies that have done a phenomenal job in software and BPO but at least currently lack the skills and financial resources to handle end-to-end deals that include hardware as well.