Strategic CIO // IT Strategy
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3/16/2010
10:00 AM
Chris Murphy
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Global CIO: Patni Latest Outsourcer To Buy U.S. Capacity

The recession offered a good chance to buy up capacity for business processing, software development, data centers.

Patni has bought an El Paso, Texas, business processing operation from a healthcare services provider, the latest example of an Indian IT outsourcer expanding U.S. capacity by buying out a client's facility.

With the deep recession, companies have reassessed what's core to their operations, and some are deciding to sell off parts of their U.S. operations. At the same time, Indian IT companies are looking to expand their U.S. presence. It could be a business processing operation like Patni's buying in El Paso, or it may be software development, testing, or data centers. One big advantage over building from scratch: It usually comes with the selling company as an anchor client. Patni says its has a multiyear, multimillion dollar BPO deal for the El Paso center.

Patni has done a number of these deals, transitioning work from clients or sometimes competitors, over the past two years. HCL, another India-based outsourcer, last year bought a retailer's New Jersey data center under a similar strategy.

Patni is a midsized India-based IT outsourcers, with about 15% of its 14,000 worldwide employees in the U.S. In the past year, it's made a strategic decision that it needs to: 1) get geographically closer to customers, with a regional focus, and 2) concentrate more on its industry expertise. (Read more on its strategy here, and more on outsourcing trends at the Recommended Reading list at the end of this column.)

When it comes to geography, the biggest demand is for service providers in the same time zone, though not necessarily the same country, to make interaction and collaboration easier. "It's not a language issue, but it's really 'Are you around? Are you there?'" says Naresh Lakhanpal, president of Patni Americas.

Some IT outsourcers, including HCL, say they're seeing demand from companies that want to keep their data in the United States. Lakhanpal says he's never had a customer ask for that.

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When it comes to industry knowledge, Patni is staking out what it calls sub-verticals. Instead of just knowing insurance broadly, a sub-vertical approach might mean having experience processing health insurance claims, or developing apps for life insurance agents. "We don't want to be a generic kind of company," says Lakhanpal. "We want to be known for something."

Why El Paso? Lakhanpal says Patni looks at a mix of factors: affordable labor, state and local tax incentives, available talent, and the infrastructure at a site to grow. It has facilities in Bloomington, Ill., Milpitas, Calif. and Cambridge, Mass. Patni just opened a new facility in Queretaro, Mexico, which its hopes will be a hub for expansion in Latin America. It's evaluating new sites in the Western hemisphere and expects to "have more to say" about expansion within six months, says Tony Viola, VP of Marketing for Patni Americas.

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