Fidelity Selling India IT Operation To Infosys Or IBM?

In a further sign that the Indian IT services industry remains a powerful force in global business, Infosys is competing against IBM to acquire the India-based IT unit of the largest mutual fund company in the world, Fidelity Investments. It's also interesting to note that Fidelity will reportedly retain control over high-value services such as business analytics and BPO while unloading primarily back-office functions.The proposed sale by Fidelity, reported just now in The Economic Times of India, reinforces a trend begun last year with similar deals involving global insurance firm Aviva and troubled financial services giant Citigroup, both of which sold off their captive India IT operations in 2008. So at a time when the recent Satyam scandal had some CIOs questioning whether India would be able to retain its hard-earned position as a source of excellent IT services, software, and process innovation, the fact that Fidelity has reportedly put Infosys on the short list with IBM reinforces the credibility of the Indian IT community.

That endorsement is expected to have longer-term implications as well because it's likely that Fidelity will engage the winning bidder -- either IBM or Infosys -- in a long-term outsourcing contract to handle its IT services for some years after the transaction. Again, this appears to be a clear sign that while the Satyam fiasco has certainly caused huge problems and headaches for many of Satyam's global customers, other leading IT services companies in India are continuing to extend their reach and influence in the global business of IT.

The Fidelity deal also could influence and possibly accelerate the thinking of other global corporations that have established captive IT units within India as those businesses continuously evaluate the right approaches and strategies for their global IT operations. Look at how a Fidelity spokesperson portrayed the company's thinking:

That summarizes some of the biggest challenges global CIOs face today: As their companies seek to transform how they approach product development, design, sourcing, sales, and marketing around the world, what's the best approach for delivering optimized infrastructure, applications, and processes around the world? Anyone who's got an answer for that, please let me know!