International steel giant ArcelorMittal has announced plans this month to upgrade and outsource their IT departments throughout Europe. The ArcelorMittal contract will go to perhaps two different companies which have thus far not been selected. International, European and Indian companies are vying for the contract.
ArcelorMittal, owned by the India born billionaire Lakshmi Mittal, is the largest steel company in the world. Lakshmi Mittal is the richest man in Europe and fifth richest billionaire in the world. Though Lakshmi Mittal was born into a well to do family in India, and his family’s major holdings consisted of a steel mill, that mill belongs to his brothers. Lakshmi Mittal made his own fortune, buying steel mills and mining operations throughout the world.
Representatives of ArcelorMittal admit one of their main objectives is to save money while updating their equipment and software, which had become outdated. “ArcelorMittal has had to contend with a lot of legacy IT infrastructure since it has grown through the inorganic (or acquisition) route in Europe. To start with, it makes sense for the company to outsource back-end work as against critical business processes,” said Mr Sudin Apte. Apte is the Principal Analyst and CEO of Offshore Insights. ArcelorMittal desperately needs to upgrade their IT equipment and software but due to the rising cost of raw materials, and declining metal prices most all European steel manufacturers are economically strained. Billionaire Lakshmi Mittal has to maintain a profit margin for ArcelorMittal, despite his own great personal wealth.
Billionaire Lakshmi Mittal plans to outsource management of the entire IT infrastructure of ArcelorMittal in Europe. Some 600 jobs will be lost to the outsourcing. Companies like HP, IBM, CSC and Capgemini are expressing interest in the project as are Indian companies like Wipro and HCL Technologies.
Apparently some Indian companies do not feel confident competing with international companies. Mr Alok Shende, Principal Analyst at Ascentius Consulting commented, “I see Indian IT companies as ‘challengers’ and not as ‘leaders’ for these kinds of engagements. In Europe there have been very few deals where in both the people and infrastructure of the clients have been taken onboard by Indian vendors.”
Despite their lack of confidence and the obvious overconfidence of multinational companies, Indian companies do have the opportunity to gain the contract. India is rapidly growing in all fields, but especially the field of IT. IT education in India is competitive with other nations, and in many cases surpasses European and American training. Pricing for IT services in India tends to come in a good bit lower than in most other areas. Since even billionaire Lakshmi Mittal is on a tight budget, it is quite likely that he will turn to his native country for an IT contract.