Walmart's foray into India surges ahead with the company increasing its Information Technology (IT) sourcing strategy from India by setting up a dedicated group called Remote Services Management (RSM) in Gurgaon. The increase in IT sourcing comes in the backdrop of Walmart's plan to expand its business operations in India & elsewhere in the world, leveraging India's cost effective IT solutions. The world's largest retailer's first venture into India being a joint venture with Bharati Enterprises, Bharti Walmart Private Limited, for wholesale cash-and-carry and back-end supply chain management operations in India.
The new group would be headed by the former CIO of Walmart India, Mickey Singh who was be responsible for setting up complete IT solution to Bharti-Walmart, covering all facets of the retail joint venture. In his new role, Singh will now be responsible for identifying Indian IT partners, say industry sources. Remote Services Management will be part of Walmart's Information Systems Division (ISD), the in-house IT arm of the company.
The company wants to be risk averse by diversifying its choice of Indian IT partners based on their areas of strength, rather than giving a huge IT contract to any single company. As part of the strategy, Walmart has awarded contracts to two more Indian IT services firms, Wipro and Collabera (a privately-held IT services company) to develop specific tools and application, and provide services around that. The contracts are estimated to be over $200 million for multi-year periods. Walmart has already awarded IT contracts to Infosys, Cognizant and UST Global for sourcing specific services and applications for Walmart globally.
With the selection of more vendors, Walmart's total IT sourcing from India is estimated to be in the range of $800 million-1 billion.
It is understood that Wipro will be responsible for application development and infrastructure outsourcing for Walmart stores globally. Besides, the company has also established a large helpdesk as part of its BPO practice. On the other hand, Collabera will develop collaborative tools for specific retail applications.
Walmart typically prefers to develop its retail applications in-house. However, the company gradually started buying packaged retail applications from leading software vendors like Oracle, HP and SAP only towards the end of 2007. This is for the first time Walmart's ISD has set up an arm outside the US.
With the Bharti-Walmart joint venture already projecting 20K jobs in the retail sector, the setting up of this arm would mean more opportunities for the skilled Indian work force and would be an icing on the cake as far as the Indian economy and job market is concerned. Although critics might see this as a Walmart initiative to help liberalise the Indian government's stance on the retail sector FDI, there is no denying the fact that at the moment it's a win-win situation for both and stands in line with the views of Mike Duke, CEO, Walmart to contribute and make a difference to India's economy & life of its people.
The demand for opening of Indian retail sectors have come from many countries.With the disorganized mom-and-pop stores accounting for over 90 percent of domestic trade, the issue is sensitive from political angle and hence there have been no forward movement yet. The retail sector is largely closed to foreign firms, with 51 percent foreign direct investment allowed only in single-brand retail. Multi-brand retail is restricted to cash-and-carry or wholesale outlets, restricting the entry of retailers such as U.S. giant Wal-Mart.
FDI in India's banking sector is currently limited at 49 percent in private banks, and 20 percent in public lenders. However, current rules restrict foreign investors to only 10 percent of voting rights, regardless of investment level. US and other foreign firms are unlikely to increase their investment unless the cap on voting power is lifted.
Insurance industry reform, to allow foreign investors to take a bigger stake in Indian firms, has been on the table for years and without the further reform the increase in US investment in India looks highly improbable.
So the figures clearly indicate that despite an impressive strategic relationship with US, India is struggling to match its peers in attracting the US investment into the country.The need of hour is to have concerted effort from Indian government to allay the concern of US investors and to ease the restrictions on key sectors for investment.