India IT vendors avoid govt projects over payment delays

Country's IT vendors are moving away from government projects due to frequent delays in payment and lack of clarity regarding project milestones, which are linked to payments.
Written by Eileen Yu, Senior Contributing Editor

India's software vendors are avoiding government-led projects due to frequent delays in payment and lack of details over project deliverables. 

Government projects lack clarity in milestones, which are typically linked to payments.

Infosys, for instance, chose not to bid for a project worth 2 billion rupees (US$32.7 million) to computerize the Debt Recovery Tribunal, said the company's India business head, C.N Raghupati, in a report Tuesday by The Economic Times. The executive said it decided against bidding for the project because it wanted a clearer investment and execution roadmap. 

According to the report, another initiative by India's telecom department to build a testing facility for security equipment was unable to kick off due to a lack of details regarding funds and project milestones. These milestones are critical because they are usually linked to payment timelines. 

"Major IT players have become more circumspect and are participating only in projects that are well-funded, have clear vision, and can pay," Rohtin Bhattacharya, executive vice president of corporate strategy at HCL Infosystems, said in the report. "We have faced delay in payment from government entities and are trying to get our money."

He said the company's strategy now focuses on non-government customers and on expanding its portfolio for the private sector. Government projects, though, still pull in around US$1 billion revenue for HCL, Bhattacharya noted, while the private sector generates around US$27.96 million (1.7 billion rupees).

According to Gartner projections, the Indian government is expected to spend some US$6.9 billion on IT this year, up 10.5 percent from 2012. This expenditure includes internal IT and IT personnel, hardware, software, external IT services, and telecommunications. Tata Consultancy Service and IBM are expected to have the dominant share of government projects. 

With the upcoming general elections in 2014, industry watchers said most big projects have stalled or are progressing slowly, The Economic Times noted.

Citing an unnamed senior executive from IBM, the report said delays in payment had become "acute" as government officials were concerned about greater scrutiny by auditors following recent corruption scandals. "With payments getting stuck, CFOs are pulling up India business heads at most of the large IT companies and asking them not to bid for government projects, as they are seen as being too risky from a cash-flow perspective," the IBMer said. 

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