HCL bags comprehensive outsourcing deal with Reader’s Digest

In the midst of the downturn in India's outsourcing industry, IT major HCL Technologies Ltd has signed a seven-year deal, covering the entire IT gamut from infrastructure to applications, with Reader's Digest Association Inc for $350 million (Rs1780 crore).

HCL will provide IT support to RDA's operations across 45 countries covering North America, Latin America, Central and Western Europe, and Asia Pacific.

The contract also involves shifting some of RDA's employees onto HCL's rolls.

R Srikrishna, senior vice president - North America Operations, HCL Tech, said the deal covers all of RDA's application, maintenance, development and infrastructure operations, and would be executed in two phases.

Srikrishna expects outsourcing interest in the media publishing and entertainment industry to continue. ''This deal reaffirms our ability to compete and win in global mega deals. It also reaffirms our belief that the media publishing and entertainment industry is one of the hottest and growing industries,'' he told CNBC TV.

Under the 'transformational' engagement, HCL Tech will provide application development and infrastructure support across the application stack of Oracle universe, open technologies, mainframe, infrastructure support for network, security, storage, end user computing, and data centres including disaster recovery services.

As a part of the engagement HCL will also rebuild the New York-based media firm's mainframe environment and migrate it to its New Jersey data centre facility. It will also provide helpdesk support in 14 languages.

On the sourcing side, HCL will be taking over several existing IT contracts from RDA and will manage them over the engagement period. This will also involve providing telecom expense management services for RDA's worldwide network through HCL's ControlPoint Solutions.

''The RDA partnership is unique services offering in which HCL blends all its outsourcing strengths - applications and infrastructure capabilities, industry knowledge and global reach,'' said HCL Technologies corporare vice-president Sanjeev Nikore.

The deal, for which a dozen IT services firms were in contention, took close to a year to finalise. Revenues from the contract will kick in from the first quarter of the next fiscal year, said Srikrishna. HCL follows a July-June fiscal. He declined to comment on the number of employees HCL will take over from RDA.

''Information technology is a key enabler to our business. We expect HCL to bring down the cost of operations significantly, while improving services and bringing cutting-edge technology and capabilities to transform our IT functionality and service,'' RDA's senior vice-president for global operations (IT and business redesign) Al Perruzza said in a statement.

In the first phase of the deal expected to last over 18 months, the focus will be on cutting costs and improving services for the media firm, Srikrishna said. In the second phase, RDA and HCL will work on using cost savings from the first phase for business transformation. ''For instance, we could look at how to deliver content digitally,'' he said.

RDA had earlier outsourced some of its IT services to other vendors, but such a large deal is the first for the firm.

Srikrishna said there has been an upswing in demand from the media, publishing and entertainment vertical in the last few quarters and there is a healthy pipeline of such deals. ''As advertising revenues dwindle, a lot of media and publishing companies are looking to cut costs and are considering outsourcing,'' he added.

RDA markets books, magazines, music, video and educational products, and claims a customer base of 130 million households in 79 countries.

The $5-billion HCL group, founded in 1976 and among the early entrants in the country's information technology industry, comprises two companies listed on India bourses - HCL Technologies and HCL Infosystems. Its team comprises over 59,000 professionals in some 20 countries who work with several leading Fortune 1000 firms, including leading IT and Technology firms, the company said.

Headquartered at Pleasantville, New York, Reader's Digest Association publishes 92 magazines, including 50 editions of Reader's Digest - claimed as the world's largest-circulation magazine.

In January the company said it would cut about 280 jobs, or eight per cent of its global work force, and implement other cost-cutting measures. Its plan also calls for asking employees to take some unpaid time off through fiscal 2010 and suspending matching contributions to retirement plans.