NIIT Technologies will form a joint venture with US-based media group Morris Communications, to offer IT services to the media and publishing businesses.
The 60:40 joint venture will also have an assured revenue stream right from the inception, as it comes with an $85-million outsourcing contract from Morris Communications itself. The contract is for five years and involves infrastructure management, media application management and BPO services.
Apart from Morris, the venture – NIIT Media Technologies – will also provide IT-BPO services to other media companies. “We will also use the joint venture to service other media companies in North America. It enables us to also provide the nearshore facility to NIIT's own customers. Not only is Augusta, Georgia (where Morris is headquartered) a low-cost centre in the US, it also allows us to address visa-related issues through a stronger direct presence,” said Mr Arvind Thakur, CEO of NIIT Technologies.
So far, Morris Group's IT processes were being handled internally by the company's managed services facility in the US; with Wednesday's announcement 100 employees of Morris Group will move to the joint venture. NIIT Technologies will invest $3 million into the venture. Revenue from the deal is expected to accrue from December quarter.
Media vertical is seen as one of the future growth engines for the IT industry, with some estimates pegging the addressable opportunity at $17-20 billion by 2020.
According to Nasscom, the digitisation of content and increased connectivity will stimulate the spending on technology and business services by media companies, which have traditionally been paper-intensive. In fact, in 2006, Genpact and broadcaster NDTV had announced a joint venture to offer media outsourcing services to enterprises worldwide in areas such as editing, digitisation and closed captioning.
For Indian IT service providers such as HCL Technologies, the media, publishing and entertainment vertical accounted for 6.6 per cent of overall revenue in March quarter. In January-March quarter, this vertical grew 11.6 per cent year-on-year and 2.3 per cent sequentially, in dollar terms for HCL.
“The print media is aligning itself to the digital age and it will call for significant investments in technology,” Mr Thakur said.
Elaborating on the announcement, he said, “Morris felt that a pure outsourcing contract does not give them control. At the same time they needed a partner to improve cost structures. The joint venture will allow them to have a skin in the game.” There will be cost reductions for Morris as the venture can leverage NIIT Tech's offshore presence, he added.