BANGALORE: Indian software companies such as Infosys Technologies and Wipro are entering the unfamiliar area of vendor financing, at the urging of cash-strapped US customers, by using reserves accumulated over years to invest in so-called software platforms that run activities like payroll processing.

The country’s $50-billion outsourcing industry has flourished for close to two decades by maintaining the IT systems of US companies at sharply lower costs by writing software application codes in India.

But as customers such as JPMorgan, Philips and Citibank attempt to cope with lower IT budgets by avoiding expensive licensed software, they are asking vendors to invest in building systems and to link payment to the number of transactions.

“We will have to bite the bullet now—if we wait, there may be no option left for us to have such conversations with customers later,” said Subhash Dhar, Infosys’ global head of sales and marketing and a member of the company’s executive council.

“All said and done, if you look at balance sheets and profit and loss, ours look better than them. And by and large, if you look at all the industries, tech is looking pretty okay from all the way from chip to software companies, they are looking good, so why not?” added Mr Dhar, referring to the demands of customers that software companies invest their own money to build platforms or what the industry refers to as software solutions.

This sort of investment is different from traditional vendor financing because companies like Infosys are not offering credit to their customers.

Nonetheless, it is a distinct shift from selling software to users and, at least to some extent, is similar to that of companies like IBM, which bundle computer hardware, software and services together in large outsourcing contracts, according to a consultant.

“The IBM issue was really around freeing up cash during hard times, and the overall value to the company was getting cash while over the long term, IBM probably made a return on the financing they did for that specific customer,” said Rodney Nelsestuen, senior research director at US-based TowerGroup.

Mr Nelsestuen, who consults with top vendors and customers about their new outsourcing strategies, said the Indians were doing it a little differently.