The US and UK arms of PricewaterhouseCoopers (PwC) have awarded a contract for back-office information technology (IT) support to Tata Consultancy Services Ltd (TCS), India's biggest IT company, after the professional services firm announced laying off at least 500 IT employees at its Tampa Bay, Florida office, according to two PwC executives who didn't want to be identified.

TCS declined comment. Its spokesperson Pradipta Bagchi said the firm does not comment on individual clients.

Those being laid off can carry on till 31 December and apply for other "open positions" within the firm, Jonathan Stoner, spokesperson for PwC US, said in a phone interview. If they cannot get another job by then, they would be paid a generous severance package, he added.

Before the layoffs were announced, there were some 1,100 IT professionals at its Tampa Bay office, which employs over 1,800 people in all. The layoffs are part of a restructuring exercise aimed at aligning the internal IT needs of PwC's US and UK firms, according to Stoner.

These two firms would outsource IT services to an "India-based vendor", he added. He refused to name the vendor, citing company policy.

A few of those being laid off are Indians. One of them said the move has triggered "quite a stir" in Florida, more so because earlier this year, the firm cut back its tax practice in Orlando. "PwC is one of the bigger employers in Tampa," he added, requesting anonymity. "So many people laid off in one stroke is big news here."

The deal signals that large firms in the US and Europe don't want in-house IT professionals on their payrolls for back-office support, said an analyst at the Indian arm of a global consulting firm.

"Indian outsource managers typically charge two-three times the employee cost of the company closing its back office," added this person, who asked that neither he nor his firm be identified.

This is because such outsourcing includes all costs of delivery: travel, communication, establishment, etc. The company outsourcing its work saves on establishment cost.

So, if PwC was paying those being laid off at Tampa $30 million a year collectively, TCS would charge at least $50-60 million annually, he added.

Outsourcing firms such as TCS offer back-office support to so many firms that their cost of delivery is very small compared with large firms managing their own back-offices, said another analyst who, too, did not want to be identified.

"Companies such as TCS have well-evolved systems and practices, which make back-office management extremely cost-efficient," he added.