IT Outsourcing India

Indias top three outsourcing majors, Tata Consultancy Services TCS, Infosys and Wipro, will gain enough muscle to take on todays IT giants like IBM, Accenture and EDS by 2011, IT research company Gartner said. These vendors are increasingly being considered for strategic service deals, and will augment or, in some cases, replace todays acknowledged mega vendors by revenue IBM Global Services, Accenture and EDS in this space by 2011, predicts Gartner. The IT research firm has based its projection on a comparison of growth rates of Indian firms and MNCs.

While the Indian companies have been registering growth of over 3040 percent in the last few years, their foreign rivals are growing at a much lower rate of around 5 to 10 percent. Even the market capitalisations of Indian tech majors were catching up their overseas competitors.

The emerging mega vendors TCS, Infosys and Wipro have made dramatic progress in the past few years and have more than doubled their revenue in a fouryear period, with the 2007 revenue being 2.6 times the 2004 revenue, said Partha Iyengar, vice president, analyst and regional research director, Gartner.

He said, This level of growth differential has continued even as these vendors have become multibillion dollar enterprises. To put this in context, there are just 100 service enterprises globally with more than  USD1 billion in revenue.

However, Iyenger said that Indian software exporters would have to overcome a few challenges before they become serious threats for the MNCs.

Looking at the revenue per employee data, it is clear that there is a divide between todays megavendors and the aspiring Indian megavendors, said the Gartner statement.

The research firm said the Indian service providers would be able to address the issue by moving away from resourceintensive revenue growth to a model that provides higher leverage and increases revenue without a linear relationship to head count.

They will have to achieve similar to the current megavendors levels of revenue per employee benchmarks to truly achieve megavendor status, said Gartner.

In 2007, revenue per employee of IBM, Accenture and EDS was  USD146,910,  USD130,200 and  USD154,340 respectively. That was much higher than the revenue per employee of TCS at  USD51,320, Infosys  USD45,800 and Wipros,  USD41,310 in the same year.

James Abraham director, The Boston Consulting Group, said, to him revenue per employee was not of much concern.

What the Indian IT players really need to work on is building more global delivery centres across the globe, and these centres should have as much scale as their MNC rivals, said Abraham.

Source : http://www.offshoringtimes.com/ 

Pressure mounts at giant Infosys campus

Saritha Rai visits Infosys’s giant Mysore training centre to gauge how outsourcers are using education to maintain their edge in challenging economic times.

Just before nine o’clock every morning, thousands of twenty-somethings stream across an expansive landscaped campus - past the Domino’s Pizza, the 24x7 library, the official merchandise store - and into large classrooms. A hundred or so file into one room, firing up their computers as their lecturer clips on his microphone and gets started on a two-hour session about Java technologies.

This could be a university classroom anywhere in the world but it isn’t. It is the sprawling training centre of India’s second-largest outsourcing company, Infosys Technologies, which boasts $4.6bn in revenues and 104,000 employees, at last count.

The 336-acre expanse, with its capacity to train 14,000 people, is likely to be the largest dedicated corporate training centre in the world. Even global outsourcing rivals would find it hard to replicate this scale in other offshore centres like Ireland, Russia or Vietnam.

But despite its grandeur, the campus has not been able to insulate itself from the effects of the global recession.

Given Infosys’s extensive hiring - peaking to 10,000 or more new hires during some quarters - it has no option but to take on fresh university graduates. And the chosen ones are not handed an appointment letter and herded to their work desks. Instead, they are bussed off to the training campus in Mysore, a three-hour drive from Infosys’ headquarters in Bangalore.

Infosys executives say intensive employee training gives the company an edge over its rivals. "It helps us meet and exceed customer expectations while maintaining our competitive edge," says Mohandas Pai, director of human resources at Infosys. "When a global customer is experiencing different suppliers, our employees come out differently," adds Girish Vaidya, senior vice president and head of the Infosys Leadership Institute.

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NEW DELHI: Switzerland-based banking and wealth management firm UBS is considering outsourcing about 5,000 jobs over the next two years, according to people familiar with its plans. This signifies an opportunity to win new businesses for Indian IT vendors such as Wipro and Infosys Technologies that already work with the Swiss bank.

UBS recently appointed consulting firm McKinsey to advise it on the outsourcing process. The decision to outsource thousands of jobs is in line with the ailing bank’s cost-cutting strategy. UBS chief executive Oswald Grubel has already announced 7,500 job cuts across the firm till 2010.

The Swiss bank has accumulated more than $53 billion in writedowns in the global financial crisis and had to receive financial aid from the Swiss government. The bank is an important client for both Wipro and Infosys. While Wipro, India’s third-largest software-services firm by revenues, gets over $50 million in annual revenues from UBS, second-ranked Infosys derives about $40-50 million. Apart from these firms, other vendors for UBS include TCS, Polaris, Cognizant and Headstrong.

In reply to an e-mail questionnaire on the bank’s outsourcing plans, UBS spokesman in Hong Kong, Mark Panday, said: "UBS does not comment on market speculation or rumour. UBS has a well defined offshoring strategy, including judicious use of India and other locations around the world. Offshoring has allowed UBS to reap many benefits, including improved quality, reduced operational risk, new revenue opportunities, cost savings and, importantly, access to talent."

Outsourcing analysts say the bank is more likely to outsource BPO work such as processes related to finance and accounting, procurement and collections. "Large banks have been using IT outsourcing for a longer time than BPO.

About 25-30% of their IT requirements would be typically outsourced, while it’s true for only about 10% of their BPO work," said sourcing advisory firm Everest Group principal Nikhil Rajpal.

With UBS planning to outsource more work, its existing vendors are likely to have a better shot at grabbing more business.

"Wipro and Infosys have worked with UBS for a long time. That means a higher chance for them to win new business from it," a Mumbai-based equities analyst said, asking not to be identified.

In line with its focus on cost-cutting, UBS had appointed Ulrich Korner, a former Credit Suisse CEO and McKinsey management consultant, as its group COO in April. Known to be pro-outsourcing, Mr Korner is overseeing the company’s cost-cutting plans and leading a restructuring of its business processes including the centralisation of functions such as IT, HR, procurement and facilities management.

Europe, with the exception of UK, has been a conservative market when it comes to outsourcing and lags behind mature markets such as the US. The region has emerged as the fastest growing market for IT-BPO outsourcing as companies affected by the global economic downturn aggressively explore ways to cut costs. Demand is particularly strong in markets such as Benelux (Belgium, Netherlands and Luxembourg), the Nordics (Sweden, Denmark, Finland and Norway), Switzerland, Germany and France.

"While the global economic downturn is acting as a catalyst to drive outsourcing, the lack of skilled workforce is another major driver," said sourcing advisory firm Quantum Step MD Sridhar Vedala.

Source : http://economictimes.indiatimes.com/

BANGALORE: India’s top two software exporters TCS and Infosys are seeing the first signs of an economic recovery as their top customers start discussing outsourcing contracts in order to further reduce their operational expenses. For instance, customers of Infosys, which signed over $100 million contract with Australian phone firm Telstra earlier this month, are now saying that the worst may be behind them.

“There is a lot more confidence among our clients; they feel that the worst is behind them. Especially in the US, many customers are saying that they were aggressive in reacting (to the recession)-they cut costs and renegotiated contracts,” S Gopalakrishnan, chief executive of Infosys told ET NOW. In a year when both Infosys and TCS have cautioned their investors on lower to negative growth in revenues, India’s $40-billion software exports industry is going through one of the toughest recessions in over two decades.

TCS, which counts Citigroup and GE among its top customers, is also seeing the first signs of recovery when it comes to the IT spending.

“We are seeing a recovery, but at a slow pace. The overall decline is slowly getting arrested. The recovery is showing but can’t predict the slope of this recovery,” N Chandrasekaran, chief operating officer, TCS told ET NOW.

Despite, financial problems and tightened IT budgets customers continue to work with offshore outsourcing companies in order to lower their operational costs anywhere between 20-30%.

As reported by ET earlier, tech biggies such as TCS, Infosys, Wipro and HCL are all set to get new outsourcing contracts worth $4 billion from top customers including British Telecom, Citi, GE and Bank of America this year. In a bid to cope with their tightened budgets, these companies plan to send their information technology works to offshore locations such as India.

Meanwhile, the ongoing slump is forcing many customers to evaluate different models of outsourcing, beyond traditional mode of structuring a contract based on number of hours and number of professionals on different projects.

“In the BSFI Segment itself I think that the downturn will drive some changes in terms of how clients engage with their partners. One major shift is shifting from capital expense to operational expense-it may be an interesting model to watch for in the future,” Mr Gopalakrishnan said. While top customers in the US are gradually beginning to discuss new outsourcing contracts, companies in Europe have been more active on the outsourcing front. According to research firm Gartner, almost 60 per cent of organisations in Western Europe will outsource more IT and business process functions in 2009, while renegotiation of existing contracts will rise to more than 60%.

“The focus on cost reduction is driving a high usage of outsourcing and global delivery in Europe in 2009 and 2010. However, under the current economic and technological conditions prices are going to decrease, creating a market full of opportunities and challenges for both end-users and external service providers,” said Claudio Da Rold, vice president and distinguished analyst at Gartner. Gartner anticipates prices of IT services outsourcing to decline by 5% to 20% through 2010.

Source: http://economictimes.indiatimes.com/