IT Outsourcing India

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/