What's New in Outsourcing

2009-01-14T12:01:00.001-08:00

Printed from

Fraud, slump? IT majors to bag deals worth $4 bn
12 Jan 2009, 0700 hrs IST, Pankaj Mishra, ET Bureau

BANGALORE: 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.

Among some of the top deals coming to India, $250-million outsourcing contract being considered by Australian phone firm Telstra is expected to be finalised by the end of January, followed by several contracts worth between $50 and $100 million from Citi, BT, GE and other customers.

Outsourcing expert Sabyasachi S Sathyaparasad of Mindplex Consulting said that the new deals will include long-term application maintenance contracts. However, even as these customers seek to award new projects by renewing existing contracts, Indian vendors may lose over $300 million because of lower billing rates.

"Many large customers have reduced their IT budgets by up to 10%, and they plan to seek more cost and business output-based deliverables from service providers in these difficult times," he said.

Telstra plans to reduce the number of vendors it works with in order to have one supplier for each domain across the product lines for bringing down the cost of managing IT systems. "The company wants to move more than half of this contract to an offshore location such as India, and that is why pure Indian offshore vendors including Infosys, Satyam and EDS-Mphasis are being seriously considered," said a senior executive at one of the top tech firms bidding for the Telstra contract. He requested anonymity.

Also Read

→ Big clients plan to exit Satyam

→ Suitors list's long, but L&T seen best match for Satyam

→ Satyam fraud could net politicians too

→ Liquidity crunch: Satyam may shut many facilities

Reducing the number of IT vendors from four to two is part of Telstra's overall transformation strategy. The company plans to bring down the number of IT systems from around 1,350 to almost 300 by 2010. On the procurement side, Telstra has already reduced the number of suppliers by almost 20%, translating into saving of $226 million this year. At a time when companies are seeking ways to cut costs, Best Buy, Visa and Nisaan are aiming at achieving significant savings through renegotiation and renewal of contracts.

Last year, when BT renegotiated its contract with Xansa, the company aimed to save around $123 million over next six years. However, BT's restructured deal also witnessed more work for Xansa, estimated to be almost 80% of BT's overall back-office projects.

Customers such as Citibank are also seeking to send more IT projects to India. "As we face these (economic) challenges, there will be greater demand for moving more work to offshore locations," Jagdish Rao, global technology head for Citi, said during his visit to India last month.

Mr Rao was in India to announce a six-year and over $500 million master services agreement with Wipro for delivery of infrastructure services and application development. As part of the deal, Wipro acquired Citi Technology Services for around $127 million, which came with Citigroup's commitment to outsource all future infrastructure management contracts to the company.

Meanwhile, companies such as Tesco, the world's third biggest retailer, are already seeing their offshore outsourcing initiatives fetching rich dividends. Mike McNamara, director operations and information technology at Tesco, told ET last week that his company would continue to outsource more work to India at its captive centre and to top Indian software vendors such as TCS and Infosys.

Tesco saves around $60 million every year by outsourcing works to India, which was a compelling enough reason to funnel more work to the country, he said.

2009-01-14T11:58:00.000-08:00

Global CIO: Satyam Scandal Isn't The End Of Indian Outsourcing

The company's misdeeds should be a wake-up call to CIOs, but not an indictment of the Indian outsourcing industry as a whole.

By M.S. Krishnan, InformationWeek
Jan. 13, 2009
URL: http://www.informationweek.com/story/showArticle.jhtml?articleID=212900112

The recent confession about inflated revenue, profits, and accounting fraud exceeding $1.5 billion by Satyam Computer Services chairman and CEO Mr. Ramalinga Raju has put everyone linked to the Indian software industry in total disbelief and frustration. Only a few weeks back, Satyam was considered as one of the four pillars of the success story of the Indian software industry in the global economy. Along with Infosys, Tata Consultancy Services, and Wipro, Satyam was known for its coveted Fortune 500 clients, innovative software projects, capacity to train thousands of software engineers, and best-in-class certification of software engineering practices.

The irony is that last year Satyam won the "Golden Peacock" corporate governance award from the London-based World Council for Corporate Governance (although that award was revoked late last week). It is understandable that this major accounting fraud in the background of such accolades and credence has formed a cloud of uncertainty and doubts about credibility in the entire Indian software industry. There is no doubt that the fraud committed by the management at Satyam under the certification of internationally reputed audit firms is unforgivable and has created a black mark on corporate governance in India.

In that context, the disclosure of the misdeeds at Satyam is certainly an alert call for any CIOs who have exposure to Indian software firms as partners in their global resource network. However, I believe it would be shortsighted -- and probably harmful -- to taint the entire Indian software industry based on the Satyam fiasco.

Not Every Mole Is A Cancer
We do not conclude that every big mole that bleeds is a skin cancer; obviously, we collect data and investigate further before drawing our conclusion. In a similar way, I believe for several reasons that this major failure of corporate governance at Satyam is not a structural problem with the capabilities of the Indian software industry as a whole, or with that of software talent in India. And I would thereby urge global customers engaged with outsourcers in India or elsewhere to not act too hastily based solely on the malfeasance of Satyam's founder.

First, despite the corporate governance problems at Satyam, none of their global customers had raised any concerns related to the quality of operational delivery and performance in their projects. In fact, there has been an increase in the size and scope of projects delivered to global customers by the major Indian software firms over the last few years. Hence if it had been a problem related to inability to execute large projects, we would have heard this from the market loud and clear.

Second, it may be interesting to note that of all the major software groups in India, only at Satyam had the top management shifted its attention away from its core software business in the last few years. The real-estate business controlled by Satyam owners had expanded substantially with projects worth nearly $10 billion last year. As in other developing economies, the real estate sector in India is known for structural problems related to transparency, accountability, and ownership rights. While the answers to the questions on how Mr. Raju managed this fraud and why he did it will be known only when the regulators and government complete their investigations, it is not a surprise that some media reports are claiming that the accounting fraud at Satyam may be linked to the real-estate business of its owners/promoters.

Finally, the operational implementation team at Satyam has recently won several accolades from global IT vendors such as the Pinnacle award from SAP in June 2008 for excellence in customer experience and accelerating innovation. Similarly, Satyam received two prestigious shared-services excellence awards last year from the International Quality and Productivity Council. Unlike the corporate-governance awards cited above that are based on subjective judgment, these operational delivery awards are based on actual customer experience. In addition, anyone who has visited the EMRI (Emergency Management and Research Institute) facilities in Hyderabad set up by Mr. Raju can vouch for the excellence in operational process discipline and delivery metrics followed.

These collective reasons indicate that Satyam's failure in corporate governance is not a structural issue about any significant delivery risk from Indian software houses. In saying that, I do not mean to diminish in any way the fraud committed at Satyam, or to try to portray it as any smaller sin. It is one of the biggest corporate governance scandals for India and it leaves lessons to be learned for all. It certainly calls for, at a minimum, a new layer of due diligence and checks by CIOs within their IT strategy for dealing with governance of their global resource partners. Moving Ahead
The swiftness with which the regulators have approached the Satyam case in the last few days underscores the significance attached to this far-reaching situation. It is very well known that the success of the software industry and exports in particular have been a catalyst in creating new jobs and the growth of the entire Indian economy in the last two decades. Hence, it is mandatory for the government and the regulators to maintain the transparency and swift action in the investigation of this case right through to conclusion. This is one way to instill confidence among global organizations currently outsourcing to Indian firms and among foreign investors, two groups who will be certainly be tracking the case very closely. It also is anticipated that PWC, the main auditors of Satyam, will be made answerable and possibly accountable either for negligence or collusion. We may recall that Arthur Andersen went down with Enron. Accordingly, it is expected that regulators and government will move on structural changes and in the Satyam reorganization with all appropriate haste.

In its strategy for pulling Satyam from this hole, the company's newly constituted board needs to balance carefully the interests of employees, customers, and investors. And while each of those groups' interests must be given all due consideration, the board must be sure not to short-change the Satyam employee base, a group of more than 50,000 who had absolutely no connection whatsoever to the financial scandal. The board must recognize clearly that the most important source of competence and knowledge in the software business is the people, and that for Satyam it is particularly critical to sustain current project teams so that they can avoid any major disruptions for the company's global customers.

In a historical context, Satyam follows other major cases of accounting fraud such as WorldCom, Parmalat, and Enron, indicating that this not about a specific industry or country. In the earlier cases, we did not adopt a global philosophy of questioning the performance of all telecom firms, food industry, or energy companies. While CIOs and their teams will need as noted above to re-evaluate governance policies toward outsourcing partners, we also should be very hesitant to question the validity of the entire industry because there is no evidence now telling us to do so. Indeed, what all these examples of accounting fraud have in common is that they came about for two reasons, one of which is personal -- greed -- while the other is institutional -- our capitalistic system's relentless focus on short-term quarterly financial performance.

Satyam serves in that regard as another reminder that while one can fool the system for some time, the problem will only intensify in the long term and the truth will be out eventually. This calls for more transparency in the system and processes, particularly as it relates to corporate boards. These examples expose how little boards of directors know about the actual details of their companies' operations. While no system can help guarantee integrity and values, perhaps corporate boards need to get closer to the reality of their businesses by looking at real-time system dashboards of company performance and cash balances, rather than being limited to static PowerPoint presentations decorated by management. While such steps might not eliminate such frauds, they will certainly leave an audit trail in systems and make investigations easier. It is clear that in infusing greater rigor into the systems, CIOs and IT have an important role to play in facilitating this much-needed increase in transparency and corporate governance. Should that come to pass, then perhaps Satyam's shameful experience will eventually lead to something good.

M. S. Krishnan is professor of business information technology at the Ross School of Business, University of Michigan. He also is co-director of the Center for Global Resource Leverage: India at the Ross School of Business. He is the co-author with C.K. Prahalad of The New Age Of Innovation (McGraw-Hill, 2008). He blogs about transforming business models on the New Age Of Innovation blog.

2008-12-31T12:17:00.001-08:00

Deccan Herald » DH Avenues » Detailed Story
Indian outsourcing industry punctured
By Jermy Kahn New York Times
Bangalore, India after years of being blamed for job losses in America
and elsewhere, Indias high-tech companies and outsourcing firms are
going through a downturn of their own. The global slowdown is forcing
them to reduce hiring, freeze salaries, postpone new investments and
lay off thousands of software programmers and call center operators.

While some industry insiders insist the global crisis will actually
benefit companies here, as western businesses seek to cut costs by
moving jobs overseas, right now the sector is gripped by an unfamiliar
sense of uncertainty.
"It's certainly not irrational exuberance," said Nandan Nilekani,
co-chairman of Infosys, one of India's best-known technology
outsourcing firms. "There is a lot of introspection about what does
this mean and when does it end."
The downturn is exposing a deeper concern: India has become the
world's front office, handling customer service calls, and its back
office, helping to process payments and run accounting and other
computer systems. But it has not yet become the head office -- making
major new products, pioneering marketing techniques or helping to
shape corporate strategy.

Rather than drowning the American technology firms or work forces with
a vast supply of cheap engineering talent, as some had feared, India –
and Bangalore, its Silicon Valley – have continued to largely serve as
the information economy's version of manual labor.

"Historically, when it comes to innovation, Indian companies are
relatively weak compared to the IBMs and Accentures of the world,"
said Partha Iyengar, the head of research in India for the Gartner
Group, which analyses trends in the technology sector. "It has been
their chronic Achilles' heel."

The recent coordinated terrorist attacks brought Mumbai, India's
commercial capital, to a virtual halt. But long before that brutal
shock, the country had been suffering the effects of the global slump,
losing capital as Western investors fled to the security of American
Treasuries, undermining Indian banks and company balance sheets.
Infosys recently scaled back its earnings projections for the year,
telling investors that it now expects revenue to expand 13 to 15 per
cent, instead of the 19 to 21 percent it had forecast and far below
the 30 per cent annual expansion the company had been used to.

Like many of India's outsourcing companies, Infosys is heavily
dependent on the financial sector, deriving a third of its revenue
from banks like Citigroup and Bank of America and other financial
clients. Its fate is also closely tied to the American economy:
Two-thirds of its business comes from the US. Neither factor bodes
well for the company's prospects.

Technology Partners International, a consulting firm that publishes a
widely watched index of global outsourcing deals, says its index is at
a 10-year low. "People think that outsourcing is a recession-proof
industry. It is not," said Siddharth Pai, a partner at the firm.

That realisation has changed the atmosphere of this city. Young
workers still flock to a rooftop terrace on Residency Road every
Wednesday night to grind to house and hip-hop music. But lately, the
crowds at NYKS, an upscale nightclub, are a little thinner. They drink
a little bit less. They talk a little less loudly. "Now they are
thinking twice before spending money," said Supreeth Chandrasekhar, a
25-year-old disc jockey at NYKS.
Mr Chandrasekhar also said that he used to perform at numerous
corporate events but that this business had largely disappeared.

In a country where most marriages are arranged by parents, the
downturn has even taken a toll on the matrimonial prospects of those
in technology outsourcing. "Because there is no job guarantees for IT
people, for the last six months brides' families have not been
accepting grooms from this background," said Jagadeesh Angadi, a
matchmaker in Bangalore.

The Indian National Association of Software and Service Companies
estimates that the country's technology sector will have created
50,000 fewer jobs in 2008 than last year, although it predicts the
sector will still have added 200,000 workers by year's end. India's
technology outsourcing companies have laid off about 10,000 employees
since September, according to the Union for Information Technology
Enabled Services, a labor group that represents technology workers.
Among the major players that have announced significant cutbacks in
hiring is Satyam Computer Services, which slashed its recruitment
plans to fewer than 10,000 from 15,000. Infosys, by contrast, has
almost $2 billion in cash on its balance sheet, a significant amount
that can help it weather the downturn. It said it intended to follow
through on plans to hire 25,000 workers this year.
"We made offers to people, and we need to stand by them," Mr Nilekani said.

But some companies that have hired recruits are postponing their start
dates. The deferrals allow companies, which once hired in anticipation
of future business, to better manage overhead by adding staff only
when they have confirmed projects.

A few so-called captive outsourcing operations – those that serve only
their parent company in Europe or the US – have also cut back.
American Express laid off some 200 of its 6,000 workers in India, and
Goldman Sachs announced last month that it would dismiss a similar
number, or about 10 per cent of its Indian work force.
For the moment, the industry has escaped large-scale job losses.
Indian labor laws make it difficult for companies to drop workers, and
mass firings can draw a political outcry. Yet outsourcing companies
have begun pruning workers, citing poor job performance, a way to
quietly reduce labor costs without attracting much public scrutiny.
The large outsourcing company Wipro dismissed 2.5 per cent of its work
force in the second quarter. Outsourcing companies are also shelving
expansion plans. Wipro, for instance, announced it was postponing the
opening of a major new software development center in Atlanta.

But India's business leaders see opportunity in the downturn. "Once
things settle down, people will start looking at their business
operations and how to make them more efficient, and that is where we
play," Mr Nilekani said.
Even consolidation on Wall Street, which may eliminate some Indian
companies' clients, could help Indian workers, outsourcing executives
say. Mergers require technical skills to integrate disparate systems,
and there is a potential for profitable outsourcing work in areas like
regulatory compliance. Banks are likely to be under stricter
government scrutiny given the sense that lax oversight contributed to
the financial crisis.
Quatrro BPO Solutions Chairman Raman Roy, says he has 300 employees
reviewing legal documents as part of bank mergers.

Copal Partners, a company that uses employees in India to help
investment banks do the sort of deal-based research normally performed
by the bank's junior analysts, has continued to expand even during the
downturn.
Critics say that will not change the local industry's basic
competitive disadvantage: a creativity gap with western competitors.

Indian technology companies are too focused on increasing the
efficiency of their internal systems, not improving their clients' own
industry-specific processes, according to Navi Radjou, an analyst with
Forrester Research. "They are having trouble tailoring a technical
application to a particular business need," he said.
But India's biggest tech outsourcing companies want to do as much as
their European and American rivals, including expanding in Europe and
the US. And the downturn may allow them to acquire talent – and even
whole businesses – on the cheap.

In August, for example, Infosys acquired the British consulting firm
Axon for $753 million. Wipro is said to be shopping for a similar
acquisition.

The changes may come too late for workers like Vikram Hathwar.
In July, Hathwar, a 22-year-old engineer, graduated from a technical
college with a job offer from a software developer.

But instead of starting his job -- paying nearly $6,000 a year, a good
starting salary in this country -- he has been waiting in vain for a
letter from the company telling him when to report for work.

"I called them and they said they would be calling two or three months
later, but still they have not informed me anything about when I
should start," Mr Hathwar said.

In the meantime, he has begun looking for a temporary job. But he said
most tech businesses were no longer hiring recent graduates. The few
that are have begun asking applicants to intern for several months
without pay and with no guarantee of a permanent position. "The
recession has made for all these pressures on us," Mr Hathwar said.
"It is very confusing to know what to do."
comment on this article
Copyright: 2007 The Printers (Mysore) Private Ltd., 75, M.G. Road,
Post Box No 5331, Bangalore - 560001

2008-12-29T15:37:00.001-08:00

Legal outsourcing set to boom
OUTLOOK 2009
Priyanka Joshi / Mumbai December 28, 2008, 0:19 IST

An Indian legal professional who takes home Rs 25,000 a month earns a
tiny fraction of the Rs 10,000 an hour that his counterpart in the US
earns.

But with Indian legal process outsourcing (LPO) industry poised to
increase it's hiring, amidst a whirlpool of cost cutting measures
being embraced aggressively by the US and the European firms, things
could change. Mathematically, this translates into 20 per cent rise in
salary packages of LPO employees and bonuses of up to 25 per cent to
experienced lawyers employed by various outsourcing outfits.

Bhaskar Bagchi, country head, CPA, leading provider of outsourced
legal support services and intellectual property management
specialist, claims that CPA would double its headcount from the
existing 500 employees, in the next 6 months. "We are targeting a
headcount of 2,000 employees by 2010," he said. Industry sources
assert that the average salary benchmark would follow the increase in
outsourced legal project revenues, which is rising at an average 30-45
per cent.

Numerous foreclosure-related assignments from US banks and law firms
have been keeping Indian LPOs occupied, besides the usual assignments
like indexing and coding to database maintenance, patent support,
contract review and management, litigation support and legal
compliance.

Most LPOs employ an eclectic mix of lawyers, paralegal professionals
and engineers for various outsourced functions.

Soumitro Chatterjee, CEO of Legal Circle, a recent startup and
subsidiary of the leading law firm Fox Mandal Little feels that salary
packages of experienced lawyers would get better by up to 30 per cent
in 2009. According to him, "As complexity and volumes of outsourced
legal work increases, lawyers from LPO firms would be the most prized
professionals leading to a compensation scramble among the growing
Indian LPOs."

Legal Circle is looking to hire 15 lawyers in legal and compliance
verticals, and expects the headcount to cross 100-mark by 2009 end.

Attrition rates are on an upward curve for Indian LPOs and most
players agree that employee benefits like bonuses and increments would
be the key retention tools in 2009. Average attrition rates in the
industry vary between 25-35 per cent. Bagchi says, "At CPA, we handed
out bonuses and increments, starting at 15 per cent and upwards. For
2009, we have a healthy orderbook and the benefits will only get
better for employees."

2008-12-29T15:34:00.001-08:00

Printed from

Global meltdown catches IT firms off-guard
28 Dec 2008, 1226 hrs IST, IANS

BANGALORE: After nearly a decade of uninterrupted boom, the Indian information technology industry finds the road ahead bumpy as 2008 draws to a

close, with the global meltdown and financial turmoil in the US and other rich countries catching the otherwise resilient sector off-guard.

With no signs of early revival, even the top firms - TCS, Infosys and Wipro - are bracing for hard times in the year ahead.

A reality check of the industry by leading IT industry-specific publication Dataquest of Cyber Media shows that the Indian software services sector is set for a lower growth this fiscal due to declining IT spends by enterprises worldwide and a volatile currency market.

"The global economic slowdown is impacting the Indian software services sector as never before. With the US, Europe and Japan slipping into recession, demand for outsourcing and offshoring IT services will slacken over the next three-four quarters," Dataquest warned.

Though the software industry body Nasscom projected 21-24 percent revenue growth rate for this fiscal as against 28 percent in 2007-08, analysts fear the annual growth could decline to 15 percent by the end of the fiscal - the lowest in a decade.

Nasscom president Som Mittal said the growth rate target would now be reviewed in January, as the member-companies were in the process of furnishing fresh data to the representative body.

"We wanted to review the forecast in mid-December but could not do so as export and domestic firms are still assessing the situation. We will re-visit the numbers and give a revised forecast next month," Mittal told IANS.

A performance review of the top 20 Indian IT firms shows the projected growth rate of 28 percent may not be met.

"The slowdown is likely to last 12-15 months. New application development is expected to be affected the most. Smaller companies looking for funding are equally affected by the tight credit market, while the large outsourcing firms/IT bellwethers are sitting pretty on cash on their balance sheets," Dataquest said.

According to global technology and market research firm Forrester, slowdown in the technology sector will continue till the third quarter of 2009, while outsourcing growth will remain moderate till 2010.

"Slowdown will force companies to turn to vendors to help cut costs. Growth in IT outsourcing revenues will remain moderate due to the use of lower-cost offshore resources and smaller-scale outsourcing deals," Forrester said in its report "Outlook for the global IT industry".

"Unlike in the first two quarters (April-September), clients have put discretionary projects on hold in the third quarter. Decisions on new projects have been postponed to next year, as clients are busy grappling with the ongoing crisis," the report said.

Bearish sentiment in the US and British markets, which account for about 80 percent of the Indian IT export revenues, are compelling vendors to tap emerging markets.

According to Dataquest, the meltdown also impacted projects in the banking, financial services and insurance sectors, which contribute about 40 percent of software sector revenues.

"Coupled with recession, the prevailing negative sentiment is also affecting new projects in manufacturing and retail verticals, which account for 15 percent and eight percent of the total revenues," it added.

To sustain the growth momentum, albeit more slowly, Indian IT vendors are shifting to fixed price model from time-and-material billing model. Infosys, Wipro and HCL are moving away from billing customers by the hour to entire projects or in parts to maintain their profitability, as fixed price contracts give flexibility to drive productivity and protect margins.

In the second quarter (July-September), fixed price contracts accounted for 34 percent of the combined business of Infosys, Wipro and HCL, as against 29 percent in the same quarter the previous fiscal. TCS has been sustaining on fixed price contracts, which accounted for 44 percent in the last quarter.

The currency volatility has also compounded the woes of the Indian IT sector.

If a rising rupee in the last fiscal had dented export earnings, the steady rise of the US dollar against the rupee, British pound and Euro during the second quarter (July-September), impacted revenue realisation in dollar terms since 30 percent of the billing is done in these currencies.

"The sharp and sudden appreciation of the US dollar against the rupee by 5.5 percent, euro (13 percent) and pound (13.8 percent) in the second quarter had adversely impacted the revenue of Indian IT firms in dollar terms," Dataquest noted.

As a result of over-hedging in forward contracts, benefits of a weak rupee were limited. For instance, Infosys posted a market-to-market loss of $28 million (Rs.1.35 billion) on hedging $932 million for the entire fiscal.

Similarly, Wipro suffered a forex loss of Rs.280 mn in the second quarter on hedging $2.1 billion, while HCL took a hit of Rs.970 mn. On the other hand, multinational companies proved to be resilient.

"Having consolidated their presence in the hardware segment, thanks to a liberalised import regime and lowered tariffs, global brands such as Dell and Lenovo have outperformed their Indian counterparts even in these times of slowdown," the Dataquest report said.

Similarly, in the software segment, global majors like Microsoft and SAP registered revenue growth of 29 percent and 104 percent respectively last fiscal, and continue to grow despite the slowdown.

Where do I sign up for my H-1B visa?

2008-12-19T17:00:00.001-08:00

Outsourcing firms warn of H-1B visa cutbacks

SEC filings show H-1B needs could be hurt by uncertain political climate
Patrick Thibodeau

December 17, 2008 (Computerworld) In filings with the U.S. Securities and Exchange Commission, companies that use H-1B and L-1 visas are alerting investors that it may become more difficult to obtain them in the future. Some firms are also noting that they don't know whether President-elect Barack Obama and the new Congress will help them get adequate numbers of visas.

Bangalore, India-based Wipro Ltd., one of the largest users of H-1B visas, warned in an SEC filing shortly after the November presidential election that the "increasing political and media attention" directed at outsourcing may lead to legislation that restricts visa use or "imposes disincentives" to expanding offshore programs.

During the presidential campaign, Obama repeatedly promised to "stop giving tax breaks to companies that ship jobs overseas" and to provide incentives that help companies keep jobs in the U.S. Since his election, Obama has not unveiled a detailed plan for H-1B visas.

But Obama has nominated supporters of increasing H-1B visa caps, such as Arizona Gov. Janet Napolitano, to cabinet posts. In addition, members of his transition team, such as Google Inc. CEO Eric Schmidt, have long been vocal about the need to boost H-1B limits. In fact, India's major high-tech trade group, the National Association of Software and Services Companies (NASSCOM), issued a statement the day after the election noting its support for many of Obama's policies, including expanding the H-1B program.

For some companies, visa numbers are substantial. For example, in its SEC filing, Infosys Technologies Ltd., also based in Bangalore, said that almost 7,000 of its employees held H-1B visas at the end of September. In addition, Infosys said that 1,500 of its workers held L-1 visas, which are used by multinational firms to transfer employees. A year earlier, 7,700 Infosys workers had either an L-1 or H-1B visa, the company said. Infosys also repeated warnings made in earlier filings that its "reliance on work visas for a significant number of technology professionals makes us particularly vulnerable" to changes in visa laws. Infosys is one of very few outsourcing companies that included specific H-1B numbers in SEC documents.

Smaller firms also said that legislation aimed at changing visa laws could hurt them. Pittsburgh-based IT services provider Mastech Holdings Inc., which has operations in India, said in in an October SEC filing that unless Congress "substantially increases the annual H-1B quota," its pool of workers could be reduced. About 40% of its U.S. workforce have H-1B visas, Mastech said, adding that it employed 619 consultants at the end of June.

Robert Meltzer, the CEO of VisaNow.com Inc., an immigration services provider in Chicago, said that many of the companies may be most concerned with potential legislation aimed at the L-1 visa, which has no cap. The H-1B cap is currently set at at 85,000, including 20,000 set aside for advance degree holders.

The L-1 visa gives companies a lot more flexibility than H-1B visas, Meltzer said. The companies may be concerned about potential rules aimed at limiting use of the L-1 visa, and imposing H-1B-like prevailing-wage requirements. "That could have a big impact on their business," he added.

At the same time, Infosy CEO S. Gopalakrishnan earlier this month told reporters in India this month that the company plans to scale back hiring because of the economic turmoil. The firm still expects to hire 25,000 people in the fiscal year ending next March, but it is apparently not setting targets for fiscal 2010. Infosys officials didn't respond to request for comment on these reports or on whether the hiring plan would affect its need for H-1B visas.

What is occurring in the outsourcing market during the downturn is, in some ways, paradoxical. The Indian firms say they see a softening IT services market, but surveys and anecdotal reports are showing that the need to cut costs may be spurring demand for outsourcing.

John Delaney, an attorney and co-chair of the technology transactions group at Morrison & Foerster LLP in New York, said that his firm is seeing increasing demand for outsourcing services even during the economic downturn. He cites an observation by a colleague that the "firm's sourcing group is as busy as our firm's bankruptcy group these days."

Delaney noted that interest in outsourcing is particularly strong in the media and retail industries, which had been slow to look to offshore services providers.

"The focus of today's outsourcing deal is almost entirely on saving money," said Delaney. Clients also wants deals completed quickly and are showing more interest in China, which promises greater cost savings over India, he said. The Indian firms may be feeling a pinched on the H-1B cap because of the trend to put more of their workers in the U.S., in order to strengthen relationships with client and project governance, he said.

Meanwhile, U.S. IT services providers are also shifting work overseas without the reliance on H-1B visas that Indian-based firms have. For instance, Dallas-based Affiliated Computer Services Inc., which only needed three H-1B visas in 2007, announced last month that it plans to move "more complex, higher-paying" jobs to other countries.

2008-12-19T16:30:00.001-08:00

If this page does not print out automatically, select Print from the File menu.

Palestine promoted as outsourcing destination

Offshoring could help to stabilise Middle East region

Rosalie Marshall, vnunet.com 18 Dec 2008

UK trade body Intellect held an event on Tuesday at Yahoo's London offices to discuss how companies can be encouraged to offshore their services to Palestine.

The event took place in the midst of a two-day Palestine Trade and Investment Forum (PDF) intended to promote Palestinian economic development by giving UK companies an overview of investment opportunities in sectors including construction, tourism and ICT.

Speaking at the forum, business secretary Peter Mandelson urged businesses to consider Palestine as a trade and investment partner.

"The UK's commitment to peace in the Middle East must not be weakened by economic difficulties," he said. "Growth of the Palestinian economy is crucial for driving forward change for the better."

Tom Wills-Sanford, Intellect deputy director, echoed the government's remarks to vnunet.com following the Palestinian ICT day which attracted 12 Palestinian business attendees.

"The general objective is to initiate a platform that will create outsourcing opportunities between the UK and Palestine and create a thread of the peace process," he said.

"In Palestine there is a young energetic industry that is able to make a contribution to outsourcing."

Wills-Sanford acknowledged that the lack of "mega outsourcing players" created "certain issues", but stressed that the region had the potential to develop.

He added that the main obstacle to overcome before businesses think seriously about investment in Palestine is the "perception problem".

"We are talking about business in the West Bank not the Gaza Strip," he said.

Wills-Sanford mentioned the names of companies that already provide services from the West Bank city of Ramallah, including BCI, Exalt, ASAL and Hulul.

Permalink: http://www.vnunet.com/2232889

www.vnunet.com/2232889

This article was printed from the vnunet.com web site
© Incisive Media Ltd. 2008
Incisive Media Limited, Haymarket House, 28-29 Haymarket, London SW1Y 4RX, is a company registered in the United Kingdom with company registration number 04038503

Close this window to return to the website

2008-12-19T16:24:00.001-08:00

Offshoring & Outsourcing in 2009: What Does the Future Hold?

By Stephanie Overby , CIO , 12/18/2008

Harris assists State with outsourcing services

12/18/08 -- 11:52 AM
By David Hubler

Sponsored By

Harris Corp. will provide outsourcing services to the State Department under a three-year task order that has a potential value of $8 million.

The award calls for Harris to provide desktop support, help desk support, knowledge management, training and asset management services for up to 37,000 desktops at 28 offices of State's Bureau of Information Resources Management.

The contractor provides similar IT support services to several State Department bureaus.

Harris is a member of Pragmatics Inc.'s team, which was selected by the department to execute the Vanguard 1.0 program. The program launches the IT consolidation initiative within State's Information Resources Management bureaus, said Wayne Lucernoni, vice president of civil federal operations at Harris IT Services.

Pragmatics, of McLean, Va., awarded the task order to Harris under its $99 million Hybrid IT Services for State contract that was announced in September. It is expected to be the first in a series of IT consolidation initiatives planned at State, Harris officials said.

Harris, of Melbourne, Fla., ranks No. 13 on Washington Technology's 2008 Top 100 list of the largest federal government prime contractors.

2008-12-19T15:43:00.001-08:00

How People in India Really Live

Examining Literacy Using India's Census

India's Population: Reconciling Change and Tradition

Is Delhi India's Largest City?

Sex Ratio at Birth Begins to Improve in India

by O.P. Sharma and Carl Haub

(December 2008) Media reports on the "exploding" middle class in India would lead any reader to believe that Indian society is undergoing a top-to-bottom transformation into a society of Western-style consumers. A recent Business Week article quoted a McKinsey Global Institute study that claimed that India, in one generation, would become a nation of upwardly mobile middle-class households, consuming goods ranging from high-end cars to designer clothing. In two decades, India would pass Germany as the world's fifth-largest consumer market, the article went on. That, in fact, may not be much of an achievement given that India has 1.2 billion people and Germany 82 million! While it is certainly true that even small percentages give rather large numbers in India, a more realistic assessment of the true situation is needed.

Is India's middle class surging? We first need to consider the term "middle class," which can convey a variety of images. Those in the West undoubtedly have a fairly clear idea of what they mean by it. In this article, we will not try to define the concept for India but we will take a look at how the average Indian household actually lives. Readers can draw their own conclusions.

Visitors to India who may have spent all of their time in New Delhi might well return home believing India had "arrived," and that the middle class was thriving. While poverty is always visible in the city, the number of new cars and SUVs, shopping malls, and tony restaurants would leave a lasting impression. Even so, just 7 percent of households in Delhi owned private cars according to the 2001 Census. And this affluent city contains just over 1 percent of the country's households. Most of India's population lives in smaller cities or rural areas in extremely simple housing and with few modern amenities.

Household Expenses and Living Conditions

There are two principal official sources for information on such topics as household amenities and consumer expenditures, the decennial census and the National Sample Surveys (NSS) taken by India's National Sample Survey Organization. The NSS measures monthly per capita expenditure (MPCE) for households each year. MPCE consists of both cash household expenditures for different classes of goods and services and cash equivalents since barter is quite common in the rural areas.¹ Actual money income is not asked in the census or in the NSS.

In 2006-2007, the average MPCE in the rural areas, where most Indians live, was 695 rupees or about US$14. In urban areas, it was 1,312 rupees, or about US$27. About 52 percent of MPCE was spent on food in rural areas, while the same figure was 39 percent in urban areas. Housing costs for owner-occupied dwellings are excluded because so many people have constructed their own homes and, in a sense, live rent-free. These estimates do not take into account different price levels in urban and rural areas, but they do provide a rough idea of the level of living.

Large Households

The 2001 Census provides a detailed look housing conditions and living standards. In 2001, there were 138 million rural households and nearly 54 million urban households. It is worthwhile to remember that, although India is often referred to as a billion-strong market, many purchases, such as refrigerators, are peculiar to households. India's households include more people than they do in the United States and other Western countries, so a billion people does not translate into as large a market for household goods as it would in Western countries. In 2001, the average Indian household consisted of 5.4 people in rural areas and 5.2 people in urban areas. The average was just 2.6 people per household in the United States in 2001.² Thus, although India's population is about four times the size of the U.S. population, it has less than twice as many households. India had 192 million households in 2001, compared with 108 million in the United States.

Mud Floors and Walls Common

In 2001, nearly 110 million of India's households lived in dwellings with a mud floor, 72 percent of rural households and 18 percent of urban households (see Table 1). This represented an improvement over the 1991 Census in which 79 percent of rural households and 27 percent of urban households lived with mud floors. Urban houses are, as one might expect, more solidly constructed and more permanent.

The census also lists 50 percent of houses as being in "good" condition, 44 percent as "livable," and 6 percent as "dilapidated." The figures are somewhat better in urban than in rural areas. The overall picture these data show is certainly at odds with a Western view of the middle class. And, the census data do not capture the small size of most houses or their vulnerability to the elements.

Table 1
Percent of Households in India Living in Houses With Given Construction Materials, 2001

Construction materials	Millions	Percent	Millions	Percent
Construction materials	Rural households		Urban households
All households	138.3	100	53.7	100
Walls
Grass, thatch, bamboo, wood, etc.	17.5	13	2.1	4
Mud, unburnt brick	54.9	40	6.9	13
Brick (burnt)	47.3	34	36.5	68
Stone	14.5	11	3.6	7
Other material	40.9	3	4.6	9
Roof
Grass, thatch, bamboo, wood, etc.	38.3	28	3.7	7
Tiles	51.9	38	10.6	20
Metal, asbestos sheets	13.6	10	8.7	16
Concrete	15.2	11	22.8	42
Stone	8.6	6	3.9	7
Other material	10.5	8	4.1	8
Floor
Mud	100.0	72	9.7	18
Cement	25.0	18	2.6	48
Stone	6.2	5	4.9	9
Mosaic, floor tiles	3.0	2	11.0	21
Other material	4.2	3	2.2	4

Source: 2001 Census of India.

Few Household Amenities

Seventy-eight percent of rural households lack a latrine within the house, while less than half of urban households have a flush toilet, or water closet. Only 24 million out of 192 million households have a proper sewage connection (see Table 2). A majority of households use firewood for cooking although LPG (liquid petroleum gas) is widely used in urban areas. The NSS indicates that the proportion using firewood for cooking did not change from 1999-2000 to 2006-2007, although there was an increase in LPG use in both rural and urban areas. Although it is often commented that television ownership is commonplace even in high poverty countries, nearly 63 percent of Indian households did not have one. In villages, however, many televisions are shared by multiple households so that viewership is larger than census data would suggest. Among the most popular programs are cricket matches, religious programs, and game/talent shows.

Table 2
Percent of Households in India With Certain Necessities or Amenities, 2001

	Millions	Percent	Millions	Percent
	Rural households		Urban households
All households	138.3	100	53.7	100
Toilet within house	30.3	22	39.6	74
With water closet	9.8	7	24.8	46
With pit latrine	14.2	10	7.8	15
Other latrine/toilet	6.2	5	7.0	13
No toilet within house	108.0	78	14.1	26
Type of drainage (sewage)
Open drainage	41.9	30	23.3	43
Closed drainage	5.4	4	18.5	35
No drainage	91.0	66	11.9	22
Availability of kitchen within house
Available	82.2	59	40.8	76
Not available	36.1	26	9.7	18
Cook in open	19.7	14	2.9	6
Fuel used for cooking
Firewood	88.6	64	12.2	23
Crop residue	18.1	13	1.1	2
Cowdung cake	17.7	13	1.1	2
Kerosene	2.2	2	10.3	19
Liquified petroleum gas (LPG)	7.8	6	25.8	48
Other	3.7	3	3.2	6
Amenities owned
Television	26.1	19	34.5	64
Bicycle	59.2	43	24.7	46
Transistor radio	43.5	32	23.9	45
Scooter, motorbike	9.2	7	13.3	25
Telephone (fixed)	5.2	4	12.3	23
Car, jeep, or van	1.8	1	3.0	6
None of the above	56.0	41	10.2	19

Source: 2001 Census of India.

Car, Computer Ownership Rare

That ultimate Western measure of middle class status, the automobile, is a relative rarity in India. Less than 5 percent of households had some type of vehicle. In the rural areas, vehicles tend to be rather old and in disrepair. In Delhi, vehicles more than 15 years old are not allowed, but these vehicles often begin a second life in rural households outside the city. The much-anticipated introduction of the US$2,000 Nano by Tata Motors will undoubtedly boost the number of cars on the road, primarily in larger cities. The Nano is quite small. with a motorcycle-type engine, and the first model will not be air-conditioned. Its price, however, is only a little more than the most expensive motorbikes and it does get one out of the rain. It can be anticipated that some will be purchased by nonresident Indians (NRIs) working in Western countries as wedding and family gifts. Still, the sight of a family of four aboard a scooter or motorbike is likely to remain more common than a family riding in a private car for a very long time to come. The number of two-wheel vehicles increased by 52 percent between 2000 and 2004, from 34 million to 52 million while, over the same period, the number of cars, jeeps, and taxis rose 54 percent, from 6.1 million to 9.5 million.

NSS data for 2002 show that 1.5 percent of urban households in nonslum areas had a personal computer with an Internet hookup and an additional 1.9 percent had a computer with no Internet (see Table 3).

Table 3
Percent of Households in India With Certain Amenities, 2002

Amenity/consumer item	Rural	Urban nonslum
Electric fan	35.3	82.3
Refrigerator	3.8	30.0
Sewing machine	10.0	26.6
Telephone (fixed)	5.3	26.4
Air cooler	25.5	16.6
Washing machine	0.6	11.8
Water heater	0.7	8.0
Room heater	2.7	4.8
Cellphone	0.9	3.9
Air conditioner	0.1	2.1
Computer, no Internet	0.6	1.9
Computer, with Internet	0.0	1.5

Source: India, National Sample Surveys, 2002.

These figures are probably at odds with the image of urban Indians one often gets from the Western media. Computer ownership was virtually nil in rural areas. Ownership of a telephone in urban nonslum areas was 26.4 percent for fixed phones and 3.6 percent for cell phones.

Electricity Not Always Reliable

The NSS also provides times series data on the source of household energy and lighting. By 2001-2002, the use of electricity surpassed that of kerosene in rural households and stood at 56 percent electricity, 42 percent kerosene in 2006-2007. In urban areas, the availability of electricity rose to 93 percent in 2006-2007. These survey statistics, however, conceal the fact that power cuts are a frequent fact of life in India so that many households are without power for many hours of the day.

Even a cursory examination of the types of data cited in this article shows that many stories written about the contemporary lifestyles of Indians are fraught with exaggeration. There is, without question, a middle class that has been growing slowly over the past few decades. Yet even that group has but a passing similarity to the concept of the middle class in the West.

O.P. Sharma is a PRB consultant in India. Carl Haub is senior demographer at PRB.

References

As in many countries, the official definition of urban areas includes relatively small localities. In India, a village or town with 5,000 or more population and with 75 percent or more of the male labor force not directly engaged in agriculture is considered urban. In India, 28 percent of the population is considered urban and 72 percent rural.
U.S. Census Bureau, "Average Number of People per Household, by Race and Hispanic Origin, Marital Status, Age, and Education of Householder: March 2001," accessed online at www.census.gov/population/socdemo/hh-fam/cps2001/tabavg1.xls, on Dec. 13, 2008.

2008-12-16T18:00:00.001-08:00

Microsoft to empower 50,000 Nigerians with IT, outsourcing skills

Monday, 15 December 2008 00:21 EMEKA EZEKIEL

Global information and communication giant, Microsoft, has set an
ambitious target of training 50,000 Nigerian youths on IT and
outsourcing skills. Ken Spann, Developer Platform Evangelist Lead for
Microsoft Anglophone West Africa, told Business Day in an interview in
Lagos that the initiative is aimed at facilitating the development of
a vibrant outsourcing sector that would ultimately make Nigeria the IT
Enabled Outsourcing hub in West Africa .
Spann explained that Microsoft would partner with the government,
individual and corporate organisations in order to develop the
country's potentials in outsourcing business.
Said he "Our objective within the next five years is to train 50,000
Nigerian youths, especially students, in various areas of information
and communication technology using Microsoft curriculum. We want to
train developers and people that know how to establish communication
solutions based on Microsoft applications. We are ready to provide the
help, training and other resources that are required towards
empowering Nigerian youths with the necessary information and
communications technology skills.
" Nigeria has the potentials to become the premier outsourcing country
in the world. The World Bank has just commissioned a study that says
Nigeria can be the premier outsourcing country in the world. Microsoft
will be exploring and looking at this opportunity. We shall be
partnering with individuals and corporate organisations towards
exploring this opportunity .We have plans to raise the intellectual
capital and capacity of Nigerians because the future is very bright
for the Nigerian economy."
According to Spann, "If you look at Indian, for instance, everybody
there is talking about outsourcing. In India , English is not their
language yet they learn English on top of everything else. On the
other hand, English is the official language in Nigeria . Therefore,
that impediment is already out of the way which makes Nigeria a more
favourable outsourcing destination because English is the language for
business in the world. With this, it is easy for Microsoft to build IT
capacity in Nigeria . The reality is that outsourcing training is part
of the Microsoft curriculum which is coming up in the future. We
intend to work with the government, corporate organisation
universities in strengthening outsourcing initiatives in Nigeria .
Globally, Small and Medium Scale Enterprises (SMEs) and Large Scale
Enterprises (LSEs) are constantly searching for economies where cheap
and readily available outsourcing skills could be deployed to improve
their overall profitability.
Outsourcing of non-core operations or jobs from internal production to
an external entity, such as a sub-contractor, is gradually changing
the landscape of businesses globally. Even in developed economies,
companies are taking advantage of cheap and readily available
outsourcing expertise in other markets to strengthen their competitive
advantage. India and China are among the emerging economies that have
made outsourcing a key driver of economic growth and development.
According to the National Outsourcing Policy and Institutional
Framework, Nigeria's outsourcing sector is estimated to provide 10,000
jobs in both Information Technology(IT) and non-IT related fields in
the first three years of implementation and over 45,000 new jobs in
the next four years.
The policy was formulated in January, 2007. In addition, the federal
government's revenue from licensing and taxation of profits from
outsourcing companies is projected to grow from N55 million in the
fifth year to over N1.3 billion by the tenth year.

Author of this article: EMEKA EZEKIEL

Show Other Articles Of This Author

'Why graduate unemployment rate is high (09 December 2008)
Nextzon to float N2.4 billion fund for start-... (24 November 2008)
More British firms eye investments in Nigeria (19 November 2008)
NNPC, PTDF to train 2,500 local welders (14 November 2008)
BEEC graduates 5,000 management professionals (11 November 2008)

2008-12-16T16:12:00.001-08:00

BM signs outsourcing deal with Rajasthan's co-operative bank

BS Reporter / Mumbai December 15, 2008, 14:10 IST

IBM, the US based infomration technology (IT) company, on Monday said that it had signed a five year outsourcing agreement for managing the IT infrastructure of Rajasthan based Madhav Nagrik Shakari Bank, for an undisclosed amount.

Madhav Nagrik Sahakari Bank has plans to expand from existing network of 25 branches in Rajasthan. It also plans to offer services such as internet banking, mobile banking and ATM facilities to its semi-urban and rural area customers.

"In this age of technology-driven banking, even co-operative bank like ours are taking a leap in providing the best of banking experience to our customers," said Mukesh Modi, managing director, Madhav Nagrik Sahakari Bank.

With IBM hosting the bank's entire IT infrastructure from its own data centers, the bank will be able to leverage the same world-class expertise that serves many of its larger enterprise as well as global clients.

Nipun Mehrotra, vice president and general manager, Global Technology Services, IBM India/South Asia said, "We will continue to expand our geographical reach and work with more clients like Madhav Bank."

The bank has completed 35 years of operation and has over 172,000 customers.

2008-12-05T21:09:00.001-08:00

Indian software giants eye Chinese market

By Yu Hongyan (chinadaily.com.cn)
Updated: 2008-12-05 16:24

Comments(0) PrintMail

Indian software outsourcing companies are going on an acquisition spree in China, taking advantage of the country's huge domestic market and the thriving software industry to beef up its presence.

Indian software outsourcing firms have recently acquired "a considerable number" of small and medium-sized Chinese counterparts, swallowing up more than 40 local firms in Shanghai alone, reported China Business News, citing an unidentified industry insider.

But the Shanghai-based newspaper did not provide the financial terms involved in the deals.

Tata Consultancy Services (TCS), India's largest IT and business process outsourcing provider, launched another global off-shoring center in North China's port city of Tianjin last month, its fourth such facility in China.

Emerging markets like China make up 20 percent of Tata's orders, while those from the US have fallen below 50 percent due to the financial crisis, Girija Pande, head of TCS Asia Pacific, told China Business News.

Pande predicts an annual growth of 45-50 percent in the Asia Pacific region.

Wipro, another major Indian outsourcing player, expects a 10 percent turnover from Asia Pacific, said Rajiv Shah, vice president of the company.

China's supportive policies on the outsourcing industry, its geographic advantage, talent pool and infrastructure appeal to Indian firms. And the financial crisis has also driven some Indian companies to emerging markets like China to spread risks, according to Pande.

2008-12-04T18:24:00.000-08:00

Go to Google News

Brazil's Vale to reduce nickel output in Canada

By ALAN CLENDENNING – 7 hours ago

SAO PAULO, Brazil (AP) — Citing falling nickel prices, Brazilian mining giant Vale said Thursday it will reduce production of the metal at its Canadian division and cut jobs in that unit through a voluntary retirement program.

Companhia Vale do Rio, the world's largest iron ore producer, plans to close indefinitely a mine in Canada's Ontario province, shut down operations for July in the province of Newfoundland and Labrador and delay for a year the sinking of a new shaft at the latter site.

Although there will be no layoffs associated with those actions, Vale's Canadian subsidiary, Vale Inco, launched a voluntary retirement program for staff employees who have at least 29 years of service.

There is no specific target number the company has set to achieve for voluntary retirees, Vale Inco spokesman Cory McPhee said.

The announcement comes on the heels of Companhia Vale do Rio's decision in October to implement similar production cutbacks at its Indonesian nickel operation and is the latest development among mining companies affected by the slowing global economy.

On Wednesday, Freeport-McMoRan Copper & Gold Inc. announced similar moves for its copper mines in Arizona and New Mexico. Since the first part of November, the Phoenix-based mining giant has issued layoff notices to about 1,400.

Metals such as copper and nickel are used in a variety of products so when the economy slows, demand and prices fall. Nickel most commonly is mixed with other metals to form an alloy such as stainless steel.

The global mining industry also has logged layoffs such as half the 80-member work force at the Kensington Mine near Juneau, Alaska, and 21 percent of the work force at Montana's Stillwater Mining Co., the only U.S. producer of palladium and platinum.

In a statement, Rio de Janeiro-based Vale said it will close indefinitely the Copper Cliff South Mine, one of six mines the company owns in Greater Sudbury, Ontario.

Vale Inco spokesman Cory McPhee said all of the 365 miners affected by the closure will be given other jobs within the company.

When the Vales Voisey's Bay operations close in July, Vale Inco will ask its 500 employees to schedule vacation during that month.

Workers assigned to the mine shaft development project will be reassigned, McPhee said. The company will review its contractors on an individual basis.

Vale also plans to pursue other initiatives to reduce costs on a global basis.

On Wednesday, Vale said it has cut 1,300 jobs from its work force of 62,000 since the global meltdown began. The cuts amounted to a 2.1 percent reduction at the world's largest iron ore producer.

The company said an additional 5,500 workers are being idled with pay to slow iron ore production, and 1,200 are being retrained for new assignments.

Vale Inco was created in 2006 after Vale bought Inco Ltd.

Vale's shares fell 25 cents, or 2.5 percent, to $9.89 in midday trading.

2008-12-04T18:22:00.000-08:00

GM Faces Sales Slump In Once Hot Brazil Due To Tight Credit

December 04, 2008: 01:59 PM EST

SAO PAULO -(Dow Jones)- General Motors Corp. (GM) can't seem to get a break as one of its most lucrative markets, Brazil, saw November sales decline to its lowest levels yet this year.

The Brazilian Motor Vehicles Manufacturers Association, Anfavea, said Thursday that GM and rivals Volkswagen AG (VLKAY) and Fiat SpA (FIAZY) all saw steep drops in car sales last month because of tight credit. GM sales declined 35.2% in Brazil in November.

At a time when GM could use some good news, General Motors do Brasil Ltda's lackluster sales for two consecutive months provide no relief to a company fighting for its future.

GM sold 23,460 cars and trucks in Brazil last month, far below its October sales and behind rivals Volkswagen and Fiat, with roughly 33,000 units each.

Brazil is GM's largest market outside the U.S., with record-breaking sales of 498,664 vehicles last year and 550,000 expected in 2008.

Brazil is GM's third largest market behind the U.S. and China for its Chevrolet brand, the only GM model sold in Brazil.

The local auto market started slowing in the second half of September, triggered by a restriction of credit that shows no signs of a rebound so far.

GM originally planned to sell 600,000 cars and trucks in Brazil and recently lowered its 2008 revenue forecast to BRL9.5 billion from BRL11 billion as a result.

Sales declines are due to tighter credit more so than a slowing economy.

Around a billion Brazilian reals, or $403 million, evaporated from the car loan market over the last two months, according to Anfavea President Jackson Schneider.

Car loans shrank to BRL136.6 billion from BRL137.6 billion as banks respond to the international credit crunch by being more cautious.

None of this bodes well for GM, which doesn't expect to break even in the U.S. until 2012.

Although GM in Brazil is not required to send large percentage of its profits to the U.S., that the subsidiary is profitable at all does help the parent company.

GM did not reveal what percentage of its profits or the amount it will send to the U.S. this year.

Speaking on behalf of the industry, Schneider said, "Besides credit problems for new and used cars, consumers are certainly being more cautious."

The industry laid off 480 full-time employees in November, most of them at truck assembly plants.

GM did not lay off any of its 23,974 employees. International auto makers like GM employed 131,237 workers nationwide as of November.

Auto makers in Brazil responded to two consecutive months of poor sales by putting the breaks on production. GM and its competitors made 34.4% fewer vehicles in November for a total of 194,879 vehicles.

For global auto makers, sales in Brazil have been one of the last safe havens in recent quarters amid shrinking demand on their home grounds and slowing growth in other emerging markets, mainly China and Russia, as the financial crisis spreads.

Auto sales growth in Brazil has been fostered in recent years by cheap credit for working class Brazilians, many of whom were able to afford a new car for the first time.

GM is the third largest auto maker in Brazil, trailing Volkswagen and Fiat. Ford Motor Co. (F) is the fourth largest.

-By Rogerio Jelmayer and Kenneth Rapoza, Dow Jones Newswires; 5511-2847-4541; kenneth.rapoza@dowjones.com (Christoph Rauwald contributed to this article.)

Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http:// www.djnewsplus.com/al?rnd=G8rN%2BJs%2FXaaSgxy4%2FPCYtg%3D%3D. You can use this link on the day this article is published and the following day.

2008-12-04T17:09:00.000-08:00

UPDATE 1-India's Infosys to freeze new hiring as growth slows

December 04, 2008

By Rajesh Kumar Singh

NEW DELHI, Dec 4 (Reuters) - Infosys Technologies Ltd (INFY.BO: Quote, Profile, Research, Stock Buzz) will freeze recruitment after meeting this fiscal year's target of hiring 25,000 staff, a telling sign the global downturn is hitting India's $52 billion outsourcing sector.

India's second largest software services firm however has no plans to cut jobs and is sticking with its third quarter outlook, CEO Kris Gopalakrishnan told reporters.

He said the outsourcing sector's growth rate would halve next year as some customers delay orders.

"Last year the IT industry grew more than 30 percent, this year it is looking at somewhere in the region of 15 percent," Gopalakrishnan said.

India's export-driven IT sector, used to a scorching pace of growth, has been hit by the financial crisis and recession in the United States, which contributes more than half their revenue.

In the last few years, the outsourcing industry has created tens of thousands of jobs, mainly attracting young workers, as global companies look to trim labour costs.

Infosys hired 16,000-17,000 employees in the first half of the fiscal year that began in April and would honour commitments to 6,000 under training, Gopalakrishnan said.

Infosys, which counts Goldman Sachs (GS.N: Quote, Profile, Research, Stock Buzz) and Philips Electronics (PHG.AS: Quote, Profile, Research, Stock Buzz) among its clients, cut its full-year dollar revenue outlook in October due to the worsening global downturn. [ID:nBOM352371]

Gopalakrishnan said on Thursday the company would freeze fresh recruitment, apart from meeting specific skill needs.

"We will have to look at controlling our cost, controlling our expenses making sure that we run an optimised business. We will have to look at what are things we need to do in order to prepare ourselves for the recovery." ( You could always outsource to China, or the Philippines).

"Growth is coming more and more from emerging markets so these are the things we need to prepare ourselves. We should not lose momentum in this slowdown," he said.

But Infosys still expects its strong client base and a weakening rupee to help it meet a forecast for December quarter earnings of $0.57 a share. The Indian rupee has fallen nearly six percent so far this quarter against the dollar.

"Infosys is seeing further degradation of the demand environment, with headwinds from leadership changes at customers, a shrinking large deal pipeline .... Pricing pressure has emerged," CLSA Asia-Pacific said in a report this week.

By 0845 GMT, Infosys shares were up 2 percent in a Mumbai market .BSESN, but outperforming a 4 percent gain in the broader Mumbai market .BSESN. Infosys shares have fallen 33 percent so far this year. (Writing by Narayanan Somasundaram; Editing by John Mair and Anshuman Daga)

2008-12-04T17:04:00.000-08:00

December 4, 2008

Recession Trickles to India

By JEREMY KAHN

BANGALORE, India — After years of being blamed for job losses in America and elsewhere, India's high-tech companies and outsourcing firms are going through a downturn of their own. The global slowdown is forcing them to reduce hiring, freeze salaries, postpone new investments and lay off thousands of software programmers and call center operators.

While some industry insiders insist the global crisis will actually benefit companies here, as Western businesses seek to cut costs by moving jobs overseas, right now the sector is suddenly gripped by an unfamiliar sense of uncertainty.

"It's certainly not irrational exuberance," said Nandan Nilekani, co-chairman of Infosys, one of India's best-known technology outsourcing firms. "There is a lot of introspection about what does this mean and when does it end."

The downturn is exposing a deeper concern: India has become the world's front office, handling customer service calls, and its back office, helping to process payments and run accounting and other computer systems. But it has not yet become the head office — making major new products, pioneering marketing techniques or helping to shape corporate strategy.

Rather than drowning American technology firms or work forces with a vast supply of cheap engineering talent, as some had feared, India — and Bangalore, its Silicon Valley — have continued to largely serve as the information economy's version of manual labor.

"Historically, when it comes to innovation, Indian companies are relatively weak compared to the I.B.M.'s and Accentures of the world," said Partha Iyengar, the head of research in India for the Gartner Group, which analyzes trends in the tech sector. "It has been their chronic Achilles' heel."

Last week's coordinated terrorist attacks killed nearly 200 people and temporarily brought Mumbai, India's commercial capital, to a halt. But long before that shock, the country had been suffering the effects of the global slump, losing capital as Western investors fled to the security of American Treasuries, undermining Indian banks and company balance sheets.

Infosys recently scaled back its projections for the year, telling investors that it now expects revenue to expand 13 to 15 percent, instead of the 19 to 21 percent it had forecast and far below the 30 percent annual expansion the company had been used to.

Like many of India's outsourcing companies, Infosys is heavily dependent on the financial sector, deriving a third of its revenue from banks like Citigroup and Bank of America and other financial clients. Its fate is also closely tied to the American economy: two-thirds of its business comes from the United States. Neither factor bodes well for the company's prospects.

Technology Partners International, a consulting firm that publishes an index of global outsourcing deals, says its index is at a 10-year low. "People think that outsourcing is a recession-proof industry. It is not," said Siddharth Pai, a partner at the firm.

That realization has changed the boomtown atmosphere of this city. Young workers still flock to a rooftop terrace on Residency Road every Wednesday night to grind to house and hip-hop music. But lately, the crowds at NYKS, an upscale nightclub, are a little thinner. They drink a little bit less. They talk a little less loudly. "Now they are thinking twice before spending money," said Supreeth Chandrasekhar, a 25-year-old disc jockey at NYKS.

Mr. Chandrasekhar also said that he used to perform at corporate events but that this business had largely disappeared.

In a country where most marriages are arranged by parents, the downturn has even taken a toll on the matrimonial prospects of those in technology outsourcing. "Because there is no job guarantees for I.T. people, for the last six months brides' families have not been accepting grooms from this background," said Jagadeesh Angadi, a matchmaker in Bangalore.

The Indian National Association of Software and Service Companies estimates that the country's technology sector will create 50,000 fewer jobs in 2008 than last year, although it predicts the sector will still have added 200,000 workers by year's end. India's technology outsourcing companies have laid off about 10,000 employees since September, according to the Union for Information Technology Enabled Services, a labor group that represents technology workers.

Among the major players that have announced cutbacks in hiring is Satyam Computer Services, which slashed its recruitment plans to fewer than 10,000 from 15,000. Infosys, by contrast, has almost $2 billion in cash on its balance sheet, a significant amount that can help it weather the downturn. It said it intended to follow through on plans to hire 25,000 workers this year.

"We made offers to people, and we need to stand by them," Mr. Nilekani of Infosys said.

But some companies that have hired recruits are postponing their start dates. The deferrals allow companies, which once hired in anticipation of future business, to better manage overhead by adding staff only when they have confirmed projects.

A few so-called captive outsourcing operations — those that serve only their parent company in Europe or the United States — have also cut back. American Express laid off some 200 of its 6,000 workers in India, and Goldman Sachs announced last month that it would dismiss about 10 percent of its Indian work force.

Still, for the moment, the industry has escaped large-scale job losses. Indian labor laws make it difficult for companies to drop workers, and mass firings can draw a political outcry. But outsourcing companies have begun pruning workers, citing poor job performance, a way to quietly reduce labor costs without attracting much public scrutiny.

The large outsourcing company Wipro dismissed 2.5 percent of its work force in the second quarter. Outsourcing companies are also shelving expansion plans. Wipro, for instance, announced it was postponing the opening of a major new software development center in Atlanta.

Even consolidation on Wall Street, which may eliminate some Indian companies' clients, could help Indian workers, outsourcing executives say. Mergers require technical skills to integrate disparate systems, and there is a potential for profitable outsourcing work in areas like regulatory compliance. Banks are likely to be under stricter government scrutiny given the sense that lax oversight contributed to the financial crisis.

Raman Roy, chairman of Quatrro BPO Solutions, an outsourcing firm based in New Delhi, says he has 300 employees reviewing legal documents as part of bank mergers. Copal Partners, a company that uses employees in India to help investment banks do the sort of deal-based research normally performed by the bank's junior analysts, has continued to expand even during the downturn.

Critics say that will not change the local industry's basic disadvantage: a creativity gap with Western competitors. Indian technology companies are too focused on increasing the efficiency of their systems, not improving their clients' own industry-specific processes, according to Navi Radjou, an analyst with Forrester Research. "They are having trouble tailoring a technical application to a particular business need," he said.

But India's biggest tech outsourcing companies want to do as much as their European and American rivals, including expanding in Europe and the United States. And the downturn may allow them to acquire talent — and even whole businesses — on the cheap.

The changes may come too late for workers like Vikram Hathwar.

In July, Mr. Hathwar, a 22-year-old engineer, graduated from a technical college with a job offer from a software developer. But instead of starting his job — paying nearly $6,000 a year, a good starting salary in this country — Mr. Hathwar has been waiting for a letter from the company telling him when to report for work.

"I called them and they said they would be calling two or three months later, but still they have not informed me anything about when I should start," Mr. Hathwar said.

In the meantime, he has begun looking for a temporary job. But he said most tech businesses are no longer hiring recent graduates. The few that are have begun asking applicants to intern for several months without pay and with no guarantee of a permanent position. "The recession has made for all these pressures on us," Mr. Hathwar said. "It is very confusing to know what to do."

2008-12-04T16:58:00.000-08:00

Back-office outsourcing growth area for delivery-services sector

Companies

Written by Miguel R. Camus

Friday, 05 December 2008 00:03

CALL centers may be at the forefront of the business process outsourcing (BPO) sector, but industry officials on Tuesday urged independent players to expand into back-office outsourcing, one of the fastest growing segments of this multibillion-dollar industry.

Back-office outsourcing is a type of service under the nonvoice BPO segment, which deals with noncore business processes like accounting, finance, logistics and human resources, to name a few.

Richard Eldridge, cofounder of Infinit-O, a multinational back-office and knowledge process outsourcing provider, said there is "a huge opportunity" for this kind of service around the world.

In a presentation, he provided industry statistics showing how contact centers far outpace back-office operations in the country, but such operations nearly matched the former in terms of average growth in the past three years.

"Cost is still the number one most important factor for companies [in terms of reasons they want to outsource]," he said during the 2008 BPO Summit Philippines.

The current crisis, he said, can be viewed as an opportunity as companies based in the developed world will inevitably look for more ways to cut costs—and will do so by outsourcing business activities like payroll and even research.

He said there were very few BPO players in the country engaged in back office outsourcing, which he estimated to be about 10 to 15 companies, and that most of these processes are being carried out by captives such as large multinational banks.

"[But] this is the direction that many companies will take," he said noting that many call center owners that he spoke with are looking to move some of their operations into back office operations.

Meanwhile, Oscar R. Sanez, chief executive officer of the Business Process Association Philippines (BPA/P), said their group is actively carrying out marketing missions to the US and Europe to highlight the capabilities of the Philippines as a back-office outsourcing option.

"We are highly optimistic for growth in this area, which is [one reason] why we held this summit," he said.

2008-12-04T14:55:00.000-08:00

Suppliers have been hurt by auto industry's outsourcing

Posted by Robert F. Mollic, Girard December 03, 2008 04:49AM

Categories: Letters

I would like to add suppliers of the American auto industry to the proposed government bailout list.

I've been a supplier to the auto and electronics industries since 1969. Over the years, normal business cycles resulted in periods of good earnings and poor. This is a reality that anyone in business accepts as normal. However, for the past seven years my business has deteriorated to the point that I can now be considered a part-time worker.

This is the direct result not of normal business cycles, but of the current business practice of outsourcing work overseas. Offshore suppliers are not burdened by costs related to Social Security, employee medical insurance, OSHA and EPA regulations, etc., nor are they required by law or conscience to pay their workers what we all consider to be a fair living wage.

I find it ironic that I am now being asked to pay for the gross mismanagement of the same auto industry whose practices have devastated my business. The automakers should be asking the beneficiaries of their outsourcing practices for help, not the companies those same practices have so negatively impacted. These executives have shown no concern for the fate of American suppliers and their employees and families, from whom they are now begging for money.

Management is not exclusively responsible for the financial crisis of the auto industry. The United Auto Workers union needs to accept some responsibility.

My sacrifices, as well as those made by other suppliers, have been significant. Before my tax money is used to bail out the industry, it would be good to know that the autoworkers are making sacrifices other than greater contributions to their health care costs and allowing new hires to earn less than half longtime employees' wages (no personal sacrifice at all to most UAW members).

2008-12-03T12:10:00.001-08:00

Published on FiercePharma (http://www.fiercepharma.com)

India may lose outsourcing deals after Mumbai attacks

By calisha

Created Dec 1 2008 - 5:43pm

A number of pharmaceutical companies have canceled visits to India after last week's tragic attacks in Mumbai. According to industry experts, Indian drug makers may lose out on opportunities to secure new outsourcing contracts as a result. Two large networking events, P-MEC India and CPhI Worldwide, were to open last week, but both were postponed. Most of the pharma companies in Mumbai also closed their offices last week following the attacks. But according to industry sources, although "the attacks may have an impact in the short-term, [they] will not have any long-term effect," India's Business Standard reports.

Others still fear the attacks will have a lasting impact. "Such repeated terrorist attacks will mar our business prospects, especially from Fortune 500 companies, who are closely observing the developments," said Ranjit Shahani, president, Indian Merchant's Chamber and vice-chairman and managing director of Novartis India. "Apart from the global meltdown, this will add more worries to our economic growth."

Some say India's loss could be China's gain. China has not had to deal with terrorist attacks and has appeared more economically stable, Ajit Kamath, chairman and managing director, Arch Pharmalabs, tells the Business Standard. "India will have to assure the international community of tough measures, both on the security and economic front," he explained.

- read India's Business Standard for more [1]

2008-12-02T12:18:00.001-08:00

Obama's health reform push seen buoying health IT

Reuters, Wednesday November 26 2008

By Debra Sherman and Lewis Krauskopf

CHICAGO/NEW YORK, Nov 26 (Reuters) - A wealth of small companies focused on information technology may be poised to benefit should the U.S. government make good on vows to run the U.S. healthcare system more efficiently.

U.S. President-elect Barack Obama reiterated his commitment at a news conference on Tuesday to increasing investments in the healthcare system as a way to save costs in the long term.

Obama cited as an example the government's role in helping local hospitals and providers set up electronic billing and medical records.

Such words could be music to the ears of small companies that specialize in improving and automating systems, services, and record-keeping in hospitals and doctors' offices.

The industry has been talking about electronic medical records for years, but the divide among political parties has been partly to blame for minimal progress, said Ira Loss, a policy analyst with Washington Analysis.

"There was no leverage to get things done," Loss said. "It may be different now. I think we're going to have a president who is more engaged in this area. He believes in it."

JP Morgan analyst Ipsita Smolinski said a likely first step the new administration would take toward increasing the use of electronic medical records would be to require them for claims under Medicare, the large government health insurance program for the elderly.

"That could happen within the first year (of the new administration)," Smolinski said. "It would have a ripple effect."

Stifel Nicolaus analyst Todd Weller said Obama's administration would likely boost the healthcare IT sector, although he cautioned investors against thinking Obama's election would be a quick windfall for these companies.

"We view it as ... another positive catalyst behind a secular trend of more adoption of health IT; but I don't think it's real prudent to go out and invest in these stocks under an assumption that all of a sudden in 2009 their business is going to accelerate in a big way," Weller said.

"You're going to see doctors and hospitals increasingly adopt technology and automate just like every other industry has done," Weller said.

Analysts said potential beneficiaries from a health IT push would be those focused on establishing electronic medical records in physicians' offices, as well as on billing software and other administrative tasks. Among them are Allscripts-Sisys Healthcare Solutions Inc, Athenahealth Inc, and Quality Systems Inc.

Physicians have been reluctant to spend money on major IT systems, analysts said.

"What we need are more carrots and sticks out there," said Richard Close, managing director of equity research at Jefferies & Co. "Obama could develop grants and enable physicians to access funds to develop systems ... It sounds as though it's a high priority."

Hospital-centered IT companies that could benefit include Cerner Corp, MedAssets Inc, Computer Programs and Systems Inc and Eclipsys Corp. Large pharmaceutical wholesaler McKesson Corp also has a substantial IT business.

Adoption of healthcare IT has lagged in smaller rural hospitals which lack the money to invest compared with larger urban hospitals, Stifel Nicolaus' Weller said. He said there has been an increase in state and federal grants to these hospitals in the past year to finance such purchases.

"I would look for a push to help smaller rural hospitals come up to speed on health IT," Weller said.

Large technology companies are also angling to be involved in healthcare, including Intel Corp, which introduced health monitoring systems to connect patients with clinicians, and Google Inc and Microsoft Corp, which are trying to drive greater penetration of electronic medical records.

Loss, of Washington Analysis, said the government has failed to come up with uniform standards that would ease the way for electronic medical records.

"The first thing that has to happen is ... they have to make one system talk to the other," Loss said.

Analysts cautioned that the timing remains unclear for any new requirements that could lead to greater IT investments. Healthcare reforms may take a backseat as Obama focuses on the weak overall economy.

"It won't be like turning on a faucet full blast," Close said. "I suspect it will take a little while, maybe a year or two." (Editing by Gerald E. McCormick)

2008-12-02T12:15:00.001-08:00

Tata to commercialise healthcare portal

Johannesburg, 27 November 2008 ] - Tata to commercialise healthcare portal

Tata Consultancy Services (TCS), an Indian IT services company, plans to commercialise its WebHealthCentre, an online portal for medical consultations, healthcare information and telemedicine, says PCWorld.

The WebHealthCentre site was set up by TCS in 2000 as part of fulfilling its corporate social responsibility. The site was started to offer patients in rural areas access to specialist doctors.

Using the analogy of Google's YouTube, Debashis Ghosh, VP and head of TCS life sciences and healthcare practice, said having set up WebHealthCentre and making it popular, TCS is exploring a number of revenue streams, including offering new services such as electronic medical records facilities through the site.

Merge offers Web solutions

Merge Healthcare, a medical imaging solutions provider, has unveiled two Web applications, Cedara WebAccess and Cedara WebScheduler, available through its OEM division, says Market Watch.

These solutions give health IT software providers plug-in portals that help expedite and automate tasks such as patient and resource scheduling, and image and information distribution.

Cedara WebAccess is a thin-client viewer, which provides technology for Web distribution of radiology images and reports to the referring physician community and beyond. Cedara WebScheduler helps health IT application developers that add centralised capabilities for managing and scheduling imaging resources.

Internet service keeps families informed

Connect4Healthcare is offering an Internet service that enables long-term care providers to give families regular proactive wellness updates through a secure Web page, e-mail or text message, says Market Watch.

The solution addresses the problems for families of the more than 3.8 million people in the US living in nursing homes, assisted living facilities or receiving home care as they struggle to stay up-to-date with the well-being and needs of their loved ones.

The company is introducing its service to long-term care providers, but plans to begin marketing directly to consumers early next year.

2008-12-01T12:24:00.000-08:00

EDITORIAL

Outsourcing comes home to roost

First came the flop with the benefits services provided by Accenture. Now state agencies express great dissatisfaction with IBM's handling of their computer services.

Friday, November 28, 2008

When it comes to huge contracts to outsource the state's computer work and claims that they will save taxpayers millions, the State of Texas — that is, Gov. Rick Perry and the Legislature — have failed to deliver. It looks like the state is on the verge of a second expensive flop.

The first flop became official in March 2007, when Albert Hawkins, the executive commissioner of the Health and Human Services Commission, announced that an $899 million contract with a major consulting firm, Accenture LLP, was being canceled by mutual agreement.

Accenture was hired after the Legislature in 2003 enacted a bill to modernize the state's systems for providing public benefits, such as Medicaid. It wasn't just a big upgrade in data processing technology; rather, much of the state operation would be "privatized" with — we were promised — big savings to the taxpayers. One way those savings would come would be by laying off hundreds of state employees who processed applications for state aid.

But the team led by Accenture couldn't pull it off to the state's satisfaction. Eligible applicants couldn't get their benefits paid because the state fell so badly behind in processing them. Finally, Hawkins and Accenture agreed to call it quits.

Now the state is considering whether to cancel another massive contract, this one for $863 million with IBM, aimed at outsourcing most of state government's computer operations, with more promises of big savings for taxpayers. The contract was signed after the Legislature in 2005 pushed for consolidation of computer services.

The idea was to centralize the computer operations of 27 state agencies into two major data centers, one in Austin and another in San Angelo, that would provide increased security as well as a backup for all data. IBM got the contract in 2006.

Unfortunately, something has gone wrong with it, too. Surveys of state agencies have found enormous dissatisfaction with IBM's service. The secretary of state's office, run by a Perry appointee, gave the IBM team a 0 on a scale of 1 to 5, and the Department of Transportation said that resolving computer problems that used to take a state employee less than an hour to fix were taking as long as a week.

Perry ordered a halt to IBM's work to review its performance. A decision could come by Thursday on whether to cancel the contract. IBM has acknowledged some problems but denies it has breached its contract.

One former state official says the state might share in the blame, for having expected too much too quickly from IBM, which had to contend with a wide variation of computer systems, aging technology and related problems at 27 state agencies. But then, no one forced IBM to make the bid or sign the contract.

Though we don't know the detailed solutions to these problems, one lesson is obvious: Hang tight to your wallet whenever an ideologue or a lobbyist starts claiming that the private sector can of course do any job more efficiently and at less cost than any state bureaucrat. It isn't true.

2008-12-01T12:16:00.001-08:00

Terror strike: Drug firms may lose outsourcing deals

BS Reporter / Mumbai November 29, 2008, 0:40 IST

Indian drug makers may lose out on outsourcing contracts as overseas pharmaceutical companies defer their visits to the country in the wake of Mumbai terror attacks, according to industry experts.

''The drug industry could see short-term setbacks, especially in the field of outsourcing,'' said Sujay Shetty, head of Life Sciences, PricewaterhouseCoopers. ''Executives of global companies may be asked to refrain from coming to India and many planned visits have been cancelled.''

Already, CPhI India, one of the largest global industry exhibitions that provides the drug makers an opportunity to secure contracts, has been postponed. The three-day exhibition was scheduled to begin at Bombay Exhibition Centre today. P-MEC India, a prominent event for the pharmaceutical machinery and equipment industry that was scheduled to begin at the same venue yesterday, has also been postponed.

''This decision has been taken in consultation with the industry and local authorities in the interest of the safety and security of visitors and exhibitors alike," informed the organisers CMP Information, a part of the London-based United Business Media (UBM).

"Such repeated terrorist attacks will mar our business prospects, especially from Fortune 500 companies, who are closely observing the developments. Apart from the global meltdown, this will add more worries to our economic growth," said Ranjit Shahani, president, Indian Merchant's Chamber and vice-chairman and managing director of Novartis India.

Meanwhile, attendance was thin at the offices of most of the Mumbai drug makers for the second consecutive day today, said company sources. Pharma companies such as Wockhardt, Cipla, Lupin and Glenmark had closed their offices on Thursday following a series of terrorist attacks in Mumbai since Wednesday night. Industry sources said though the attacks may have an impact in the short-term, there will not have any long-term effect.

"This is a very unfortunate event that has shocked not just Mumbai city and the country but the entire world. At a time like this, it is important that we stand united against the mindless terror that is increasingly threatening to derail the economic gains that we have made as a country," said Glen Saldanha, chief executive officer and managing director of Glenmark.

Industry experts also said India's loss could be China's gain, especially in securing outsourcing. The developments could help China gains an edge as it has been terrorism free and has appeared more stable in the current meltdown, noted Ajit Kamath, chairman and managing director, Arch Pharmalabs. "India will have to assure the international community of tough measures, both on the security and economic front," he noted.

2008-12-01T12:13:00.001-08:00

Date Submitted: Fri Nov 28, 2008

NEW DELHI - Outsourcing by U.S. companies will be the biggest concern for India due to the change in U.S. administration next year, says a global research firm.

"For India, the biggest concerns perhaps in over its important outsourcing industry, as the practice of shifting jobs overseas had come under fire during the U.S. presidential campaign," Moody's economy.com, a subsidiary of global research firm Moody's Corporation, has said in a report.

In February this year, continuing to play the anti-outsourcing card, Obama, the then Democrat presidential front-runner, had said, while America cannot "shy away" from globalization, it would have to take measures to ensure that jobs are not shipped overseas.

"We have to stop providing tax breaks for companies that are shipping jobs overseas and give those tax breaks to companies that are investing here in the United States of America," Obama had said during a debate with rival Senator Hillary Clinton in Cleveland, Ohio.

However, Planning Commission Deputy Chairman Montek Singh Ahluwalia said on Nov 15 that the U.S. has given an assurance to India that the policies to strengthen bilateral ties will continue and felt that outsourcing, a hot topic during the U.S. presidential polls, will not be an issue. "They (U.S.) assured us that the new Administration would continue to strengthen the relations between the two countries," Ahluwalia told reporters on his meeting with former Secretary of State Madeline Albright, deputed by President-elect Barack Obama to meet world leaders currently in Washington for the G-20 summit.

The research firm added, India's outsourcing business depends on robust service industries in advanced economies, most of which are battling recession.

The apex body of Indian software and services companies, Nasscom, has expressed cautious optimism on working out mutually beneficial policies to boost the economies of both the countries after Obama won the presidential election.

The $40-billion software and B.P.O. export industry, mainly driven by outsourcing, draws 60 percent of its revenues from the U.S. India Inc has long maintained that outsourcing has resulted in savings for the U.S. economy. (PTI)

"Methinks he protest too much" Shakespeare

2008-12-01T11:43:00.001-08:00

Printed from

No need to worry about the outsourcing industry
28 Nov 2008, 0548 hrs IST, Partha Iyengar,

In a recent analysis of India's continued suitability for offshore outsourcing based on 10 key criteria: language , government support, labour

pool, infrastructure, education system, cost, political and economic environment, cultural compatibility, global and legal maturity , and data and intellectual property security and privacy, India has retained
its position as a 'leader' amongst the 30 countries studied (see table: India's Outsourcing Rating).

In maintaining this global leadership position in the offshore application services market, India still ranks high in most of the criteria. However , factors such as salary escalation , attrition levels and increased cost of living have reduced the country's historical cost advantage. Strangely enough, the current economic climate offers the industry a much needed respite, with both salary raises and attrition having come down dramatically , as employees' somewhat mercenary behaviour turns to caution.

Despite dramatic investment increases, infrastructure remains India's biggest weakness. Strained power capacity, inadequate local and international connectivity remain challenges. The industry needs to and, in an encouraging sign, is starting to, place a greater emphasis on business and behavioural skills, as opposed to only technical skills. Tier 1 providers have also recognised the need to break the linear relationship between revenue growth and resource growth and move to higher-value service offerings.

Overall, Gartner's strategic planning assumption (SPA) is that "Through 2012, India will continue to respond effectively to growing country competition and will retain its leadership position as a destination for offshore application services delivery ."

However, in today's economic climate, the biggest threat to the Indian offshore industry, as well as, in a correlated assessment, the domestic industry is not any of the above challenges, but the shortsighted 'knee jerk' reactions by Indian management! Similar to the domestic industries' perplexing IT investment pull-back during the dot-com burst of the early 2000s, at a time when they were just beginning to fuel badly needed productivity improvements and competitiveness , we are seeing a maddening reversal of sentiment now, though any true economic recession is still far from our shores.

And whatever slowdown we are seeing in some sectors (real estate being the most visible) is increasingly fuelled by negative sentiments in the other globally visible driver of the Indian economy, the offshore IT services industry. Considering the fact that every dollar of offshore services revenue supports at least 3 dollars of local Indian spend by these companies and their employees (primary, secondary and tertiary spending in real estate, retail, entertainment transport etc.), a slowdown in this sector has a profound and disproportionate impact on the Indian economy. Why we are seeing such high levels of negative management sentiment in the offshore industry is baffling.

Consider this: the global IT Services industry is approximately $760 billion. Indian offshore providers currently have only $45 Billion of that global industry spend (approximately 6%).

Even if we assume the worst case assumption of no IT services spending growth in 2009 or even a slight retraction, it still leaves a phenomenal amount of spending that is increasingly a target opportunity for the Indian providers, So, at a time when the global economy is going through a significant upheaval, undoubtedly resulting in a strong cost-cutting agenda — the sweet spot of Indian offshore services even today — why is the industry closing shop and putting out the 'not hiring' signs? At a time when they should be arming their sales force and marketing campaigns with a strong message of being a credible and strong alternative to provide the much needed cost relief to global companies from the US, Europe and Japan, and pursuing the growth agenda even more aggressively , they are retracting into their shells - and taking the Indian economy with them.

Yes, there is a period of slowdown upon India as companies globally sort out the economic issues and challenges as their countries slide into or are already in recession . However, even companies in those countries are working to identify the key IT initiatives that are critical to future competitiveness when the turnaround happens (and the one imperative is that recessions do end). The big opportunity for Indian service providers is now to gain not just a share of the cost-cutting portion of IT services work but also the higher end work that will increasingly have a cost-optimisation focus to it as well.

In many ways, this is an opportunity similar to what Indian companies faced at the end of the Y2K bonanza, where the concern equally was that with the Y2K problem ending, the wave of IT services work would end as well and Indian providers would go back to the low end of the food chain doing only 'body shopping' . However, Indian providers did a great job of moving past the one time 'software factory' need and becoming relevant, and eventually, important, to their clients in their traditional IT services work, not just Y2K related.

The similarity of the opportunity today is to use the current crisis – and most new opportunities emerge out of crises – to hasten the move into the higher end of the IT services food chain with a global client base. The companies that recognise and position themselves to seize this opportunity will find themselves in a significantly strong competitive position as economies start to turn the corner. In spite of all the 'doom and gloom' that seems to pervade the current environment, it is critical for Indian management to keep an eye on this strong future opportunity and work to make it a reality sooner rather than later.

The author is Head of Research, India, Gartner

2008-12-01T11:30:00.001-08:00

2008-12-01T11:25:00.001-08:00

More woes for India-based outsourcing

Filed in archive Offshoring by Scott Wilson on November 26, 2008

Not to minimize the very real human tragedy and other geo-political implications of the terror attacks currently paralyzing the Indian city of Mumbai, but the first technology related thought to cross my mind was, wow, this is a another unfortunate blow for India's off-shore outsourcing in a time when the industry really didn't need any further disruptions or disadvantages.

Mumbai, of course, is well removed from Bangalore, the tech hub of the country, but from half a world away, I'm not sure that many CIOs will appreciate the separation. Bangalore has not been immune to similar terrorist attacks, and the very fact of such vulnerability and unrest in the country is sure to have a chilling effect on businesses considering off-shoring their technology operations. With the market already depressed, and competition rising in China (which has depressingly efficient internal security services which effectively remove these issues from consideration in that country), this is the last thing that the Indian tech industry needs right now.

While terrorist attacks have been a reality in India for years, the relative isolation of Bangalore from incidents, combined with the general perception that the Indian government was the primary target, certainly seemed to insulate India-based outsourcing operations from any ill-effects... the industry exploded even in the wake of significant bombings in Mumbai in 2006. Of course, at the time, there were fewer options available to firms looking to outsource.

The disturbing new perception that American and other Western citizens may have been the primary targets in the most recent attacks, combined with the rise of China-based off-shoring operations, may change that. It's a short step from targeting American citizens to targeting American interests, and there is a lot of American interest in Bangalore. Responsible CIOs are going to be looking at their options right now, and India may be dropping off the top of the list.

2008-12-01T10:23:00.001-08:00

GM, Ford, Chrysler CEO Jobs May Hinge on Bailout Plan (Update3)

Email | Print | A A A

By Jeff Green

Dec. 1 (Bloomberg) -- General Motors Corp. Chief Executive Officer Rick Wagoner and his counterparts at Ford Motor Co. and Chrysler LLC will put their jobs on the line this week when they try to convince Congress they can save their companies.

U.S. House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid on Nov. 21 criticized Wagoner, Ford CEO Alan Mulally and Chrysler CEO Robert Nardelli for being unprepared after two days of Congressional hearings failed to convince lawmakers the automakers should get $25 billion to avoid an industry collapse. Congress ordered that new plans be presented tomorrow.

"Reid and Pelosi gave them a pretty clear plan for what they expect, and their focus had better be on coming in with a solid plan and looking contrite," said Clint Currie, a Washington-based transportation analyst at Stanford Group. "If I had to guess, I'd say top management is gone, I don't think they can survive this situation."

GM's board met in Detroit to consider the rescue plan that may determine Wagoner's fate. The directors started reviewing the automaker's proposals yesterday in a 10-hour meeting and will continue today, people familiar with the plans said.

GM rose 24 cents, or 4.6 percent, to $5.48 at 10:02 a.m. in New York Stock Exchange composite trading. Ford rose 25 cents, or 9.3 percent, to $2.94.

Board members are keeping open the option of filing for Chapter 11 bankruptcy protection if Congress refuses funding, the Wall Street Journal reported. In such a move, Wagoner would probably lose his job, the newspaper said.

Public Pressure

While Republican detractors such as Senator Richard Shelby from Alabama have said the auto chiefs were "arrogant" and that management changes might be needed, neither the government nor GM's board has yet signaled Wagoner will need to leave to get an agreement, people familiar with those discussions said.

So far, the public pressure for changing management, as the government did in the bailout of mortgage lenders Fannie Mae and Freddie Mac and insurer American International Group Inc., has come mostly from outside critics and Republican lawmakers who oppose the automaker bailout. The auto chiefs weren't directly threatened with removal during the hearings two weeks ago.

Still, Democratic Senator Christopher J. Dodd, chairman of the Senate Banking Committee, said Nov. 28 that Congress may demand executive changes from auto companies as part of the bailout.

'Writing a Check'

"Certainly I would never support writing a check to them without conditionality," Dodd said during an interview on PBS's Charlie Rose show, when asked if he might demand executive changes.

The U.S. didn't require management changes in the bailout last week of Citigroup Inc. and other banks' executives have kept jobs after getting bailout money.

Wagoner, head of the biggest U.S. automaker and the executive with the longest tenure of the three executives, has borne the brunt of criticism.

"Rick Wagoner does not deserve to be the head of GM," said Maryann Keller, an independent automotive analyst and consultant in Greenwich, Connecticut. "I don't know that Congress could make that decision, but Wagoner has evidenced so many times that it's a day late and a dollar short with this guy."

A GM spokesman, Steve Harris, declined to comment on what may be included in the Detroit-based automaker's plan or the board discussions. Ford and Chrysler said last week that they also would present plans to prove their future viability and detail their use of the loans.

Debt Swap

"Chrysler LLC is fine-tuning its original plan to meet the recent request from Congressional leadership, leading up to Tuesday's submission," Chrysler's Lori McTavish, a spokeswoman, said in an e-mailed statement last night.

Mark Truby, a Ford spokesman, wouldn't comment on specifics of Ford's plan to Congress. Ford said today it may sell its Volvo unit as part of moves to strengthen its balance sheet during a global auto-sales decline and economic slowdown.

The Senate is scheduled to conduct a hearing Dec. 4 and the House will follow on Dec. 5 before a possible vote the week of Dec. 8.

GM wants to cut debt -- probably through an exchange with current debt holders for either debt, equity or a combination -- and change union rules that pay workers when their plants are closed as part of an effort to ensure its future viability, people familiar with the plan said last week. The largest U.S. automaker also may ask to delay a $7 billion payment to a union retiree health-care fund and drop more brands, said the people.

Life Support

Pelosi and Reid told the automakers in a Nov. 21 letter that they must provide "a forthright, documented assessment" of their operating cash positions, short-term liquidity needs "and how they will meet the financing needs associated with the plan to ensure the companies' long-term viability."

"It shouldn't come as a surprise that the companies will have to show that the loans will be repaid and in three to five years the companies will have to be profitable," said former Michigan Governor Jim Blanchard, who worked on a federal loan program for Chrysler LLC in the late 1970s.

"What Congress really wants to insist on is a realistic plan for payment of loans and a viable path to profitability," Blanchard said.

Wagoner said during hearings that automakers would like action before President-elect Barack Obama takes over, because a global credit crunch that has slammed sales in the U.S. is spreading to global auto markets.

"A bailout is more like putting someone on life support when what they really need is a new heart," said Bill George, former CEO of medical-devices maker Medtronic Inc. and professor of management practices at Harvard Business School. "The only way to save GM is a massive restructuring, to tear the company in half and make it much smaller."

At the very least, Obama should appoint an "auto czar" to oversee the way the money is used, George said.

"GM needs a new management, and maybe a new headquarters city," he said. "It's got to have a different culture. In fairness to Rick Wagoner, he was dealt a bad hand."

To contact the reporter on this story: Jeff Green in Southfield, Michigan at jgreen16@bloomberg.net;

Last Updated: December 1, 2008 10:13 EST

2008-11-25T17:20:00.001-08:00





Fears on cut in outsourcing, H-1B visas unfounded: US business Aziz Haniffa in Washington DC \| November 25, 2008 \| 12:52 IST It's no secret that during the presidential campaign, American business and industry, particularly those doing business in India and China, were wary of Democrat Barack Obama. Their caution emanated from fears that Obama might pander to workers' unions, gut outsourcing and eliminate H-1B visas, as opposed to 'the free trader' Republican John McCain, who had repeatedly stated that he would promote free trade and expand the professional visa category programme. But now that the election is over and Obama is the new President-elect, organisations like the US-India Business Council have been scrambling to get the message out that such fears were unfounded and that an Obama administration would be good for enhanced US-India commercial ties. In New Delhi, the USIBC launched its first phase of 'transition briefings' ahead of President-elect Obama's inauguration January 20 as the 44th President of the United States, with former Defense Secretary William Cohen -- a member of the USIBC board -- assuring the participants that the commercial partnership between India and the US would continue to deepen in an Obama administration. Cohen, an erstwhile Republican Senator from Maine, who was appointed Defense Secretary by the Democratic Clinton administration, said, "Indo-US relations enjoy strong bipartisan support in the US, as was evident by the overwhelming support for the civil nuclear agreement." Thus, he told senior USIBC members based in India at an exclusive conclave convened to share perceptions and aspirations about the incoming transition: "I am confident that an Obama administration, whose leadership and advisers include many friends of India, will continue on this positive path." Cohen, chairman and CEO of The Cohen Group, met with In-Country USIBC members in New Delhi, November 19 at a CEO Roundtable, titled 'Transformation and Innovation: The Way Forward', which was chaired by USIBC board member Tejpreet Chopra, president and CEO, GE India, and hosted by Anuj Puri, chairman and country head, Jones Lang LaSalle Meghraj. Executives from top companies involved in the US-India commercial partnership participated in the roundtable and included Amarchand Mangaldas, AT & T, Avanta Group, Bharat Forge, Computer Associates, Caterpillar, Genworth, Hirco, IBM, Lockheed Martin, and Punj Lloyd. In Washington, USIBC president Ron Somers told rediff.com: "I believe those fears are unfounded," about an Obama administration penalising companies outsourcing and relocating overseas. "I believe that we have to separate campaign rhetoric from actual policy and policy implementation," he said, and pointed out that "President-elect Obama, just the other-day, articulated that India will be a priority in his administration and all of our companies now are engaged, not any longer in outsourcing, but in value-addition, which the Indian companies are providing, 24 hours a day, 7 days a week." Somers argued that "the industry in India has evolved considerably, where value-addition is there and all of our companies will be advocating in favor of global sourcing because this enables our US companies to remain competitive globally." Thus, he said, this is what US business and industry would be drilling into the Obama administration that it's the value-add by Indian industry that helps American companies to be globally competitive and "so we will be encouraging the Obama administration to take a very forward leaning view on partnership with India." "Let us not forget that Vice President-elect Joe Biden, a dear friend of India, is there and so I am very confident that this is going to be one of those great history-changing events where we have a young president that will resonate and be able to connect with a very useful demographic of India." He predicted that "it will be this presidency that will bring our countries even closer together."

2008-11-20T14:09:00.001-08:00

Click to print

Nasscom positive about India's outsourcing future despite Obama's win

By Staff Reporter
Posted 12 November 2008 @ 07:44 am GMT

The Indian IT-BPO industry is celebrating Barrack Obama's victory at the 44th US presidential election brushing aside concerns that with Obama at the helm of affairs, outsourcing might be curbed.

According to Ganesh Natarajan, chairman of National Association of Software and Service Companies or Nasscom, the consortium that serves as the apex body of the Indian IT software and BPO industry, the present gloom in the IT-BPO industry is due to economic slowdown and has nothing to do with concerns that Obama might cut down on outsourcing.

During his election rally, Obama gave hints of a protectionist regime if he is voted to power and promised tax breaks to "companies that hire in the United States and end tax breaks for companies that ship US jobs overseas," triggering concerns in India that fall in outsourcing orders could lead to reduced profits and massive job cuts.

However, Natarajan said Obama's win the presidential election would not mean death of outsourcing business for India. His triumph, Natarajan said, would in fact spur the growth in outsourcing business as a strong US economy would result in huge opportunities for India.

"Barrack Obama's plans to cut down on outsourcing does not pose a threat to the Indian IT-BPO industry. Our expertise in several areas of outsourcing will always attract new projects from the US," Natarajan said, adding that US companies will be under too much pressure to cut costs, and offshore outsourcing will be one way to do it.

"We should not worry about any ban on outsourcing. It is just not going to happen. If at all, he might give incentives to job creation in America which we support and I don't think that is going to add any adverse impact on Indian outsourcing. After all, Obama administration at present have far more important issues to tackle with, like that of the current financial crisis. America will charter a new course for itself in history which will give opportunities for all of us in India," he said.

"As the winds of change sweep across the American economy there will be multiple opportunities for Indian IT to engage in the rebuilding of the economy. Indian IT and business services firms have already entrenched their services in the heart of American value chains and can continue to provide truly transformational solutions to American corporations and the Government itself," he added.

According to Natarajan, Obama is keen on putting the US economy back on track by creating more jobs but that does not necessarily mean stopping the trend of outsourcing because the main thrust is to revive the economy.

"Most of us are working for Fortune 500 companies and are very integral to the value chain. So its not like shutting down a factory somewhere. So he (Obama) will do nothing that will disturb the success of these companies. At the same time, all of us have to realize that job creation must happen in United States and there will be different measures to take that up. I do not think anybody sensible like Obama will come in the way of current outsourcing," Natarajan said.

Nonetheless, a high-profile Nasscom delegation will be meeting top officials of Obama administration in March next year to ensure that no nasty surprises greet the Indian IT-BPO industry on the outsourcing issue, he added.

N.R. Narayana Murthy, chairman of India's IT bellwether Infosys Technologies, shares the same view. "We believe president-elect Obama to be a pragmatic leader who understands that American industry needs to be competitive not just in America but in third countries as well," Murthy said.

Agrees Samir Chopra, president of Business Process Industry Association of India (BPIAI). "My belief is that the election of Senator Obama does not in any way pose a threat for the Indian IT/ITES industry. Indian industry today is deeply entrenched in business critical work for global customers and in his efforts to bring the economy back in shape he is unlikely to take actions which will impact the global competitiveness of US companies," Chopra said.

"I think that this (Obama's victory) will lead to a new era of greater cooperation between India and US. In the current context it is even more important for the two countries to find ways to partner together to spur innovation, foster economic growth, develop an educated work force and skilled workforce, and create jobs for the global market place," he said.

"As long as the work we do is high-skilled and provide qualified talent, there is no way we can be replaced overnight. From where will the US bring so many engineers," said M. Narasimha Rao, president of Hyderabad Software Exporters Association.

Agrees Kaustubh Dhavse, deputy director, ICT practice at Frost & Sullivan. "Outsourcing has benefited the American economy more than it has taken away, resulting in strong margins for the US companies which have been passed on to their shareholders who are predominantly American. The story will not be any different now and that's something Obama cannot overlook," Dhavse said.

"I do not believe that Obama's presidency will spell doom for the Indian IT industry. Offshoring to India enhances the cost competitiveness of US industries and is a net creator of jobs. Obama is a new generation leader. He has an excellent grasp of economic issues and is unlikely to take measures that will hurt the US economy," said Roopen Roy, managing director, Deloitte & Touche Consulting India.

"US companies outsource to India not for tax incentives but to remain competitive. My bet is that under Obama, the US and India will actually scale new heights in economic cooperation," Roy said.

Meanwhile, attempting to infuse confidence among Indian techies, Nasscom said the financial crisis that has hit global markets and the economic downturn in the US are "temporary" and the IT-BPO sector in India would remain untouched by the meltdown.

However, the IT-BPO lobby group has cut its hiring forecast for the current fiscal year, saying IT services companies and BPOs are expected to hire about 200,000 people by next March, instead of the 276,000 that it originally projected. The revised figure represents a significant decrease from the 250,000 new hires recorded for the previous fiscal year.

To survive the global economic crisis which is likely to last for another 12-15 months, Nasscom noted IT services companies are also boosting their staff utilization rates and letting go of those who fail to live up to expectations.

With the Indian software business growing by 21 to 24 percent every year, Natarajan said that by 2020, India can fulfill the need of technical talent of the whole world.

"As far as IT or BPOs are concerned there is nothing to worry. By that time the whole world would need 43 billion technocrats while India will have 47 billion surplus technocrats," he said.

However, Natarajan added that a huge investment was required to groom the available talent pool and urged IT firms to focus on non-US markets like Latin America, Japan, China, Europe and Africa to diversify their client base.

While the US market accounts for over 60 percent of India's software exports, the UK has grown to become India's second biggest market.

Read the full aticle of:

http://in.ibtimes.com/articles/20081112/nasscom-positive-about-india-outsourcing-future-despite-obama-win.htm

This article is copyrighted by Ibtimes.com.

2008-11-20T13:58:00.001-08:00

India optimistic about outsourcing, despite global financial crisis

Sindya Bhanoo, The Industry Standard11.19.2008

With America's economy in crisis, it would seem that India has a lot to worry about. The country's annual revenues from outsourcing exceed $40 billion, and a downturn in the U.S. economy could damage India's outsourcing industry.

But at the India Economic Summit in New Delhi this week, Indian officials and corporate executives remained optimistic about the future of outsourcing.

Montek Ahluwalia, Deputy Chairman of India's Planning Commission, predicted that India's economic growth for 2008-2009 will be between seven and nine percent. That's good for the country, Ahluwalia said in a press release.

"Even if you take growth at 7%, it is 2% less than what we have had but still higher than what we had four years ago," he said in the statement. "This is not an Indian crisis. We are being impacted by a global crisis."

Indian media has also written a great deal about President-elect Obama's stance on outsourcing. One quote in particular has been repeatedly cited by Indian newspapers as an anti-outsourcing sentiment. During a debate with Sen. Hillary Clinton (D-NY) during the primaries, Obama said, "We have to stop providing tax breaks for companies that are shipping jobs overseas and give those tax breaks to companies that are investing here in the United States of America."

However, Indian officials remain optimistic -- at least in public -- about the country's outsourcing future.

"Barack Obama's plans to cut down on outsourcing does not pose a threat to the Indian IT-BPO [business process outsourcing] industry," said Ganesh Natarajan, chairman of the National Association of Software and Service Companies, in an article in the International Business Times. "Our expertise in several areas of outsourcing will always attract new projects from the US."

Infosys, one of India's outsourcing titans, is predicting a 13-15 percent growth next year, according to the Financial Times. The company has no plans to scale back, and is committed to keeping the 25,000 new hires it made this year, adding to its workforce of 100,000, said S. Gopalakrishnan, the chief executive officer of Infosys in the Financial Times report.

Still, he admitted that times were tough. This downturn is far worse than the 2001 dot-com bubble burst, he told the Times.

"It is different, it is probably worse. It is not restricted to one segment or one sector or one region," he said in the article. "It impacts all sectors and the uncertainty is prolonged."

2008-11-19T17:22:00.001-08:00

Egypt: The New IT Outsourcing Destination

Last update: 5:06 a.m. EST Nov. 18, 2008

CAIRO, Egypt, Nov 18, 2008 /PRNewswire via COMTEX/ -- The economics of outsourcing are changing in America and Europe. High employee turnover, eroding profit margins and unreliable communications have led companies that traditionally rely on India and other countries for offshore information technology (IT) services to start looking for something beyond.

As outsourcing to far-flung destinations becomes increasingly expensive, North American companies in particular are open to the idea of nearsourcing their back office operations to countries in similar time zones. Africa is rising to meet the opportunities created by the global economy.

Internet-based tools and associated IT-enabled services make it possible for Africa to actively engage in the growing IT-based economy. Egypt is leading the charge to ensure Africa has a part in global dialogue by fostering an attractive market for outsourcing, one of the fastest growing IT sectors.

"Egypt has built an entire ecosystem to support the country's ICT industry. The availability of a qualified multilingual workforce, excellent infrastructure and political stability has all helped attract companies to invest in Egypt," says Dr Hazem Abdelazim, CEO for ITIDA.

With some unique advantages such as a multilingual workforce (fluent in English, French, German, Spanish, Portuguese, and Dutch); lower labor costs than in surrounding low-cost regions; time zone proximity with the West; and relative familiarity with Western culture over traditional outsourcing destinations like India and China, Egypt's IT sector is forecasted to grow from $889 million in 2006 to $1.3 billion in 2011.

The Egyptian government offers tax breaks and other financial incentives to attract international companies to set up call/service center and business process outsourcing (BPO) operations in Egypt. It also supports the training of staff to handle multinational clients and maintain global standardized work ethics.

Beginning the Journey

In Egypt, the national information and communication technology (ICT) sector is emerging as a role model of deregulation and privatization as well as a catalyst for reform in other sectors. To meet the demands of business, Egypt realized the need to establish a unique, specialized, and modern business park to be the flagship hub for ICT and built the Smart Village in Cairo, which stretches over 600 acres. It is Egypt's first fully operational Technology and Business Park, and the first of its size in the region. It accommodates multinational and local telecommunications and information technology companies, financial institutions and banks, together with related government authorities.

Currently, over 13,000 professionals run the operations of more than 100 Companies and institutions at the Smart Village, and the number is expected to exceed 40,000 by the end of 2014. Egypt is fast moving beyond traditional stereotype and becoming more than just the land of the Pharaohs. It is engaging formally in the international dialog and evolution of global IT. It is creating opportunities for its own citizens, as well as the multinational companies needing a talented workforce around the globe.

SOURCE ITIDA

2008-11-19T17:18:00.001-08:00

Mirror Image: Can outsourcing be stopped?

Opinion

Written by Reynaldo C. Lugtu Jr.

Tuesday, 18 November 2008 23:49

Now that President-elect Barack Obama will be inaugurated on January 20, 2009, many are holding their breath, especially the business-process outsourcing companies in India, the Philippines and others, as to how he can turn around the outsourcing of jobs from the United States. In debates and on the road, Obama repeatedly said that if elected, he would discourage companies from "shipping jobs overseas" by taking away tax breaks, or by giving benefit to those corporations that keep jobs domestically.

"We can keep giving tax breaks to companies that ship jobs overseas, or we can give tax benefits to companies that invest right here in New Hampshire," Senator Obama said at a joint appearance with Sen. Hillary Clinton in Unity, New Hampshire.

According to CIO magazine, economists and legal advisers contacted about those comments said they are unaware of any specific tax breaks aimed at offshoring or outsourcing tech jobs. Instead, they said, Obama may be targeting broader tax-deferment strategies, such as the ability of multinational firms to avoid taxes on profits by moving money overseas.

But can corporate tax policy alone really do much in stopping the offshoring of US jobs? Some analysts don't believe so. "Any plans for a Tax Code change are like trying to plug a hole in a leaky dam with your finger—to believe the US government Tax Code promotes outsourcing is a major misconception of the fiery debate around outsourcing offshore," according to Joe Greco, director of California State University-Fullerton's Center for the Study of Emerging Markets. Also, according to a Computerworld report, Nielsen Co., the media company known for audience measurement, has given up tens of thousands of dollars in local tax breaks this year after signing up with an outsourcing provider based in India.

Back in 2004, John Kerry was, likewise, criticized for using the same tax-policy argument against offshoring. Factcheck.org, a political-analyst group, pointed out that taxes "are a very small part" of companies' decisions to move jobs offshore. Those at a 2005 Brookings Institution summit on trade also said taxes had little to do with outsourcing. In addition, Joel Slemrod, a tax expert at the University of Michigan's business school, said that, "For those who see [offshoring] as a problem, this is not a solution."

And so US companies continue to outsource. One glaring reason is the huge cost differential between the United States and offshore providers. A programmer can be hired in China for $12 an hour while the same goes for $56 in the United States. Depending on the skill and location of the offshore vendor, the international wage ratio can reach 100:1 as corporations outsource to where they can reduce costs and maximize profits. Experts predict that the significant cost differential between the United States and other countries will continue for 30 years.

Although cost reduction is the major reason US companies do offshoring, there are a number of others why firms do it. According to a 2004 Outsourcing World Summit report, of the Western firms that do offshoring, 9 percent want to gain access to skills and 3 percent require innovation from the outsourcing vendor, and the number is growing. And why not? China and India graduate a combined half a million engineers and scientists a year, versus 60,000 in the United States; India and the Philippines are already recognized globally as the hotbed of information-technology innovation and creativity in the areas of programming, animation and design.

Many of the outsourcing professionals and executives in India and the Philippines are not bothered by the pronouncements of Obama during the campaign. Outsourcing will continue to flourish in the coming years as corporations find ways to stay competitive. As India's Finance Minister P. Chidambaram commented, "Once Obama is in office, he will realize that it is an interconnected world, and countries have to work together."

"Mirror Image" is a rotating column featuring writers from the DLSU Professional Schools Inc.

Reynaldo C. Lugtu Jr. teaches management and marketing courses in the MBA program of De La Salle Uiniversity Graduate School of Business. He may be e-mailed at rlugtu2002@yahoo.com or visit his blog at http://rlugtu.blogspot.com.

< Prev		Next >

2008-11-19T17:14:00.001-08:00

Indian outsourcing groups prepare to stage comeback

By Andrew Hill, Joe Leahy and Richard Milne

Published: November 19 2008 02:00 | Last updated: November 19 2008 02:00

The clouds of global recession may be just gathering for many Indian industries. But one sector that has already been in the line of fire for more than a year is the country's information technology outsourcing sector.

Last year, the industry leaders, such as Tata Consultancy Services, Infosys Technologies and Wipro, were blasted by an appreciation of the rupee against the dollar, as foreign investors rode a wave of cheap liquidity to buy Indian stocks.

The stronger rupee made it more costly for Indian outsourcers to provide services to offshore clients, eroding margins that are among the highest in the IT industry.

This year, the rupee has depreciated nearly 20 per cent, restoring their foreign exchange advantage. But the collapse of some of the industry's largest clients in the developed world is hurting the prospects of the leading outsourcers.

This has been reflected in their stock prices, which are down by more than half from their 12-month highs, compounding losses last year. But Indian outsourcers such as Infosys are holding tight. There are no mass lay-offs and many are using the opportunity to train their young workforces.

They know that if they can survive the initial wave of the downturn, clients will once again turn to them to cut costs. (If concerns are only about turning a profit, perhaps they should consider outsourcing to China, or the Philippines. There is cheaper labor out there....)

It's easier to get a job in the US, than it is right at home.

2008-11-19T17:06:00.001-08:00

Jobs plan controversy in India

By Prachi Pinglay
BBC News, Mumbai

The government of the western Indian state of Maharashtra has asked businesses to give preference to "locals" when recruiting staff.

It says that priority for jobs should be given to anyone who has lived for at least 15 years in the state.

Officials say that the policy to employ more locals in Maharashtra has existed since 1968 but was never implemented.

Critics say the move comes ahead of general elections next year and could be an attempt to win votes.

Instigating violence

Some 37% of the 18 million population in the state capital, Mumbai (Bombay), are migrants - mainly from northern India - drawn to the city in search of work.

Right wing parties have over the last six months been at the forefront of sometimes violent protests against the migrants in Mumbai and other towns in Maharashtra.

The leader of the right wing opposition Maharashtra Navnirman Sena (MNS) party, Raj Thackeray, was recently arrested and given bail for allegedly instigating violence against the migrants.

He has consistently denied his involvement in violence but wants local people to receive preferential treatment for state employment opportunities.

The state government led by the Congress party has announced that all businesses - small, medium and large - must now ensure that at least half the workforce for supervisory jobs must not be migrants.

For non-supervisory jobs it has stipulated that at least 80% of the workforce must be made up of non-migrant labourers.

The state government directive says that monitoring committees will be set up which will report back to it three times a year.

It says that any citizen, Marathi-speaking or not, will qualify as long as he or she produces a certificate stating domicile status of at least 15 years in Maharashtra.

The MNS has been accused of several attacks on migrant workers in recent months.

It claims that they are taking jobs from local people.

There have been protests in the northern state of Bihar, which borders Uttar Pradesh, over the violence in the Mumbai area against migrants.

Indian Prime Minister Manmohan Singh has reportedly spoken to the chief minister of Maharashtra state, of which Mumbai is the capital, to ensure the security of migrant workers.

2008-11-19T17:03:00.001-08:00

This Offshoring Patent Services to India Report is Now Available

Last update: 12:06 p.m. EST Nov. 18, 2008

DUBLIN, Ireland, Nov 18, 2008 (BUSINESS WIRE) -- Research and Markets ( http://www.researchandmarkets.com/research/08d9d4/offshoring_patent) has announced the addition of the "Offshoring Patent Services to India" report to their offering.

Revenues from the Indian patent services offshoring industry are estimated at $46 m for the calendar year 2007 and are expected to reach $206 m by end 2012.

Typically catering to the international markets, patent services outsourcing to India is still in its infancy with a history of only about 3 to 4 years behind it. There are about 50 vendors in the industry with an estimated 1,550 professionals employed as of end 2007. While a few vendors have been in this business longer, this industry has gained momentum only in the last few years.

Patent services include a wide range of specific tasks or services. We have divided these services into the following broad areas: Patent searches, Patent illustration and proofreading, Patent drafting, Patent analytics, Patent asset management, Patent litigation support and Patent consulting.

Among the various functions in the patent services industry, the manpower intensive and process driven services are more easily offshored. The relatively low-value, high volume services include prior art searches, patent illustration and patent proofreading.

Large corporations are in favor of offshoring patent related (and other legal) work to India as they are the ultimate beneficiaries of the cost savings. The current addressable value of the patent services offshoring market is estimated at $2.2 b. According to Subha Kalathur, analyst and co-author of the report, "Indian vendors have significant opportunity to grow as the current addressable market is 50 times the current size of the industry. Having already established relationships with American companies and law firms, vendors also have significant opportunity in taking on work from the Patent Offices."

According to Arun Jethmalani, CEO, ValueNotes, "The established vendors with exposure to high-value services will look to complete their array of offerings to attract more business from their existing clients. They will look to leverage end-to-end solutions."

The report provides an in-depth analysis of the buyer market as well as the Indian vendor space along. Based on the extensive primary research and analysis, ValueNotes has identified top five vendors in this industry - Evalueserve, Pangea3, CPA Global, Lexadigm and Clairvolex.

The report is designed to help:

- Corporations, Law firms and Patent attorneys looking to outsource/offshore

- Outsourcing consultants to evaluate and compare the offerings of vendors

- Offshored patent service providers to understand the offshore opportunity as well as assess their competitive environment

- American and European corporations/law firms looking for Indian partners

- Venture capital companies looking for investment opportunities

- Researchers looking for detailed information on patent services outsourcing

The report is based on secondary data as well as extensive interviews with key people (buyers of patent services, patent attorneys and offshore patent service providers).

Key Topics Covered:

1. Executive Summary

2. Buyers of Patent Services

3. India Opportunity

4. Future Moves: Trends & Projection

5. Trends and Insights

6. Research Methodology

7. About Valuenotes

For more information visit http://www.researchandmarkets.com/research/08d9d4/offshoring_patent

SOURCE: Research and Markets

Research and Markets 
Laura Wood 
Senior Manager 
press@researchandmarkets.com 
Fax from USA: 646-607-1907 
Fax from rest of the world: +353-1-481-1716

2008-11-18T08:41:00.001-08:00

Transition Watch: Obama will cut outsourcing

By Brian Robinson
Published on November 17, 2008

President Obama will reduce the number of contracts that outsource government work to private firms, according to a Washington Post report.

That goal was included in statements Obama made in campaign letters sent to employees at seven federal agencies in an effort to garner their votes in the election. The letters were sent in response to a request from John Gage, president of the American Federation of Government Employees.

Other promises made in the letter included paid family leave, flexible work schedules, more opportunities for teleworking and improved bargaining rights. Defense was the only agency he made promises about that didn't include extra spending, the Post said.

2008-11-17T15:01:00.001-08:00

Printed from

Outsourcing biggest concern for India post-Bush: Report
16 Nov 2008, 1015 hrs IST, PTI

NEW DELHI: Outsourcing by US companies will be the biggest concern for India due to the change in US administration next year, says a global

research firm.

"For India, the biggest concerns perhaps in over its important outsourcing industry, as the practice of shifting jobs overseas had come under fire during the US presidential campaign," Moody's economy.com, a subsidiary of global research firm Moody's Corporation, has said in a report.

In February this year, continuing to play the anti-outsourcing card, Obama, the then Democrat presidential front-runner, had said, while America cannot "shy away" from globalisation, it would have to take measures to ensure that jobs are not shipped overseas.

"We have to stop providing tax breaks for companies that are shipping jobs overseas and give those tax breaks to companies that are investing here in the United States of America," Obama had said during a debate with rival Senator Hillary Clinton in Cleveland, Ohio.

However, Planning Commission Deputy Chairman Montek Singh Ahluwalia said on Saturday that the US has given an assurance to India that the policies to strengthen bilateral ties will continue and felt that outsourcing, a hot topic during the US presidential polls, will not be an issue.

"They (US) assured us that the new Administration would continue to strengthen the relations between the two countries," (Perhaps India could make this a two way street and outsource a few of those positions back. Who would be the wiser if an employee was working in the US instead of India? )Ahluwalia told reporters on his meeting with former Secretary of State Madeline Albright, deputed by President-elect Barack Obama to meet world leaders currently in Washington for the G-20 summit.

The research firm added, India's outsourcing business depends on robust service industries in advanced economies, most of which are battling recession.

The apex body of Indian software and services companies, Nasscom, has expressed cautious optimism on working out mutually beneficial policies to boost the economies of both the countries after Obama won the presidential election.

The 40-billion-dollar software and BPO export industry, mainly driven by outsourcing, draws 60 per cent of its revenues from the US. India Inc has long maintained that outsourcing has resulted in savings for the US economy.

2008-11-17T14:52:00.001-08:00

Date:17/11/2008

Satyam bets big on business in Europe

Any European company would like to start its business in a modest way and expand in future.

Drs Peter M Heij, Head, Continental Europe

Satyam Computer Services, India's fourth largest software exporter, is eyeing to tap a large portion of the European market. The company is targeting 30 per cent of its total global revenue from Europe by financial year 2010.

The IT major had been investing carefully and at the right places. It aimed at providing the preferred near-shore option for European companies.

The company wanted to leverage strategic initiatives such as nurturing global accounts in the region, consultative and solution-based selling and forming alliances with local technology and business partners, according to Keshub Panda, Head of Europe Operations.

Mr. Panda told Indian journalists who visited Satyam's development centres in the U.K and Germany recently that the company hoped to see a higher IT spend in areas such as application outsourcing, project shared services, business process outsourcing and infrastructure-related outsourcing in Europe by 2010. The main aim of Satyam in the U.K. and Europe was to have deeper engagement with the major accounts and increase the revenue growth above the market trend. With the current U.S. recession, customers were having less money to spend. But business activity would neither reduce substantially nor would come to a complete standstill, added Mr. Panda.

Risk-and-reward model

He said the European region, which accounted for 21 per cent of Satyam's revenue, had an addressable IT outsourcing market opportunity of $168 billion. The company had adopted the "risk-and-reward" model for scaling up the future outsourcing deals and turn into a partner rather than pure service provider to clients. Earlier, the companies used to adopt time and material model and fixed bid model. With risk and reward model, the companies take a calculated risk anticipating higher returns from the customers.

Mr. Panda said Satyam already deriving a certain per cent of revenue from the risk and reward deal structure. It intended to get into business transformation models instead of plain vanilla ones to increase its margins.

Today, the companies are undergoing business transformation and it became necessary for any IT company to take part in the decision-making of other companies business strategies. It also became important for the IT companies to influence decision making processes of the chief executive officers and chief financial officers in their respective businesses, which was a tough process. This led to the growth of consultancy business vertical.

The Head of Satyam's Continental Europe, Drs Peter M Heij, said that there was a significant market in Continental Europe that was still untapped.

Market behaviour

On the market behaviour, he said the purchasing behaviour of any European company varies from that of a U.S. company. Any company in this part of the world would like to start its business in a modest way and expand in future. The local content was large when compared to the U.S. It had a protective environment and the companies wanted a blended model in the business. At present, Satyam had 25 per cent local content in its European business. That means, the local companies wanted 25 per cent of their local people to work in the onsite and rest offshore, he added.

According to Satyam penetrating into the European countries, would be done by tapping the small and medium sized companies. It was hoped that nearly 10 to 15 per cent of the small and medium companies in the European market would be tapped by Satyam. It would be providing complete end-to-end solutions to all these SMEs, said Mr. Heij.

Similarly, he said to market their product, the model would also have to be different such as "pay as you use" and 'end-to-end solutions". Under the pay as you use model Satyam will pay for the IT systems based on the usage. Similarly for end-to-end solutions, the company will provide services from installation to maintenance.

He hoped with these strategies, Satyam would be in position to acquire two very large accounts worth $ 100 million and 30 other accounts worth $ 10 million by 2010.

Satyam Central Europe Head Aloke Palsikar, said despite the global financial meltdown, the outsourcing market, in Europe and particularly in Germany and France, was expected to increase. In the present market scenario, the company saw more opportunities than challenges in the European markets, he added.

Mr. Palsikar said though the U.K. market continued to dominate, there was every probability to have change in the ratio. It was hoped that its share together with Ireland would come down from 52 per cent to 40 per cent, while that of continental Europe would increase from 48 per cent to 60 per cent over the next two years. In Q2 of current fiscal, revenue from Europe was 20.60 per cent of Satyam's total revenue of $ 652 million. The U.S. market had contributed 62.03 per cent of Satyam's revenue in the quarter. Satyam's operation in European countries commenced in 1997 and at present has branch operations in 15 countries and presence in more than 20. Its three development centres in the U.K., Germany and Hungary serve over 160 active customers in Europe.

SHANTHI KANNAN

(Recently in London and Germany)

2008-11-13T15:11:00.001-08:00

By Pete Engardio
Business Week Online
08/16/08 4:00 AM PT

India's engineers are gaining in skill and experience, leading many
companies to grant autonomy to their Indian divisions. Some are
responsible for entire product lines, from engineering to profits and
losses. All this being done despite the rising wages and overcrowding
that plague modern India.

The Fujitsu ScanSnap Scanners - Scan to searchable PDF with the touch
of one button! Scan 18 color double-sided pages per minute, from
business cards to legal-length documents. Tell us how you ScanSnap.
You might win a $100 American Express gift check!

Given its skyrocketing wages, tightening labor market, and worsening
infrastructure bottlenecks, one might think India is starting to lose
steam as an offshore research and development haven.

Not a chance. According to a study by Zinnov, a consulting firm that
helps multinationals craft global product-development strategies,
India's R&D scene is not only still gaining momentum, it's also
becoming more strategically important. This is happening even though
the average cost per employee rose 16.2 percent annually in the past
three years.

Offshore R&D has mushroomed into a US$9.35 billion annual industry,
Zinnov reports, and is growing at a 23 percent annual clip. By 2012,
the firm predicts, this business will reach $21.4 billion. The
findings are based on interviews with senior managers of 120
India-based R&D centers of foreign companies.

The key drivers are multinationals. Roughly two-thirds of the work is
done at R&D centers owned by tech giants such as Cisco (Nasdaq: CSCO)
, Motorola (NYSE: MOT) , General Electric (NYSE: GE) , and HP (NYSE:
HPQ) , as well as a growing number of small- and midsize U.S.
companies. The number of such foreign-owned centers has surged from
180 in 2000 to 594 this year.

What's more, the India R&D bases of multinationals increasingly are
becoming the leading sites for developing particular products sold
globally, whether they be new chips, software packages, or telecom
devices. That means they often are responsible for all of the
engineering, strategic direction, and even the profits and losses of a
product line. Currently, 10 percent of offshore centers have "full
ownership" of product lines, Zinnov estimates. By 2012, that will
reach 30 percent.

Affordable Quality and Experience

Why is such Indian offshoring continuing to rise despite higher costs?
One reason, of course, is that despite all the wage inflation, India
remains a lot cheaper than the U.S. The total cost of employing a
full-time Indian engineer -- including wages and benefits, facilities,
telecom, travel, and administrative support -- ranges from $35,000 to
$55,000. The U.S. average is at least three times that, Zinnov says. A
lead engineer in India still averages just $30,000 a year in salary,
while a raw recruit classified as an "associate engineer" draws a mere
$4,440 a year. The growth of Indian engineering wages, meanwhile, is
starting to slow, meaning the gap with the U.S. won't close anytime
soon.

But a bigger reason, asserts Zinnov Managing Principal Vamsee
Tirukkala, is that the growing quality and experience of India's huge
technical workforce is offsetting escalating wages. Some of the
estimated 250,000 Indian engineers working on global R&D, especially
those who have been employed by big Indian software-services providers
including Infosys, Tata Consulting Services and Wipro, now have 10
years of experience working for international corporations, Tirukkala
says. Countless others have received heavy training by their Indian
employers. "The reason to go to India no longer is just about cost,"
he says. "It's about the quality of talent."

That's a big reason Bangalore -- even with its horrible traffic
congestion and soaring costs -- remains by far the most important R&D
base. Of the city's 80,500 engineers working in foreign-owned R&D
centers, according to Zinnov's statistics, about two-thirds have four
to seven years of experience. One-third have seven to 15 years, enough
to qualify as a lead architect for many products. No other city in
India comes close, Tirukkala says.

An influx of returnees from the U.S., Britain, and Australia, many
boasting years of managerial and R&D experience at Western
corporations, is supplementing India's technical workforce. Expatriate
Indians now account for 10 percent to 15 percent of the staff in
offshore R&D centers, Zinnov estimates. The software industry alone
has benefited from the return of 30,000 expatriate professionals,
according to Nasscom, India's information technology trade
association. "The immigrants have brought the high-end talent that
India needs," says Tirukkala.

Up the Innovation Ladder

This greater experience is enabling India to move up the innovation
ladder, Tirukkala argues. More companies are making India the main R&D
base for certain products because they are finding it harder than
expected to control offshore engineers out of the U.S. "Chief
technology officers are finding that globally distributed innovation
is not working," he says. Some companies have decided to move
engineering back to the U.S. But others have shifted top managers to
India to run development work entirely from there. The India country
head of software giant Adobe Systems, (Nasdaq: ADBE) for example, is
also senior vice-president for its global printing and publishing
system product business.

Not all analysts are convinced Indian R&D operations are ready to
assume the lead in innovation, however. Martin Kenney, a University of
California at Davis economist who has studied offshore R&D in India
and China, agrees the trend is still growing in India and that its
workforce is becoming more experienced and innovative. Since 2000, he
notes, U.S. patents awarded to inventors filing from India rose more
than fivefold, to around 550 a year.

But the number of India patents remains very small in the scheme of
things: Last year the U.S. issued nearly 94,000 patents. And Kenney
suspects the vast bulk of India's engineering hordes still is far too
green to do complex design and innovation work. "Bangalore is not like
Silicon Valley, where in a couple of weeks you can round up 10 people
who have already designed chips at three different startups," he says.
"We don't really yet know much about the true quality of the work done
there. There are company anecdotes going both ways. Some of it may not
be what it is cracked up to be."

Kenney believes low cost is still the primary reason U.S. companies
are shifting work to India. "My guess is that if the Indian engineer
cost the same as our engineer, nobody would go to India," he says.

Kenney does agree, however, that India's R&D workforce is steadily
gaining the experience to produce innovation. The debate is whether
that time is another five years away -- or has already arrived.

2008-11-13T14:53:00.001-08:00

Indian giant Tata to launch UK design agency

Catherine Dawes, packagingnews.co.uk, 12 November 2008

Tata Group, the Indian steel giant, is to launch a branch of its Indian design consultancy Tata Elxsi in the UK and is planning more international expansion, Packaging News can reveal.

The industrial giant, which owns companies including steel maker Corus, Jaguar Land Rover, and Tetley tea, hopes to open a global network of design studios that would connect back to its central hub in Bangalore.

Tata's UK studio in Milton Keynes will focus initially on design work for the FMCG and home appliances markets, and already has projects for major clients in these markets underway.

The consultancy will offer packaging design, product design, graphic design and product realisation, and is holding a launch event tonight at the Design Council in London.

Tata Elxsi was established in Bangalore in 1989 and has more than 3,000 staff offering product design, R&D and technology development, across industries including FMCG, electronics, automotive, media and communications.

In October, Tata Group was forced to look for a new location to manufacture the Nano, which it is promoting as the world's cheapest car, after a row over the land for the factory in West Bengal.

2008-11-11T19:53:00.001-08:00

Tata drill for crunch hour
6-point plan for 96 bosses

PIYA SINGH

Mumbai, Nov. 11: Ratan Naval Tata, chairman of the $62.5-billion Tata group, is in crisis mode.

The feisty 70-year-old chairman of one of the oldest business houses in the country has ordered the chief executives of his 96 group companies to put off acquisition plans unless these are strategic in nature, soft-pedal capacity expansion plans, tap into all available credit lines, pare costs and improve operational efficiencies.

In short, batten down the hatches — as the group tries to cope with the rumbling effects of the worldwide financial turmoil.

Last week, Tata wrote to the CEOs of all his group companies warning them about the far-reaching implications of the credit crisis that has roiled businesses across all geographies.

He asked his head honchos to kick off a critical review of business plans and strategies.

Tata outlined a six-point action plan that each company should consider in the backdrop of the deepening credit crisis. Besides ordering a complete review of all buyouts and expansions, the action plan directs the CEOs to look at ways to conserve cash, tap into existing funding agreements, and cut operational expenses, it is learnt.

Tata, who took over the group's reins in 1991 and turned it into a conglomerate straddling six continents, is altering the roadmap for the 96 operating companies to help them deal with the global credit crunch.

Some of these guidelines could spell a strategic shift from the way the group has carried out business over the past decade. The Tata group had been well on its way to realising the chairman's ambitions of becoming "an Indian business conglomerate that is at home in the world".

Over the past eight years, it has notched up overseas acquisitions worth $18 billion, including deals like Tata Motors' $2.3-billion buyout of Jaguar Land Rover, and Tata Steel's $12.1-billion takeover of Anglo-Dutch steel maker Corus in early 2007 — the biggest overseas acquisition by an Indian company — that turned it into the world's sixth largest steel producer.

There were other acquisitions as well: Tata Chemicals bought Brunner Mond of the UK, Tata Motors took the wheel at Daewoo Commercial Vehicles of South Korea, Tata Steel snapped up Singapore-based Nat Steel, VSNL (now Tata Communications) locked into Tyco Global Network, and Tata Chemicals acquired the US-based General Chemicals. Some of these deals, however, have faced pressure to refinance their debt obligations.

At present, the group has 263 projects under various stages of implementation (including some that have just been completed). The big-ticket project investments are currently being made by Tata Steel, Tata Power, Tata Teleservices, Tata Motors, Tata Chemicals and Tata Communications (see chart).

High-profile projects like the Nano small car venture, which has just been relocated from Singur to Sanand in Gujarat, and the Mundra ultra-mega power project will not be impacted by Tata's directive, said an analyst on the condition of anonymity.

The CEOs of companies that operate in sectors that are facing cyclical pressures may, however, review some of their plans, he added.

Tata has reportedly expressed concern about the ability of the companies to access credit and raise equity in the current scenario. He does not expect the state of affairs to improve over the next year or so.

Tata group companies have seen a spurt in borrowings as a result of their aggressive acquisitions. Data collated by CMIE show that Tata Steel saw an 84 per cent year-on-year growth in borrowings. Tata Motors reported a 57 per cent rise in borrowings during the year ended March 2008.

Tata has said the current crisis calls for immediate action. The global exposure of the group — revenues from international operations amounted to $38.3 billion, or 61 per cent of its total revenues in 2007-08 — has probably made Tata more sensitive to the implications of the financial meltdown.

The Tata directive could now serve as a cue to other business houses and conglomerates in the country.

What's New in Outsourcing

Where do I sign up for my H-1B visa?

Palestine promoted as outsourcing destination

Offshoring could help to stabilise Middle East region

Offshoring & Outsourcing in 2009: What Does the Future Hold?

Harris assists State with outsourcing services

Household Expenses and Living Conditions

Large Households

Mud Floors and Walls Common

Few Household Amenities

Car, Computer Ownership Rare

Electricity Not Always Reliable

Brazil's Vale to reduce nickel output in Canada

UPDATE 1-India's Infosys to freeze new hiring as growth slows

Recession Trickles to India

Suppliers have been hurt by auto industry's outsourcing

Posted by Robert F. Mollic, Girard December 03, 2008 04:49AM

India may lose outsourcing deals after Mumbai attacks

Obama's health reform push seen buoying health IT

Outsourcing comes home to roost

First came the flop with the benefits services provided by Accenture. Now state agencies express great dissatisfaction with IBM's handling of their computer services.

"Methinks he protest too much" Shakespeare

With Times Tight, Even Lawyers Get Outsourced

By NIRAJ SHETH in Mumbai and NATHAN KOPPEL in New York

Related Articles and Blogs from WSJ.com

Related News From the Web

Email Newsletters and Alerts

Email Newsletters and Alerts

marketplace

More in Careers Main

Rubin, Under Fire, Defends His Role at Citi153 comments

Showdown Looms Over 'Card Check' Union Drives25 comments

Seeking a Presidential Pardon? Try Praising the Right to Bear Arms22 comments

Shoppers Hit Stores but Mood Is Subdued19 comments

An Ode to Oil18 comments

Email Newsletters and Alerts

Email Newsletters and Alerts

Ask a Question

Journal Community

Hello

Notice:

Log In or Subscribe to access your WSJ.com Account

WSJ.com Account:

Help & Information Center:

About:

WSJ.com:

Tools & Formats:

Digital Network

Foreign language editions:

WSJ International

Filed in archive Offshoring by Scott Wilson on November 26, 2008

India optimistic about outsourcing, despite global financial crisis

Egypt: The New IT Outsourcing Destination

Indian outsourcing groups prepare to stage comeback

It's easier to get a job in the US, than it is right at home.

This Offshoring Patent Services to India Report is Now Available

Transition Watch: Obama will cut outsourcing

Indian giant Tata to launch UK design agency