Wednesday, January 14, 2009

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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.

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.

Wednesday, December 31, 2008

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."
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Monday, December 29, 2008

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."

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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.

Friday, December 19, 2008

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

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.

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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.

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© Incisive Media Ltd. 2008
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