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JUNE 2005 |
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PUBLISHER'S NOTE:
 While the Western media was hyping Andhra Pradesh’s “wonderful” Chief Minister N. Chandrababu Naidu and his dreams of bringing IT to that state, a terrible man-made disaster struck the state’s villages. Harsh doctrinaire policies of neoliberal ayatollahs put Andhra farmers in such an economic fix that they committed suicide in unprecedented numbers. Siliconeer had previously written a cover story on the disgraceful episode (“The Threat to Food Security: Peril to Both Iowa, Telengana,” by Sripad Motiram, Vamsi Vakulabharanam and Vijay Prashad, February 2004), but for two reasons, we decided to revisit the issue. First, we have learned from a report of the British charity Christian Aid that it wasn’t just Indians. Tony Blair’s Labor government pumped in British taxpayer dollars to finance the murderous policy. Second, the Christian Aid report gives a heartbreaking human face to the tragedy. We present some vignettes from the report as we focus on the fallout of blinkered ideology. The Indus Entrepreneur’s annual conference is billed as “the world’s largest conference for entrepreneurs.” Every year, TiE manages to rope in a who’s who of the hi-tech entrepreneur world, and this year was no exception. IT honchos rubbed shoulders as Pulitzer Prize-winning New York Times columnist Thomas Friedman regaled the audience with the argument he has been making in his latest book: the U.S. better get its act together in the contemporary globalized world, otherwise countries like India or China are going to eat America for lunch. We carry a report in this month’s issue. Outsourcing is one hot topic now. American industry says the U.S. needs continuous access to foreign skilled manpower as well as the flexibility of outsourcing to compete in a globalized world, but irate IT employees are crying foul. They say this is an attempt by U.S. corporations to use cheap labor at the expense of American employees. Now a bunch of entrepreneurs have come up with an idea which neatly dances around the argument. They are planning to commission a ship off U.S. shores in international waters and house both U.S. and Indian IT employees, thus giving new meaning to the word “offshoring.” Our India correspondent Siddharth Srivastava reflects on this issue. |TOP| MAIN FEATURE: Fields of Despair: The Death of Lachi Reddy - A Christian Aid Report
On the morning of Feb. 2 this year, 32-year-old Lachi Reddy seem no more depressed than usual. He had been worried for months about the mounting debts on his three acres of potatoes and, his wife Bujjamma believed, today was no exception. The harvest was due and Lachi knew he was in the wrong crop. Seed potatoes were expensive and as they grew, they were thirsty for the water and fertilizer needed to force the dry, red earth round the village to yield a viable crop. Ever since he had begun farming a decade ago, these extras had cost more and more. So Lachi had borrowed. First from the banks and when they refused, he went to private lenders. Lenders rarely said no, but their yes cost dearly—36 percent on the repayments. Even with all the latest pesticides and chemicals to throw at the land, making a living had been a huge struggle for Lachi. Over the years, sales hadn’t come even close to covering costs. Then, two years ago, the situation deteriorated rapidly. The last of the surface water evaporated in the storage tanks around the village in the Madak area, as it fell victim to the severe drought covering most of the Deccan plain in Andhra Pradesh. Without water there was no hope, so Lachi did what all his neighbors had done, and borrowed even more money—Rs,80,000—to dig a bore well. It was a gamble. There might not be any water where he dug, and the men from the agriculture ministry who could tell him where to dig hadn’t been seen for years. But unless Lachi spent the money, he would never find out. The alternative—doing nothing, invited certain failure. Besides he might strike it lucky. He did. There was water where he dug. Only his troubles lay elsewhere. The price of potatoes at market had fallen too low even to repay the interest on the loan for the ell, let alone all his other debts which now amounted to some Rs. 170,000. So two years ago, Lachi had decided he would have to change to another crop. Sugar cane was the answer, he thought. It seemed a more reliable cash crop than potatoes. And he couldn’t go back to traditional farming. Given his debts, just growing the crops he needed for his family was no longer an option. The trouble was that now he didn’t have enough money to buy the cane or the labor to plant it. The banks continued to refuse anymore loans, and even the private lenders were saying no. The only option left open to this proud man was to go round to his friends and neighbors pleading with them to lend him some money. It is hard to imagine what it took Lachi to ask this. For the sake of his wife and two young sons, he had to try. He must have known that everyone in his home village of Raipally was in the same position. He must have realized, therefore, that he would be rebuffed. Perhaps he knew even then that the alternative was far worse. So on that February morning as Lachi looked out at his potatoes waiting to be harvested, he must have realized that his troubles were far more than simply being in the wrong crop. But we can only surmise what he really thought, because at 10:30 a.m., Lachi told his wife that he wanted top get something from the bullock care. Without anyone seeing him, he went back to his empty hut and swallowed a bottle of Endo Sulfan pesticide. With this inside him, he returned to Bujjamma. He told her once more about the potatoes and the debt and the sugar cane and the water, and how he believed that he could not care for his family. While taking, he collapsed. He never regained consciousness and died later that day in the local hospital. In 2004, 2,115 of the state’s farmers took their own lives. That’s over 40 people a week—nearly six a day. Since, 1998, 4378 farmers have committed suicide in Andhra Pradesh. The causes of suicide are always complex. Many areas of India have been afflicted by terrible droughts which have exacerbated existing problems. It is also true that farmers from all around the world have always taken their lives for a variety or reasons. But in Andhra Pradesh the number of such deaths rose sharply from the mid-1990s, caused by an agricultural crisis in the state which has provoked a crisis of personal debt and misery. The agrarian crisis was caused by a zealous program of liberalization and privatization brought about by the World Bank, the International Monetary Fund, with the active support of the British government. In 2005, the Commission on Farmers’ Welfare, set up by the Andhra Pradesh government, concluded that the state was in “an advanced stage of crisis.,” the most extreme manifestation of which was the rise in suicides among farmers. Chaired by Professor Jayati Ghosh of Jawaharlal Nehru University, the commission concluded that the causes of the problems related directly to public policy and economic strategy at both local and national levels. Heavy burden of personal debt among farmers is the “most acute proximate cause of agrarian distress,” the commission said. “There may be various reasons for the farmers’ suicides, but the most important one seems to be the very high level of indebtedness,” says JNU economics Prof. Utsa Patnaik. “The question is: Why should there have been this phenomenon leading to high indebtedness?” Simply, there are solid institutional reasons: (i) A steep rise in the cost of inputs; (ii) Volatility and often a fall in the price of produce (iii) Lack of proper agricultural advice and (iv) lack of access to formal lines of credit. Farmers like Lachi Reddy have been forced to pay more for their seeds, fertilizers, pesticides, water and power. At the same time, the price they’ve received for their crops at market has swung wildly and even fallen. Round this off with an inability to get bank loans and a sudden absence of proper advice from the state government on what crops to grow where, and farmers are on the fast track to ruin. “While this is a generalized rural crisis, the burden has fallen disproportionately on small and marginal farmers, tenant farmers and rural laborers, particularly those in drier tracts. The most extreme manifestation of the crisis is in the suicides of farmers.” Farmers were encouraged to shift from growing a mixed bag of traditional subsistence crops to concentrating on single cash crops. This was fine while it lasted, but dangerous in the longer term as farmers found themselves competing in a volatile market. Non-food cash crops increased hugely the amount of water, pesticides and fertilizer required to grow them, having a significant effect on farmers’ debt. Andhra Pradesh’s love affair with liberalization received a major fillip when Naidu signed the first-ever state-level agreement with the World Bank—The Andhra Pradesh Economic Restructuring Program.The World Bank gave Andhra $830 million in return for a set of structural reforms. Naidu enlisted international consultants McKinsey, which envisaged a new form of corporate agriculture which saw small firms giving way to larger ones. Markets were to be opened, agriculture was to become agribusiness. “The state of Andhra Pradesh had become a laboratory for every extreme form of neoliberal experiment,” said Jayati Ghosh and C.P. Chandrasekhar. A DFID grant of $3.1 million was used to help set up a body called the Implementation Secretariat. DFID awarded the contract of running the secretariat to the right-wing, free market fundamentalists from the Britain-based Adam Smith Institute. Till Naidu was thrown out, the IS was immersed in a whirlwind of privatizing activity. At the project’s heart was Adam Smith. As Adam Smith’s influence grew, so did the number of state-run enterprises to get the chop. In phase one, 19 went down. By the end of it 43 state-run enterprises had bitten the dust. Former Andhra Pradesh principal secretary V.K. Srinivasan said: “This is privatization of governmental decision-making with staff neither being responsible for the results nor being accountable to the government or the legislature.” The Implementation Secretariat’s savaging of the public sector seriously damaged some aspects of the agricultural sector. The immediate causes of the terrible suicides deaths in Andhra Pradesh is debt. This debt was brought on by a number of factors, all of which, except for the weather, can be ascribed to liberalization. “There is a general attitude towards (privatization) and specific interventions that have contributed substantially to removing public protection from farmers,” said Jayati Ghosh. “And without public protection no farmers anywhere in the world can survive, and that’s what’s happened here.”
INFOTECH INDIA  Award for Chemist... Infosys Profit Up 50 Percent... Wipro: Alliance with Wind River... I-flex Castek Alliance... Satyam in Malaysia... Singtel Pumps $252M in Bharti... Capgemini Opens New Center... Scandent Net Up 22.5% — Here is the latest on information technology from India Award for Chemist  Renowned Indian chemist Professor C.N.R. Rao has won the one million USD Dan David Prize here for his lifetime contribution to material sciences.“This is a high point in my career. I have received several awards but this is like the Nobel Prize. The standards are very high here and such a major award is being bestowed on an Indian after a long gap since C.V. Raman got the Nobel Prize in 1930,” Rao said before the award ceremony. He also expressed hope that the award will inspire young Indian scientists to believe that pioneering research can be carried out in their own country. “I always wanted to stay and work in India. I never wanted to move out even though I could and I am glad that my work is being recognized,” Rao told PTI. The Dan David Prize is a joint international enterprise endowed by the Dan David Foundation and headquartered at Tel Aviv University. The award is annually given in three fields — archaeology, performing arts and material science — in the three dimensional time framework of past, present and future. Reminiscing his long trail of scientific research, the 71-year-old Linus Pauling research professor at the Jawaharlal Nehru Centre for Advanced Scientific Research in Bangalore said that people initially ridiculed when he delved into solid state research some 40 years ago. Infosys Profit Up 50% Nasdaq-listed Infosys said its April-June net profit rose to 1.9 billion rupees or 28.59 rupees per share, from 1.27 billion rupees or 18.93 rupees a share in the same period a year ago. Total income rose 68.9 percent to 6.26 billion rupees. That exceeded the consensus net profit estimate of 1.84 billion rupees in a Reuters poll of 12 brokerages. Net profit rose 4.4 percent from the previous January-March quarter, compared to expectations of a mere 1.45 percent increase. “Infosys has surpassed expectations both on profit and total income,” said Chetan Shah, a technology analyst at DBS Securities in Bombay. “The client additions are encouraging considering the current environment. In the light of the company guidance, we plan to revise our whole-year profit estimate upwards.” The technology bellwether added 26 clients in April-June, against 37 in January-March, the highest quarterly figure ever. Bangalore-based Infosys, the first Indian software company to report results for the past quarter, had forecast in April total income of 5.8 billion to 5.9 billion rupees. Infosys announced the results before the start of trading. Infosys’ shares were up 1.7 percent at 3,580 rupees in mid-morning trading. The Bombay Stock Exchange benchmark index was up 0.65 percent at that time. Alliance with Wind River I-flex Castek Alliance As part of the alliance, the company has established an equity financing arrangement with Castek that allows it to become the largest shareholder in Castek, I-flex informed the Bombay Stock Exchange. R. Ravisankar, CEO of international operations and business development of I-flex, has joined Castek’s Board of Directors, it said. “Our investment in Castek creates a winning combination of I-flex’s project and quality management skills built over a decade coupled with Castek’s advanced product intellectual property and domain expertise. We are committed to the insurance industry and this initiative is in line with our mission of enabling financial institutions worldwide to excel through the use of technology,” he said. The firm is currently holding talks with potential clients including banks, the financial sector and government bodies, Satyam’s senior vice president Zain Hussain was quoted by the New Strait Times daily as saying. He said the pressure and demand from customers globally would drive business to solutions of this kind to be more competitive. The VDS, which has been tested by Satyam, will help coordinate inter-departmental functions via shared information. The company has decided to use Malaysia as a development center to market its products and services to other international markets, the daily said. It added that Satyam had transferred the bulk of its outsourcing operations in India to Malaysia. SingTel’s stake has gone up by buying shares worth $252 million in the unlisted Bharti Telecom which is the parent company of Bharti Tele-Ventures. Meanwhile, the company has decided not to proceed with the proposed secondary overseas issue. SingTel’s stake in BTVL has been increased through its subsidiary Pastel Limited which has increased the stake in Bharti Telecom to 32.81 percent from 26.96 percent.
CONFERENCE
Entrepreneurs’ Bash: TiECon 2005 - A Siliconeer Report Headlined by the likes of Pulitzer Prize-winning New York Times columnist Thomas Friedman, this year’s TiE conference was abuzz with ideas and eager, energized participants. A Siliconeer report.  CLOCKWISE FROM TOP, LEFT: NEW YORK TIMES COLUMNIST THOMAS FRIEDMAN, GOOGLE CHIEF ERIC SCHMIDT ; VIEW OF THE CONFERENCE HALLWAY; SLOGAN FOR THE MEET (BOTTOM, CENTER) AND PANEL PARTICIPANTS (L-R) ADOBE COO SHANTANU NARAYEN, MICROSOFT VP SATYA NADELLA AND ORACLE VP FRANK PRESTIPINO. (ALL PHOTOS BY SOM SHARMA / DIGITAL IVISION) Two-time Pulitzer Prize-winning New York Times columnist Thomas Friedman headlined an A-list of Silicon Valley entrepreneurs at the TiECon 2005 May 13-14 at the Santa Clara Convention Center hosted by The Indus Entrepreneurs. With Silicon Valley showing renewed signs of life after a prolonged hangover following the dot-com debacle, many of the 3,000 attendees had a spring in their step. Friedman quoted Infosys chief executive officer Nandan Nilekani, who told Friedman in India that “the global playing field is being leveled, and you (Americans) are not ready.” It is hard to think of a more receptive audience. The articulate foreign affairs writer, who seems to be everywhere these days as he promotes his book “The World is Flat,” is telling anybody who will listen that in the present “plug and play” world, Americans are dangerously unaware of the impending challenge that is going to be posed by formidable brain power coming out of countries like India and China. As he rattled off key events that led to his flat-plain theory — the fall of the Berlin Wall, Netscape going public, the growth of middleware connecting applications, the open standard movement, outsourcing, offshoring, supply chain efficiency and the convergence of all these elements, the audience lapped it up, not always without a trace of self-satisfied smugness. TiE likes to call its annual conference “the world’s largest conference for entrepreneurs.” In its Web site, it said the conference offered “two days of learning, discussion and networking among thought leaders, corporate executives, and successful veteran entrepreneurs.” The conference detailed “the framework of today’s business environment and discuss(ed) the big issues facing industry and entrepreneurs. Plenary sessions and panel discussions focused on business ecosystems in networking, semiconductors, software, storage, consumer Internet, wireless and new emerging technologies.” In opening remarks at the conference, TiE Silicon Valley president Raj Jaswa celebrated the diversity within TiE. In a joint presentation, TiE Inc. chairman Apurv Bagri and TiE Inc. president Sridar Iyengar spoke about the progress of the organization. TiE now has 42 chapters in nine countries, 1,300 chapter members and over 7,000 members worldwide. Bagri added, “More than 70,000 people every year attend (one of TiE’s) 500 events.” Iyengar said TiE is looking for TiE members to help launch new chapters in Dhaka, Mauritius, Colombo and South Africa. Google chief executive officer Eric Schmidt was on hand. In his remarks to the audience, he dismissed any notion that cost-cutting was his company’s priority when he open research facilities in India. Google was in Bangalore and Hyderabad, he said, because it was attracted to the brainpower of India’s top computer scientists.
Schmidt was cautious about detailing specific projects, but he indicated that high-end research that meets Google’s scalable requirements is one area of focus. Google’s corporate culture apportions about 70 percent of employees’ time to core issues, 20 percent to “adjacent” areas and 10 percent to “blue-sky,” or visionary, ideas. He said Google was lucky enough to have so many satisfied workers so excited about their work that few workers gravitate to blue-sky projects, he said. On day two attendees had to choose between a mind-boggling 17 panel discussions led by founders of software, semiconductors, services, security, healthcare, Internet, networking and wireless digital media companies. “TiECon caters to a global audience, with representatives from top technology companies, leading VC firms, key service providers and consumer electronics firms. Attendees span the spectrum from CEOs of mature companies, to first-time entrepreneurs creating new companies, financial market experts, and government policy makers and well regarded personalities from academics and media,” the TiE Web site says.. In one panel, Yahoo! COO Daniel Rosensweig spoke on the future of Web services. He said the old model of network television, where consumers worked out their schedules to fit the broadcast schedule had been turned upside down in the case of the Internet where the winner would be the nimbler service providers who could attend to the individual consumer’s needs most effectively. He said Yahoo!’s phenomenal growth with revenue of $3.6 billion was made possible because the company has two revenue streams: advertising and paid services. The day’s events included a rebroadcast of Microsoft CEO Steve Ballmer’s May 12 talk at a TiE reception; a keynote speech by Bruce Chizen, CEO of Adobe Systems, Inc.; and a discussion on “Democracy and Sustained Economic Growth.” |TOP| Outsourcing Digest: Siliconeer presents of the latest news from the world of outsourcing.  World Outsourcing Forum in Dubai Nortel Expanding in India Offshoring to Continue SCI Companies Expands Symphony Eyes China Colorado Outsourcing IT Work Report Warns about BPO New Tax Threatens BPO Firm, UMD Battles Outsourcing MindTree Acquires Linc Software World Outsourcing Forum in Dubai The first global forum for the outsourcing industry will take place this year, bringing together for the first time leading outsourcing companies, suppliers, consultants and experts from around the world to discuss future business requirements and opportunities in global outsourcing. The World Outsourcing Forum is a conference and networking based event designed for senior decision makers and industry influencers within global businesses. The forum will take place in Dubai during GITEX international technology week in late September, and will be hosted by Dubai Outsource Zone, the world’s first “free zone” dedicated to outsourcing which launched in June 2004. James Freeman, director of the World Outsourcing Forum said: “Outsourcing has become a defining global strategy for many high-profile multinational businesses, but until now the industry has lacked a focal point to support these companies and the vendor companies that make up this industry. What the World Outsourcing Forum will do is for the first time, enable leading outsourcers and outsourcing suppliers to share case studies and opinion on macro-level outsourcing issues ranging from global sourcing to international standards and corporate social responsibility within a collaborative, open environment.” India’s Minister for Communication and Information Technology Dayanidhi Maran told news agencies in New Delhi that several foreign companies including Nokia, Nortel and Alcatel were lining up to set up plants in India. Other reports quoting Nortel CEO Bill Owens said the company plans to invest and expand in India through equity partnerships and joint ventures. Nortel spokeswoman Ann Fuller wouldn’t comment on the reports, but said Nortel is “aggressively” pursuing growth in India, one of the world’s fastest-growing economies. “Essentially, if it becomes a law that you require locally manufactured products (for Indian government telecom contracts), Nortel will absolutely look at it and work with suppliers to figure out how to address that,” Fuller said. Nortel has previously outsourced much of its manufacturing to other companies and plans to outsource the rest by early next year in order to concentrate on developing new products in higher-margin parts of its business. “Nortel’s pulling out of manufacturing in general, and I don’t think they’d be establishing facilities in India just to address that market,” said Scotia Capital analyst Gus Papageorgiou. However, Nortel bought a $10 million U.S. stake in Indian telecom outsourcer Sasken Communication Technologies in April, saying the two companies would work together to develop new software and deploy Nortel’s networking technology. “There could be some more hiccups, but the long-term factors that favor outsourcing are still in place,” said Gartner analyst Frances Karamouzis. U.S. businessmen have little choice but to continue to outsource IT work because they simply do not have the internal resources to meet their needs, she said. “Some big companies are still operating with green-screen applications because they don’t have the IT people or the skills to move off legacy systems,” Karamouzis pointed out, adding that much of the work that is outsourced will also be placed offshore because of price considerations. Alarms were raised in some quarters about outsourcing to India when it came to light that money was siphoned from Citibank accounts, but most analysts do not see an end to the offshore-outsourcing boom. Karamouzis noted that the perpetrators in the case were quickly arrested and jailed by police. “It shows that India has modern, capable law enforcement,” she said. Adam Frisch, a UBS Securities analyst, also does not believe that the outsourcing market is about to lose steam. “We do not think the fundamentals of a growing and nascent industry will change in a three-month period,” Frisch said in a report. The SCI India operations will be handling data entry of paperwork, which will allow its U.S.-based client service team to focus on providing higher level of quality customer service to its clients. SCI has placed stringent security measures, such as a state-of-the-art firewall and 128-bit encryption, to ensure data integrity between its U.S. offices and its India operation. Over the past months, SCI has identified and implemented key processes to maintain its reputable quality of standards across the board. At the same time, SCI has moved its Atlanta operation center into larger premises. One of the highlights of the 25,000-square-foot office in Lawrenceville is a best-in-class payroll center to accommodate the growing number of clients. The Atlanta operation center handles payroll distribution, benefits administration, and other HR services for SCI clients located primarily in the Southeastern region. “We will start to shift work out to China early next year, employing 100 people to begin with,” Symphony CEO Gordon Brooks said. Seeking skills not easily available in the country, Symphony bought over the services of about 100 people from an existing Mumbai-based company, kickstarting its operations there. That business line also had some employees based in Europe, thus Symphony could strengthen its European offerings too. Symphony operates some 10 different areas, and is expecting to either take over the operations of, or handle the expansion of at least another 20 areas during this year. This will add some 400-500 people on the rolls, said Brooks. Symphony has been advocating third-party outsourcing to companies who want to set up areas and in several cases, managed to take over the entire existing unit when the local set-up could not meet the expectations of the U.S. or European parent. The contract is for developing a computer system called “RISE,” a program to help the department in its mission of preparing disabled Coloradans for the job market. It’s the kind of contract that Sen. Deanna Hanna (D-Lakewood) was trying to forbid state agencies from entering into when she introduced a bill in the last legislative session that targeted outsourcing. “Our taxes should be paying salaries of people who live in our country,” Hanna says. “My citizens are going without jobs.” Hanna’s bill failed to pass, but she hasn’t ruled out re-introducing it. However, a spokesperson for the Department of Human Services, which oversees the Division of Vocational Rehabilitation, says they are bound by state procurement rules that direct them to give the contract to the lowest qualified bidder. “Yes we’re very concerned about outsourcing,” says Liz McDonough, spokesperson for the Department of Human Services. “But the reality is, we also have to balance against the best interest of the taxpayer, and we have to ensure that we get the best value for the federal or state dollars that we spend.” Contradicting this, Sabyasachi Satpathy, director-research, neoIT — an offshore advisory and management firm — said that outsourcing is going to stay, but companies (vendors) need to have strong program governance. “Some of the findings of the report are true, though we cannot say that outsourcing will lose its importance in the near future,” he said. According to Satpathy, companies are now not looking at outsourcing large deals. “Each deal is splitting into two to three vendors. This will provide extra cost benefit to customers. Also, this will lead to lesser dependence on a single vendor,” he said. The Deloitte report says that in the long run, organizations that continue to outsource will experience a loss of bargaining power to vendors as the supply side consolidates. Further, the report claims that weaknesses in operational management will result in more deal failures, prompting organizations to bring more operations back in-house. “Some of the hosting-data centre kind of outsourced work is going back. If vendors try to take beyond what he can offer, there will be some issues,” says Satpathy. According to him, over 60-70 deals in 2005 are due for renewal. “There will be some price negotiations with these projects,” he says. However, he says that outsourcing will continue to offer savings for companies. The US-India Business Council, which represents over a 100 big companies doing business in India, has written to Finance Minister P. Chidambaram saying that the proposed tax will have “significant ramifications on businesses operating from India.” Companies that outsource a huge amount of work to take advantage of the cost benefits that India offers will now have to rethink their strategy as the levying of FBT makes India an expensive place now. The USIBC letter said that the “tax will reduce cost competitiveness and add to litigation at a time when companies operating from India are seeking to build a competitive position in the export sector, and global business interest in India is rising The letter added that FBT will, over time, lead to a misalignment between benefits enjoyed by employees and taxes borne by them, as employers seek to pass on the FBT costs equivalently among employees. Saturn Systems Inc., a 15-year-old software engineering firm, unveiled its “Outsource to America” initiative with UMD’s electrical and computer engineering department. The hope is to increase the number of student interns Saturn uses as part of its plan to offer low-cost services to medium-sized businesses. It’s being offered as an alternative to companies that outsource work to countries such as China and India — a phenomenon that has badly hurt information technology, manufacturing and other American industries. “We’re not going to surrender and say China and India have won,” said Saturn Systems Chairman and CEO Jim Gustafson. Some businesses have found that the savings they expected when outsourcing overseas are disappointing. One study — prepared in 2004 by Howard Rubin, a computer science professor emeritus at City University of New York — said that the average cost savings for New York City companies was 44 percent. He also found that “the true savings can sometimes be less than half of that. Using the skills of UMD undergraduate and graduate interns will help keep Saturn’s fees 30 percent to 50 percent lower than competitors based in larger cities, said Bart Knopik, director of sales and marketing. That’s $40 to $250 per hour, depending on the type of work. Other contributing factors include Saturn’s location in a small city, with its lower cost of living, and the region’s outstanding work ethic. The same concept could be used in other fields, too, said Stan Burns, head of UMD’s department of electrical and computer engineering, which will graduate a record 38 undergraduates and two graduate students this month. The arrangement will give students “skills that you can’t get in the classroom,” he said. Avendus was the exclusive financial advisor to MindTree in this transaction. Avendus vice president Shyam Shenthar said that “the strong competence of Linc in the IBM mid-range system space would enable MindTree to offer its clients a wider range of services thus aiding its plans to grow significantly ahead of the market.” Founded in 1988, Linc Software focuses on the areas of application development and maintenance, ERP product support and Web development. The Bangalore headquartered company has over 220 employees and offices in the U.S.A., U.K., Singapore, Switzerland and Australia. Linc specializes in offering software services to manufacturing and, banking and insurance sectors. The company has Fortune 500 customers such as Conagra Foods, Unilever, Atlas Copco, Emerson Group, Novartis and Viacom. “There is a large installed base of IBM iSeries (formerly AS/400) systems and a strong demand for application development and maintenance on these platforms, the world over. As an important component of our growth strategy, the acquisition of Linc Software will enable MindTree to strengthen its capabilities in this space,” said MindTree CEO of IT Services Krishnakumar Natarajan. OUTSOURCING: Offshoring for Real: IT Workers on Ship - By Siddharth Srivastava  If you can’t get them in, ship them close enough. Savvy U.S. entrepreneurs are now planning to house software developers in ships close to the U.S. coast, giving new meaning to the word “offshoring,” writes Siddharth Srivastava. A front page report in The Times of India talks about three American entrepreneurs who plan to house an international crew of software developers on a ship just off the California coast. This way, say promoters of the company called Sea Code, U.S. jobs will stay close home, foreign workers will be saved immigration hassles, and U.S. firms will get competitive rates for projects. Sea Code will be registered in the Bahamas, not subject to U.S. labor laws. The trio has already identified a $10 million ship called the Carousel for their experiment. The promoters, San Diego techies David Cook and Roger Green backed by investor Barry Shillito, a former assistant secretary of defense, say they will hire around 600 programmers from all over the world — including the U.S. and India. “With hybrid-sourcing Sea Code brings already-off shored jobs back to the U.S. and assures that 90 cents of every dollar from our clients stays in the U.S. instead of flowing to foreign locations,” a company press release said. Cook, a former sailor-turned-techie, said he expects the venture to sail smoothly, adding: “We’re not a slave ship.” His partner Green says it will be more “like the International Space Ram Station.” Well, it remains to be seen whether the trio pull it off, but their attempt surely is a reflection (even if slightly bizarre) of the U.S. industry feeling the pinch of federal government policies to keep a check on the number of foreign skilled workers. Microsoft chairman Bill Gates echoed similar sentiments when he directly slammed the U.S. administration’s strict limits on temporary visas for technology workers (the bulk of whom are Indians), saying that if he had his way, the system would be scrapped entirely. “The whole idea of the H1-B visa thing is, don’t let too many smart people come into the country,’’ the world’s richest executive has said. “The thing basically doesn’t make sense.” Gates was reacting to the current annual cap of 65,000 with an additional 20,000 exempt visas (for foreign graduates out of U.S. universities), taking the total to 85,000 consequent to the outsourcing backlash as well as Americans losing jobs to skilled workers from Asia. Prior to 2000, the H1-B program had a visa ceiling of 65,000 but was increased to 115,000 in 2000 and subsequently to 195,000 for a period of three years, during the tech boom. But, after the three-year period ended, H1-B cap was brought back to the original 65,000 per year, due to protests by American workers in an election year. Last year the quota was exhausted on the very first day the new allocations opened, the first such occurrence. H1-B is the specialty-occupation visa status under which a large number of Indian information technology firms send their employees to the United States for on-site project-development work, popularly known as body-shopping. The United States is the prime export destination for the Indian software industry. Echoing Gates words, Ravi Venkatesan, chairman, Microsoft India, has said: “There exists a demographic challenge in the U.S. with an aging population whereas India has dynamic and highly educated youth. It is in the natural interest of both the economies to allow this integration of resources and talent. In this day of globalization, dropping of artificial barriers such as this is essential to allow free flow of trade and talent to benefit both countries while fostering economic development at the same time.” U.S. industry has been pushing for a removal |
Infosys Technologies, India’s second-largest software exporter, has reported that its net profit rose 50 percent in April-June from a year earlier, beating expectations, but said it was keeping its full-year revenue estimate unchanged. 
India’s third-largest software firm Wipro Ltd. and U.S.-based Wind River Systems, which develops technologies to run software in devices efficiently, has announced that they have formed a strategic alliance. Damian Artt, vice-president of professional services at Wind River, said in a statement that the alliance would increase the potential of both companies in device design outsourcing. Joint customers of the two firms will have access to a larger team of development engineers trained in Wind River products, the statement said. No financial details were disclosed on the alliance, which deepens a relationship that began in 1998. Prior to the announcement, New York-listed Wipro’s stock closed with little change at 667.85 rupees on a slightly stronger Bombay Stock Exchange. 
India’s Satyam Computer Services plans to introduce the company’s Virtual Delivery System solutions, which facilitates information flow in an enterprise, in Malaysia. 
Singapore Telecom has increased its stake in Indian telecom major Bharti Tele-Ventures, offering mobile services under AirTel brand, to 30.84 percent by infusing $252 million dollars.
Europe’s largest computer consulting company, Capgemini, has announced its fourth center in India and will step up hiring people to serve global customers.