|INFOTECH INDIA | Tech Briefs:
Engineering Services Exports India’s Next Big Thing | Nasscom to Train 15,000 Infotech Teachers | INFOSYS: Buys UK Firm | DELL: $1B Revenue | MICROSOFT: Computing Penetration | TCS: Selling 2 Percent | INTEL: $400 Laptops | HCL: Buys Control Point
Engineering Services Exports India’s Next Big Thing
Engineering design and services exports, presently a small component of India’s software and services exports, is set to be the next big thing, says a new survey.
In fiscal 2007-08, engineering services accounted for revenues of $2.5 billion, up from $1.8 billion in the previous fiscal.
This represents a growth of 25.6 percent in rupee terms and slightly more than 40 percent in dollar terms, says the 25th annual information technology industry survey of Dataquest.
This revenue figure does not include revenues from India’s exports in software product engineering, semiconductor design, and other high technology and telecom engineering, the survey says.
“Like in IT services and BPO, cost and access to engineering talent remain the top two drivers of offshore engineering services,” the survey says.
Two years ago, a study done by global consulting giant Booz Allen and Hamilton for National Association of Software and Services Companies had estimated that by 2020, India could earn close to $30 billion (Rs.1.2 trillion) from offshore engineering services.
This was against the backdrop of a global spending of $750 billion on engineering services in 2004, which the study says was growing.
“In hindsight it seems even Booz Allen Hamilton had underestimated the potential,” the Dataquest survey says.
“With a revenue figure of $2.5 billion (despite excluding areas mentioned above), the industry could surpass that $30-billion mark by at least three to four years before 2020,” it says.
The big picture, according to it, is the way rising engineering services revenues represent the possibility of India making a transition from services to manufacturing.
Giving the example of how India’s largest IT services firm Tata Consultancy Services bagged a concept-to-manufacturing contract from an Italian aerospace company, the survey says that if TCS’ experimentation — it is still too early to call it a trend — succeeds, the Indian dream of ‘services to manufacturing’ may just become a reality.
Nasscom to Train 15,000 Infotech Teachers
According to a report, 15,000 teachers in information technology and computer sciences are not up to date with their knowledge, affecting the quality of teaching in technical institutes, Nasscom has said.
In its blueprint on the National Faculty Development Program, the National Association of Software and Service Companies has said teachers need special training to update their knowledge in emerging areas.
As teachers are poor in their own field, the quality of teaching is affected in majority of the technical institutes of the country, it said.
The blueprint says about 15,000 teachers from IT and computer sciences, all from tier-II and tier-III institutes, need to be provided special training.
“In the tier-II and tier-III institutes, the faculty members are not in touch with industry. They are not updated on the emerging areas. These teachers need special training,” Nasscom vice-president Rajdeep Sahrawat told the media.
According to data, there were 1,668 engineering institutes in the country in 2006. About 15 to 20 percent of these institutes come under tier-I category which have all advanced facilities and good teachers.
The standard of teaching is a matter of concern in these institutes. Nasscom has prepared a three-pronged strategy which emphasizes on first-time education, off-line material and mentoring and refreshers’ program.
Nasscom will submit the blueprint on National Faculty Development Program to the government soon, he said.
INFOSYS: Buys UK Firm
Infosys Technologies has agreed to buy British consultancy Axon Group Plc for $753 million as India’s second-biggest software services exporter looks for growth beyond an uncertain U.S. market.
The cash deal values Axon at six pounds per share, a 19.4 percent premium over Aug. 22 close of 5.025 pounds and 33 percent over the average price of the last six months, Infosys CEO Kris Gopalakrishnan said.
The offer price included any interim dividend that Axon, which has a market value of almost $600 million, may announce when it releases results, Infosys said.
The Axon board has already “unanimously recommended” the offer, with its large shareholders and some key employees also supporting the deal, Infosys CFO V. Balakrishnan said.
“They wanted to enter Europe in a big way, and probably this is the reason why they have paid a higher premium,” said R.K. Gupta, managing director of Taurus Mutual Fund in New Delhi. “It’s a positive sign for the company because they were sitting on a huge cash pile, and it was not generating any return.”
Subject to shareholder and regulatory approvals, Nasdaq-listed Infosys expects to complete the deal in November. Axon, which provides services to companies using products of German business software maker SAP, would be delisted, Infosys said.
“The objective is to create a leading global SAP services provider,” Gopalakrishnan said at a news conference. “There is strong demand for these services, and (this) will allow us to leverage the capabilities and strengths of both to have global reach, scale and financial strength to participate in deals that are large,” he said, but declined to give guidance on the impact of the acquisition on Infosys’ margins.
DELL: $1B Revenue
PC giant Dell expects its India business to touch a billion dollars next year. Founder, chairman & CEO Michael Dell, who was in India to launch a new ultra-portable business laptop series, said he was “tremendously excited about growth in India.”
Dell launched a new line of Latitude and Dell Precision laptops, including a 12.1-inch, 0.99-kg business laptop that promises battery life of up to 19 hours and other features targeted at the always-connected business users that Dell calls “digital nomads.” Highlighting the importance of emerging markets for the world’s second-largest PC maker, Dell pointed out that Brazil, Russia, India and China would account for a majority of a billion new laptop users in the next five years.
Talking about opportunities in India, he said, “Internet usage has grown 26 percent in India over the last year. By 2012, India will have the largest WiMAX network in the world.” Dell, which not only manufactures and sells hardware in India but also has a service and support arm, saw a volume growth of 99 percent year-on-year in the first quarter of the year. It had ended the year 2007 with a revenue run rate of $700 million.
“We have nearly tripled our business in India from $300 million three years ago to $800 million we expect to do this year. We will be a billion-dollar business next year,” said Dell A-PAC’s president Paul-Henri Ferrand. Dell, which is a strong player in the large corporate segment, has also made inroads in the government segment. However, it still has catching up to do in the consumer segment, something it hopes would be helped by its presence in retail stores. The company had tied up with electronics retailer Croma to retail its products.
MICROSOFT: Computing Penetration
Microsoft, the world’s largest software developer, is now focusing on developing innovative tools to expand computing penetration in India and other emerging markets, a top company official said in Hyderabad.
“There are only 1.1 billion PCs deployed around the world and we see a huge opportunity in this area,” S. Somasegar, senior vice president of Microsoft’s developer division, told a media conference held here to mark completion of 10 years of its Indian operations.
The emerging markets group at Microsoft India Development Center, the company’s largest development centre outside its Redmond, Wash., headquarters, is focusing on expanding computing penetration in India and elsewhere through personal computers, mobile phones, television and other devices.
“We are focusing on how innovation can make computing more effective and how technology can become more accessible to people,” he said.
“Affordability, desirability, relevance, ease of use and local language interface are the key drivers of computing penetration in emerging markets, and we are innovating around these drivers on PC, mobile and TV,” said Srini Koppolu, corporate vice president and managing director, MSIDC.
MSIDC marked the completion of 10 years of operations by inaugurating a new building on its sprawling campus at Gacchibowli in Hyderabad.
The software giant, which made a humble beginning with 20 people in 1998, now has 1,500 employees in its India arm. They are now contributing to innovation and product development for global customers, company officials said.
TCS: Selling 2 Percent
Tata Sons, the unlisted holding company for Tata group firms, is considering options to sell part of its stake in India’s largest software exporter Tata Consultancy Services to fund the group’s expansion plans, especially in telecom.
Currently, Tata Sons holds 74.81 percent stake in TCS, which has a market value of nearly Rs. 610 billion. Besides, till March 31, 2007, the company had cash and cash equivalents of Rs 20 billion on its balance sheet, according to data compiled by credit rating agency Crisil.
The TCS stake sale could be used to subscribe to Tata Motors’ rights issue to fund the Jaguar-Land Rover takeover and for the $2 billion (Rs 84 billion) GSM rollout by subsidiary Tata Teleservices. A 2 percent stake sale in TCS, which has a total market cap of Rs 814 billion, will fetch Tata Sons close to Rs 16.2 billion.
However, a Tata Sons spokesperson said: “As a practice, the Tatas do not comment on future investments and deals.” According to an analyst, the shares may be sold in tranches so as not to further impact the stock price. “Tata Sons has a sizeable stake in the company and even if it sells 2-5 percent in the current fiscal, it will still hold a sizeable stake. At present, the TCS stake sale is the best option for the holding firm in these market conditions,” said sources.
INTEL: $400 Laptops
The world’s largest chip maker Intel is closely working with PC manufacturers like Dell, Acer and Asus to bring down the cost of WiMax-ready laptops to around $300 to $400. “Intel believes a Wimax-ready laptop could be available in the Indian market at around $300 to $400 in a few months,” Intel India’s newly appointed managing director for Wimax division C.S. Rao said. At Rs. 16,000-Rs 20,000, the company expects to make deeper penetration in both urban and rural markets.
HCL: Buys Control Point
Global IT services provider HCL Technologies has announced the signing of an agreement to acquire Control Point Solutions Inc, a provider of voice, data and wireless telecommunications expense management services.
As part of the transaction, HCL will acquire four delivery centers in U.S. with over 200 professionals who come to HCL with domain knowledge and technical expertise. Control Point Solutions is being acquired at an enterprise valuation of $20.8 million.
Commenting on the acquisition, Ranjit Narasimhan, president and CEO- BPO Services of HCL Technologies, said, “The strategic acquisition of Control Point Solutions is in line with HCL BPO’s goal to make strategic, platform-based acquisitions which give us sustainable competitive advantage in chosen verticals. This acquisition enhances HCL’s ability to become an end-to-end provider of business process outsourcing services in the attractive TEM space.”
Langham Capital Limited acted as financial advisors to HCL in the transaction. The acquisition is subject to fulfillment of certain closing conditions.