SILICONEER | INFOTECH INDIA: Tech News Briefs | OCTOBER 2009

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One in Four Top BPO Providers Will Vanish

About 25 percent of the top business process outsourcing operatives will not exist as separate entities by 2012, according to research firm Gartner, which Sept. 30 said that market exit, acquisitions, and the ascent of new vendors will rearrange the BPO provider landscape in the coming years, and enterprises should look for warning signs when evaluating BPO vendors to mitigate risk.

“As providers are exposed to the economic crisis, loss-making contracts, and an inability to adapt to standardized delivery models, many will struggle to survive in their current form,” said Robert H. Brown, research vice president at Gartner. “Some will be acquired and some will exit the market completely to be replaced by dynamic new players delivering BPO as automated, utility services.”

Gartner has identified several key signposts to watch for that might herald the predicted market shakeout and identify which BPO vendors might be candidates for acquisition or outright market exit.

Chronically unprofitable BPO deals is one of the key signposts. Some BPO providers are carrying unprofitable contract portfolios, largely stemming from too-much, too-soon pursuit of deals, without much thought as to how to transition them to a standardized, rationalized, profitable state of ongoing operations.

Another key signpost is sustained inability to win new business or drive growth and/or profitability. It is important to gain insight into the vendor’s track record of winning new business, particularly over a sustained period of two to three years.

Loss of established marquee BPO deals to competitors at the end of a contract life, is another big indicator of a BPO's slow demise.

Some heavily leveraged, or risk adverse, vendors may be unable to obtain the necessary investment needed to bid on a business opportunity, however attractive the proposition. In addition to the costs of the bid and proposal, large BPO deals usually require significant amounts of upfront cash investment on the part of the vendor.

Meanwhile, heavily leveraged vendors still invested in the lift-and-shift approach are the most likely to run into problems acquiring funding, says Gartner.

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WIPRO: Eyeing Acquisitions

Against the backdrop of a spate of recent acquisitions by international technology companies like Dell and Xerox, Indian IT giant Wipro Oct. 2 said it is looking at acquisitions to fuel growth.

"We are selectively looking at acquisitions...it will be a string of smaller ones," Wipro chairman Azim Premji told reporters on the sidelines of a conference.

He, however, declined to divulge further details saying, "It is premature to talk of them."

Premji said Wipro is focusing on the domestic sector, which accounts for just about 5 percent of its Rs. 62.74 billion revenues for the quarter ended June 30. About a quarter of domestic sales comes from government projects.

"We are very active in the (government) space and chasing many deals... About 20-25 percent of our Indian revenues come from the government sector," Premji said.

On the signs of recovery in the IT market, which was hit by the global economic meltdown, Premji said, "I think there is stabilization in the market.

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TCS: Singapore Deal

Software giant Tata Consultancy Services Sept. 30 said it has signed a two-year multi- million dollar deal with Singapore-based People's Association for application management services.

People's Association is a statutory board under Singapore's Ministry of Community Development, Youth and Sports.

Under the pact, the IT giant will develop and maintain People's Associations' business and citizen-centric applications, including mission critical applications, TCS said in a statement.

"Our expertise in AMS, combined with our ability to deliver certainty of results, will provide sustained value to People's Association," TCS Asia-Pacific EVP and head Girija Pande said.

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HCL: Hiring Spree

India’s fourth-largest software exporter HCL Technologies plans to hire 2,000 software engineers in the next three-four months to leverage new client base and existing operations across verticals, said a top company executive.

While 30 percent of the new hires will be new entrants, the remaining 70 percent will comprise experienced professionals. This will take the company’s total workforce to more than 57,000 globally.

The software giant struck various IT outsourcing services deal in the past few months, which has led to an increase in demand for workforce. Till last year, the company was active in campus hiring and took in 15,000 new employees.

However, the firm intends to go slow on campus hiring this year due to overall slowdown in demand for IT services world-wide.

“We are following just-in-time model of hiring. Unlike earlier when we used to give hiring guidance 18 months in advance, it will be a quarter or two in advance, as we are yet to have a clear visibility on where the industry is heading. Focus will be on lateral hiring for core IT processes across sectors,” said HCL Technologies global head (human resources) Dilip Kumar Srivastava.

He said the company has no plans to alter the compensation package of newcomers and that variable component of the salary will solely be performance based. Early this year, the company had put a freeze on employee salaries and resorted to bonus cutbacks, citing tight demand and declining volumes in the U.S. and Europe as the rationale.

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Ex Satyam CFO Guilty

A high-powered panel of the Institute of Chartered Accountants of India — the nodal body in India for auditors — has prima facie found two former auditors of Satyam Computer and members of the software company’s internal audit cell guilty of professional misconduct and failure in carrying out their duties.

The institute’s five-member disciplinary committee agreed with the findings of the director discipline, ICAI, which found these people guilty. The findings were placed before the institute’s disciplinary committee Sept. 23.

The committee also found Price Waterhouse-Kolkata and Price Waterhouse-New Delhi prima facie guilty of professional misconduct. PW was the audit firm for Satyam. The institute will issue notices to all the respondents and seek written replies within 30 days, ICAI president Uttam Agarwal said.

Agarwal is also a member of the disciplinary committee. The prima facie guilty are: S. Gopalakrishnan, Srinivas Talluri (former auditors of Satyam), head of audit team P. Sivapasad, audit team member C. Ravindranath, Satyam internal audit cell (head) V.S. Prabhakara Rao and Satyam chief financial officer V. Srinivasu.

However, according to PW officials, the institute has so far not asked for any documents from the audit firm in matters related to the case, and has also not spent time speaking to the two partners of PW to investigate their alleged role in the fraud.

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