|INFOTECH INDIA | Tech Briefs:
Outsourcing Roars Back to India, China | TCS, Infosys Hiring staff as U.S. Demand Grows | INFOSYS: Rural Bank Deals | CISCO: Global Drive | BHARTI AIRTEL: Outsourcing Cable | WIPRO: Upbeat about Q4 | Wage Hike | No Coaching Classes
Outsourcing Roars Back to India, China
Outsourcing has roared back to life in the last six months with some of it moving to countries like India, and from India to other places like China, the Philippines, Costa Rica and even Romania, according to a new study.
"After fizzling out over the past couple years as companies simply slashed jobs rather than move them, outsourcing is back in vogue," Forbes.com reported citing a new PricewaterhouseCoopers study.
"Cost is still the major factor," Charles Aird, managing director for shared services practices at PWC, was quoted as saying. "But people are also looking for greater efficiency, better quality and access to talent."
The list of what's being outsourced is growing, too, with much of the recent growth being driven by competitors playing catch-up with market leaders that slashed their costs prior to the downturn.
Not everything can be outsourced effectively, though, Forbes said: "Computer customer service that was outsourced to India, for example, was notorious for alienating customers."
"Dell eventually brought much of its call-centre support back into the U.S. from India, while Apple has made a point of keeping support within the country in which the calls originate," it said.
In contrast, application development — a much more complicated skill set — that was outsourced to India has proved to be extremely successful, it said.
There also is a risk that outsourcing some core services can cause damage to a company, Forbes said citing Aird: "The key is that you've got to tie your sourcing strategy to your business strategy."
Not everything can be outsourced to the same place. India, which was the first big outsourcing center, is largely bound by the English-speaking world, Forbes said.
TCS, Infosys Hiring staff as U.S. Demand Grows
India’s top three outsourcing companies are ramping up hiring and increasing pay as global corporations, mainly from the U.S., send more work offshore to cut costs as they emerge from the downturn.
Tata Consultancy Services, Infosys, and Wipro expanded their global workforces by an average of 5.1 percent last quarter, together adding 16,701 employees, company documents show — an early sign that the global recession may ultimately benefit India as cost-conscious companies outsource more work, just as they did after the dot-com bust.
“Our expectations are for flat to marginally stronger IT budgets with a greater share of offshore spending,” Wipro chairman Azim Premji said in a conference call. “Our customers remain focused on cost reduction.”
The employment revival in India's outsourcing sector, which counts on the U.S. for about 60 percent of global sales, comes as unemployment in the U.S. stagnates at around 10 percent — near a 26-year high. Inflation-adjusted wages in the U.S. last year fell 1.6 percent, the biggest decline since 1990.
“When there is a downturn the compulsion to control costs increases,” said Dipen Shah, an analyst at Mumbai's Kotak Securities. “The demand for offshoring will increase. That will play to the advantage of Indian IT companies.”
He argues that the cost savings from offshoring has helped U.S. companies survive — and that's good for the American worker.
“You might say jobs in the US are getting displaced by jobs in India, but because of the value provided by Indian companies and lower costs, there are firms who are able to keep their heads above water and continue to employ their existing employees,” he said.
INFOSYS: Rural Bank Deals
Infosys' product division, which markets Finacle banking solutions, has received orders from 20 regional rural banks for implementation of its core banking solution.
"We have signed 20 deals and we are in talks with other such banks," Infosys Technologies (Finacle) head Haragopal M. said.
More orders, he said, are likely to come as all the RRBs have to migrate to CBS by September 2011, the deadline set by the Reserve Bank of India. Currently, there are 86 RRBs in the country of which 3 banks have become 100 percent CBS.
Two of Union Bank of India's sponsored Rewa Siddhi Gramin Bank and Kashi Gomti Samyut Gramin Bank and Punjab National Bank-sponsored Haryana Gramin Bank is fully CBS.
Finacle core banking solution for RRBs is a comprehensive, integrated yet modular business solution that effectively addresses their strategic and operational challenges, he said.
Haragopal said it is a future-proof solution and can be seamlessly integrated with other enterprise applications. With a robust architecture and proven scalability, it ensures protection for the institution's technology investments.
Talking about another solution, direct banking, Haragopal said, the company has signed up two major deals, one in Europe and other one in North America. In this kind of market condition a solution like direct banking is compelling proposition for the advanced market, he said.
Direct banking is a comprehensive solution for banks to directly acquire, track and service customers, through Internet, mobile or call center channels, in the complete absence of a brick and mortar infrastructure, he said.
CISCO: Global Drive
With the economy showing signs of revival, Cisco Systems, a leading supplier of networking equipment and network management for the Internet, is accelerating its globalization strategy out of India.
In January 2007, Cisco had created the new post of chief globalization officer in Bangalore, to make India its second headquarters. As the number two executive in Cisco, Wim Elfrink is leading the company’s globalization strategy out of India. The objective is to transform Cisco into a company built for scale.
“In three years, we have gradually implemented this head office. We had slowed down in the implementation during the downturn. Now, we see that the economy is picking up and we are accelerating that strategy,” Elfrink said in an interview.
Elfrink was in Mumbai to participate in a panel discussion on securing urban Indian cities at a summit on city planning and governance.
Cisco has chosen India as its worldwide centre for innovation. While it hopes to churn out products and technologies out of India, given that 20 percent of its top leadership is now based here, Elfrink said that Cisco would also look at other markets to tap into unique innovations.
For instance, Cisco could look at Chile for technological innovation in the mining industry. Similarly, it could look at Brazil for innovations in the forthcoming Olympic games. “It does not have to be of the scale we have in India, but from the globalization point, we try to be closer to where the innovation is taking place,” he said.
BHARTI AIRTEL: Outsourcing Cable
Bharti Airtel has invited bids to outsource the management of its inter-city optic fiber cable network and hopes to close the deal before the end of this fiscal, its chief executive officer Manoj Kohli said.
The deal is estimated to be worth up to $1 billion over a five-year period, industry sources familiar with the development said. Kohli refused to put a value to the contract size.
“We will form a joint venture and have a stake in the company to which we award this contract,” Kohli added. The Economic Times first reported in August 2009 that Bharti would outsource the management of its inter-city fiber network, the physical cables on which voice and data signals travel between cities.
Bharti Airtel operates an optical fiber cable network of over 100,000 route kilometers. Bharti Airtel is also set to renew its multi-billion rupee network-outsourcing contracts with Ericsson and Nokia Siemens this year.
State-owned telco BSNL, which has the largest fiber network in the country, comprising about a 600,000 km route, is also set to invite bids from segment players in February to outsource the management of its network. According to executives with the firm, the deal is would be closed in the second half of this fiscal. BSNL’s network outsourcing contract is expected to be worth over additional $1 billion over a five-year period.
Bharti Airtel and BSNL contracts could well be the largest outsourcing deals in the country this calendar year.
WIPRO: Upbeat about Q4
India’s third-biggest software exporter, Wipro, reported a 21 percent rise in third-quarter net profit to Rs 12.17 billion, joining larger rivals TCS and Infosys in providing an upbeat assessment of its prospects for the January-March quarter.
The company added 31 new customers and reported a 5 percent rise in third-quarter revenue of Rs 69.66 billion. The company also said revenues from IT business for the quarter ending March 2010 would rise by 3-5 percent to $1.16-1.18 billion.
“We have seen a positive demand environment which has driven broad-based sequential growth across all our verticals, service lines and geographies,” said the company’s billionaire-chairman Azim Premji. “Our expectations are that IT budgets are going to be flat to marginally stronger with greater emphasis on offshoring,” he added.
Wipro’s upbeat forecast reflects better days ahead for the industry, which struggled to get new business last year as the global economy worsened. The country’s $60-billion IT industry, which serves customers such as General Electric, Citigroup and JP Morgan, is increasingly witnessing more demand for application development and back-office projects, as these clients look to bring down operational costs by outsourcing non-core activities.
However, Wipro shares on BSE closed 1.63 percent down at Rs 725. “Wipro delivered a better-than-expected performance for the quarter, but the fact that its performance lagged its peers left more to be desired,” said Hitesh Agrawal, head of research at Angel Broking.
Wipro, which counts retailers such as Target among its customers, also saw a 1.5 percent decline in billing rates during December quarter because of lesser number of working days during the quarter.
Tata Consultancy Services expects to increase wages in the 2011 financial year, a top executive.
The top software outsourcing firm beat street estimates with a 33-percent rise in quarterly profit as demand for outsourcing surged and prices stabilized.
IT employees and HR experts expect many companies such as Target, Cognizant, SAP, VMware, Mahindra Satyam, TCS, Wipro, Infosys, Genpact, Oracle, MindTree and Accenture to offer a pay hike of 7-15 percent at the operational level and 12-18 percent at senior levels.
Abhinav Krishnan, an employee at VMware, the largest maker of software that lets computers run different operating systems, recently received a salary hike. This came as a big relief to him as he is his family’s sole breadwinner.
“The company I worked with previously did not give me any hike. So I moved out, and my salary has now doubled,” says this 26-year-old employee, who was earlier with one of the world’s largest technology companies.
The improving market sentiments have also resulted in a rise in attrition levels, as companies have started to pay premium packages to hire skilled hands from other companies.
An Infosys employee said attrition levels have gone up and most employees were going to rival firms like Tata Consultancy Services and Wipro, which are offering a 40 percent hike in salaries.
“We are expecting a salary hike of 8 percent this April,” he said. He said that during the tough times, they had to put in six hours of work, which was considered a full day. “Now, spending 3.5 hours is considered to be a full day,” he said.
No Coaching Classes
Each year, hundreds of thousands of IIT aspirants queue up outside coaching academies so they can take a shot at the tough joint entrance exam. A few years on, and on the other side of the campus wall, now as IITians, they have shut the door on these classes, which evinced interested in participating in campus recruitments.
“Some coaching classes wanted to recruit graduates to fill their teaching positions. But we decided against allowing them to participate,” said a source at IIT-Kanpur, who is involved in the placement process.
The same story played out in all other tech school campuses. IIT-Guwahati placement in-charge Saurabh Basu said the institute decided to ban coaching classes from participating in the campus placement process as they want to encourage students to join core engineering companies.
Sources in IIT-Bombay and IIT-Kharagpur also echoed similar thoughts. “We don’t want to encourage students to join coaching classes. Neither for JEE preparation nor during the placement process,” said a faculty member.
Among other educational providers, several private and deemed universities are already on campus, busy trying to attract IITians to join as faculty.