Daily BPO News Alert 31/05/2006

[BPO Business Intelligence]

 

COMPANY NEWS FLASH

Satyam to Invest $60Mn, Hire 2,700 in China by 2008 
According to press reports, Satyam, an Indian IT services provider, will invest USD 60 million and hire about 2,700 more employees in China by 2008. The company has about 300 employees in the country at present. The company will place about 80 percent of its new staff in the second or third tier cities of China in order to prevent wage hikes. At present, the company has centers in Dalian, Shanghai, and Guangzhou in China. The company expects its revenues from China to reach USD 10 million in the financial year ending March 31, 2007. 

IBM's Indian BPO subsidiary grows to 20,000 staff
IBM's Indian business process outsourcing services subsidiary has grown to 20,000 employees from about 6,000 two years ago, the company announced Tuesday. In 2004, IBM acquired Daksh eServices, a BPO company in Gurgaon near Delhi, and renamed it IBM Daksh Business Process Services. It expanded the scope of the subsidiary's services to include business transformation services that helped customers make their processes more efficient. The operation has about 40 customers. IBM has also expanded the number of staff it employs in India for software development. IBM's operations in India have around 43,000 staff, up from 9,000 employees at the beginning of 2004, the company said. The company did not disclose how many of these staff are in software development and related work.

Unisys CEO highlights future growth areas, cost-cuts
Troubled IT services providers Unisys Corp plans to focus on "large, mainstream high-growth markets" and will continue to drive down costs as part of its ongoing restructuring effort, said Joe McGrath, the company's president and CEO. Speaking at a JPMorgan conference in San Francisco last week, McGrath laid out the company's future services strategy and offered some more details into the restructuring it announced last October, including some 3,600 job cuts, or roughly 10% of the total workforce. Currently services make up 83% of Unisys' business, with its technology line pitching in the remaining 17%. For the first quarter for this year, in which the company whittled down its net loss to $27.9m, services revenue grew 6% to $1.18bn. This increase was offset by an 18% sales drop in Unisys' profitable server business. One bright spot was that Q1 marked the second straight quarter of double-digit gains in bookings, McGrath said. Overall, McGrath said the company is looking for revenue growth in the mid-to-high single-digit range by 2008, as well as operating margins between 8% and 10%. These targets are rather bold coming from last quarter, when revenue inched up only 2% and operating margins sunk to negative 12%. McGrath's strategy includes targeting services markets that are growing at least 10% and present a minimum of $500m in annual revenue for the company. The first of these is outsourcing and includes BPO and IT work. It is obviously a large market, but one in which Unisys has had trouble running some of its larger contracts at a profit. It is also a highly competitive space with India's low-cost suppliers having an increasing impact on the market. Read More

Infosys' land search for Kolkata centre continues
An Infosys Technologies' team today saw yet another piece of land for a possible development centre in Kolkata. Infosys is planning a facility for at least 5,000 people, at an investment of Rs 250 crore, in West Bengal. The project entails a minimum land requirement of 100 acres. The site seen today is near Rajarhat and around 20 minutes away from the airport. Infosys representatives - H R Binod, senior vice president, (commercial and facilities) and Niladri Mishra, regional manager, based in Bhubaneshwar- were offered 100 acres at the site. The land would be acquired by West Bengal Industrial Development Corporation (WBIDC). WBIDC was in the process of acquiring 750-800 acres, of which 100 acres was offered to Infosys. Infosys was earlier shown sites at Bantala and Rajarhat for its proposed centre.

HCL stealing business from CROs via India
IT services company HCL Technologies continues to experience rapid growth through its ability to undercut clinical research organisations (CROs) on price for clinical data management (CDM) services through its new operations in India. The company, specialising in value-added IT solutions, business process outsourcing (BPO) and infrastructure management services, saw a 28 per cent jump in sales in the last quarter, while at the same time operating profit rose by a quarter. Through its recent alliance with India's leading CRO, Synchron, the US-owned firm is now providing CDM services to pharma customers in the US, Europe, Japan and the Asia Pacific at a fraction of the cost that US and other Western companies charge. As a result HCL's Pharmaceutical Segment grew by 120 per cent during the last quarter, signalling that the move is paying off. To free up internal resources, pharma companies are typically turning to outsourcing providers, such as CROs, for four key functions: patient recruitment; finding/running investigator sites; CDM and statistical analysis, however, as pharma companies tighten their belts, they are beginning to expect more and more cost savings from these providers.

Java green: NIIT, Sun join forces
Software and training major NIIT on Tuesday announced a tie-up with Sun Microsystems India to introduce specialised education and training programmes for students in programming platforms such as Java and Solaris. The move is expected to boost the topline growth for both companies in India. While NIIT will gain by attracting greater number of students to its centres, Sun will gain by an expansion in the demand for hardware and services that run Java, Solaris and JEES based programmes and application. The two companies refuse to divulge any revenue projections for the tie-up. The tie-up will allow NIIT to get access to newer versions of these languages before they are commercially launched in the market. For the working professionals, the high end Sun curriculum would be integrated into the NIIT’s CATS (Curriculum for Advanced Technology Studies) offerings. The initial launch would focus on the Sun Java platform while Solaris would be addressed later this year, NIIT said.

NEW TENDER NEWS FLASH

Australian Customs Service Floats Tenders for Outsourcing IT Functions 
The Australian Customs Service has floated tenders for outsourcing its IT functions. The organization’s present contract with EDS expires in June 2007. The proposed contract involves data processing, application maintenance and support, voice infrastructure and Internet, and a secure gateway. The organization has stated its requirement for a vendor to provide the mainframe, midrange and storage infrastructure, and related services for a five-year base period and two extension options of three years each. In addition, the organization proposes to set-up a panel of two or more vendors, with another two or more vendors as reserve panelists for providing application maintenance and support services. It is to be a three-year arrangement with two three-year extension options. A single provider will manage the organization’s telephony infrastructure and related services till December 7, 2008. Another supplier will handle the provision and management of certified perimeter gateway services for the Customs Connect facility and services which the organization provides to other governmental agencies. The services will have a base period of two years and two extension options of two years each. 

NEW INDUSTRY NEWS FLASH

India's offshore advantage to last for 30 years
India will maintain its low-cost IT skills advantage in the offshore outsourcing market for at least another 30 years, according to a new study. The 2006 Global Sourcing Market Update, by research company Everest, claims fears that rapid wage inflation and skills shortages will quickly reduce India's offshore cost advantage are "greatly exaggerated". The labour arbitrage advantage India has over the UK will last for at least another 30 years, while India will also retain its low-cost wage advantage over the US for at least another 18 years, according to the report. Low-cost offshore locations such as India and the Philippines are aggressively making moves to minimise the impact of wage inflation by encouraging the expansion of the quality and size of the relevant workforces and by developing more low-cost offshore locations, the report says. IT suppliers in India, for example, are lowering their costs by moving to 'tier two' cities - away from traditional high-tech centres such as Bangalore - and opening delivery centres in other countries.

Board Differences Exist over Outsourcing in UK Cos – Study                                                                                            According to a study commissioned by HCL, an Indian software and IT services provider, there is a difference of opinion existing between the IT and non-IT directors of UK companies regarding ownership and representation of outsourced operations. Vanson Bourne, a UK-headquartered consultancy firm, conducted 100 interviews amongst UK IT directors for the study while Continental Research, another UK-headquartered research firm, conducted 200 interviews amongst finance directors and managing directors in the UK. About 83 percent of the IT directors in the UK wanted to represent outsourcing at the board level as compared to a corresponding figure of 1 percent for finance directors and managing directors. About 40 percent of the non-IT directors preferred finance directors to head outsourcing, while about 25 percent of the non-IT directors preferred operations directors to head the outsourcing. The IT directors are non-supportive of finance directors and operations directors heading outsourcing, with just 2 percent of them supporting finance directors to head outsourcing and 8 percent supporting operations directors for heading the outsourcing. Both IT and non-IT directors did not approve the idea of a separate chief outsourcing officer or outsourcing director.

Nasscom BPO meet to focus on growth, competition
Is the ten-year-old Indian BPO industry facing a mid-life crisis? Managing growth and combating competition will be among the key issues that will be debated at Nasscom's two-day ITES-BPO Strategy Summit on June 7-8 in Bangalore. The ninth annual Nasscom event will focus on the challenges faced by the industry and also on the next phase of growth. The ITES industry, which clocked exports of over $6.3 billion accounting for about one fourth of total Indian IT&ITES exports, had lived up to the expectations and market projections in 2005-06. The summit will focus on how India can emerge as the benchmark in global outsourcing and continue to offer an unmatched package of benefits to overseas investors. The aim is also to draw attention to the challenges and pitfalls that lie in the path of the Indian ITES-BPO sector and how they can be overcome to maintain the country's edge in this space. Attendees will deliberate on issues such as staying fit to survive, the future of third-party BPO vendors, the evolving ITES-BPO landscape and using operational excellence to optimise costs. The event will also host a CEOs Conclave on June 7, which will bring together the thought leaders and business heads of large and specialised ITES-BPO firms. Prominent speakers participating in the event include Mr John McCarthy, Vice-President, Forrester, who will speak on the customer feedback from US and EU markets, apart from highlighting the changing face of BPO in India. Besides, vendors from the Philippines, South Africa, China, Portugal and Pakistan will showcase their ITES and BPO attractiveness and focus on how they can work together and jointly exploit the global offshore outsourcing opportunity.

Outsourcing cuts cost by 50%
If the spiraling salaries of top executives making you compromise on the quality of personnel you hire? Then the solution lies in outsourcing strategic management which will also cut the cost by atleast 50 per cent, says Mukund Lele, director of Essentia Management Services. Cost structure for business process outsourcing (BPO) for service, delivery support and management comprise 22 per cent of revenues, of which senior management staff such vice-president (VP) technology, HR, training, administration, finance, accounts etc form six per cent of revenues, executive staff in support functions comprise four per cent, administration, utilities, communications and others four per cent and marketing, customer acquisitions and commissions cost eight per cent. As BPO operations are driven by cost and quality pressures, "Small or medium size BPOs usually compromise on these costs as they lack sufficient senior management expertise," said Lele who is the co-founder at Essentia and worked in the BPO industry with companies like Genpact, GTL and Office Tiger. Pointing out that the concept of shared management services (SMS) has been there in the IT services space, he said, "It is relatively new for BPOs." The potential for these servicves can be guaged from the fact that there are 1,500 BPOs in the country of which 80 per cent have less than 100 employees.

NEWS YOU CAN USE !!

Goodbye MS Office, hello OpenOffice
Looking for an alternative to Microsoft Office? Try OpenOffice, touted as one of the best alternatives to MS Office. OpenOffice competes almost feature-for-feature with Microsoft Office. Primarily, OpenOffice is a multiplatform and multilingual office suite which is open source and, as a result, is available not only for Windows but also for Mac OS X, Sun Solaris, and Linux. And, most important, it's absolutely free! The suite includes word processor, spreadsheet, presentation, vector drawing and database components. The suite can be installed on different platforms, including Microsoft Windows and Unix-like systems with the X Window System. It can also read and write most of the file formats found in Microsoft Office, and many other applications. The features, such as the ability to save documents in Adobe PDF format, are missing even in MS Office. Read More