Archive for October, 2009

Indian IT Q2 results show optimism

October 31st, 2009

With the US economy – the biggest market for India’s $50-billion outsourcing industry – showing signs of recovery, top honchos at Infosys, Wipro and HCL said their optimism had been proved right.

The financial results of the country’s top three software exporters had already provided signs of recovery earlier this month. India’s software exports industry derives more than half of its revenues from the US.

“The IT industry has seen a better Q2 and given positive guidance for rest of the fiscal. The GDP data reinforces the optimism,” said S Gopalakrishnan, CEO of Infosys Technologies.

While the number two exporter, Infosys saw profits rise by around 7.5% during the September quarter to Rs 1,540 crore, top-ranked Tata Consultancy Services (TCS) saw its net profit grow by 29% to Rs 1,642 crore. Wipro added 37 customers in the second quarter to September-the most in a year-and-a half-and forecast that revenues would rise by up to 4.5% in the three months to December.

Wipro was the first Indian software exporter to provide an upbeat assessment for the industry. The company had said while announcing its financial results during the quarter ending June that things could improve from the second half of this year.

“Any economic recovery in the US, whether it’s consumer spending or capital markets, is really good news. For the tech industry and business of outsourcing, companies will step up investments. They have the money, what’s been holding them back is sentiments,” said Girish Paranjpe, joint chief executive officer of Wipro, India’s third-biggest software exporter.

Many customers, including Citigroup, JP Morgan and Bank of America have been holding back new tech investments because of a worsening economic crisis. With the US economy showing signs of recovery, Indian tech vendors believe the worst could be over.

“There are three phases of growth-negative, wait & watch and positive. The global economy is in the wait & watch stage currently where everyone is planning the growth. The US growing at 3.5% indicates that economic growth will definitely happen in a quarter or two, which will eventually increase spend on IT,” said Vineet Nayar , chief executive of HCL Technologies.

Experts such as Andrew Bartels, vice-president of Forrester Research, said in a phone interview that the $567-billion market for IT goods and services in the US could see positive growth. “We are close to the bottom, and we expect the upturn to happen in 2010,” he said. According to Mr Forrester, the outsourcing market will grow at 4-5 % in 2010.

Mr Forrester also advised tech vendors to step up their marketing and sales activities.
“Now is the time for tech vendors to get ready to take advantage of the rebound in tech-buying as CIOs get the word from CFOs that capital investment can go ahead,” Mr Bartels said in his September report. “With 2010 IT budgets not yet finalised, it is a critical time to remind CIOs of the value and benefits that your solutions can provide to their IT departments,” he added.

Meanwhile, Indian companies seeking to grow their revenues from European markets in order to offset the US slump may find the going tougher. “Europe is the second biggest market for Indian IT companies, and the UK-the biggest European market-is coming out of recession in a very sluggish manner,” said Mr Bartels.


HCL may lose ‘lowest bidder’ status for BSNL’s Rs 900-cr IT deal

October 31st, 2009

In what could affect HCL Infosystems’ ‘lowest bidder’ status for BSNL’s Rs 900-crore IT outsourcing contract for the northern region, rival bidders and other officials familiar with the decision making are crying foul over the shortlisting process for awarding the contract.

BSNL, which is currently evaluating bids for outsourcing development and maintenance of IT technology and business systems across the four regions, had earlier identified HCL as the lowest, or the L1 bidder, ahead of rivals TCS, Mahindra Satyam and Spanco. Now, officials are scrutinising HCL’s bids for some erroneous calculations in
the proposal.

“The errors could be in the nature of an arithmetic error or a missing line item. If the prices of some line items are missing then the price submitted by the highest bidder is substituted in its place,” said a person familiar with BSNL’s outsourcing decisions. The financial evaluation takes place after the ‘financial reading’ in the bid process, he added.

If HCL loses its position, as the lowest bidder in the North zone, following errors detected in its bid during the financial evaluation, Spanco in the North zone and Tata Consultancy Services (TCS) and Mahindra Satyam in the other zones are bound to emerge favourites.

The contract for the North zone is over Rs 900 crore. Spanco, which is one of the companies bidding for BSNL’s outsourcing contracts, said HCL may lose its ‘lowest bidder’ status. However, ET could not independently verify these claims.

“We have come to know there is some calculation mistake in the financial bid of HCL. They may lose the L1 status in the North. BSNL has a very transparent and fair system, and we are sure that very soon the true picture will emerge,” said Kapil Puri, chairman and managing director, Spanco. When contacted HCL Infosystems chief executive Ajai Chowdhry said: “We’re not making any claims that we have got any contract or not got any contract. The announcement should come from BSNL.”

The contract, collectively valued at over $1 billion for all four zones, was closely fought by all vendors with the bids ranging from Rs 850-1,040 crore. So far, HCL had emerged as the lowest bidder based on the financial reading, which is a preliminary reading. “It is now almost certain that HCL Infosystems will not be the lowest bidder in any of the four zones (north, south, east and west),” said a source privy to the information.

The declaration of the winning bid that was expected to be announced on Friday for some zones is likely to be delayed, following the error that was discovered. Apart from HCL, Spanco and TCS are the two other bidders for the North zone.

The two are also the shortlisted contenders for the West zone. In the South and East zones, HCL is competing against TCS and Mahindra Satyam.


QBE signs IT outsourcing contract with IBM

October 30th, 2009

QBE, a leading international insurers and reinsurers, announced a strategic agreement with IBM to transform and manage the IT infrastructure of QBE’s UK and Western European offices.

As part of the contract, IBM will develop and maintain QBE’s IT support services including its helpdesk, desktops, data centres, LAN, WAN and disaster recovery arrangements. IBM’s Portsmouth data centre will manage business support and QBE’s virtualised server estate which will also reduce QBE’s carbon footprint.

Kathy Lisson, COO QBE European Operations, said; “The agreement with IBM underpins QBE’s European transformation of operational support services by delivering a scalable operations platform and raising the service levels for our global operating platforms, particularly in the area of disaster recovery. I am delighted that, after a rigorous tender process, we have appointed a world-leading partner of the calibre of IBM to work with us at QBE.”


Security worries over outsourced IT

October 30th, 2009

One in five IT managers believes their outsourced systems and processes are less secure than their in-house gear, yet intend to increase the amount they outsource, according to a report commissioned by NCC Group.The survey also found that only 64% of IT managers in medium-sized firms expected their companies’ suppliers to have formal security procedures and policies in place.

NCC Group called upon suppliers to demonstrate more commitment to security and warned that companies choosing to outsource simply weren’t asking the right questions of prospective suppliers, putting their business critical systems at risk as a result.

“Businesses that fail to check their suppliers’ credentials, choosing cost and convenience over security, are investing in false economy,” said John Redeyoff, head of 365 assured at NCC Group.

Redeyoff also urged suppliers to uphold their side of the bargain and demonstrate more commitment to security.


IT outsourcing popular among insurers in Asia Pacific: IDC

October 30th, 2009

Insurance carriers in the Asia Pacific are known for their reluctance to spend on IT but the latest report from IDC Financial Insights indicates a change in scenario. The increasingly challenging marketplace is encouraging insurers to forego the tendency to look inwards rather than outsource.

IDC Financial Insights is a research and advisory firm in the Asia Pacific. It is dedicated to help clients select or short-list vendors, assess their IT master plans, and devise business and operational best practices.

The firm says insurers in this region are becoming more aware of the benefits of outsourcing technology. They now realise the importance of outsourcing for competing in today’s challenging marketplace.

Change driven by economic slowdown

The ongoing global economic crisis has given these insurers a major push towards IT outsourcing. These insurance vendors have realised how tough it is to survive in a changing business environment and understand the need to create a more dynamic business framework through the assistance of technology.

These findings are revealed in IDC Financial Insights’ study “Insurance Vendors: Spotlighting the Major Players in Asia/Pacific.” This document assesses the leading insurance technology vendors in this region.

This report focuses on three enterprise-wide technology firms: CSC, IBM and SAP, and six insurance technology firms: 3i Infotech, Cognizant, EAB Systems, eBao Technologies, Mastek and Perot Systems.

The study includes their strategic objectives; approach to product development, deployment and support; value proposition and competitive differentiation; market footprint and client profile; and, overview of major products. In addition, it provides IDC Financial Insights’ assessment of the strengths and limitations of these vendors.

According to Li-May Chew, CFA, senior research manager for IDC Financial Insights Asia Pacific, each company has a unique value proposition, and compete through their different products, services and solutions.

While CSC is known for their large installed base with commendable end-to-end reach, IBM is appreciated for its high commitment level to the industry and vast ISV ecosystem of business partners.

“Among the InsTech organisations, 3i Infotech has a laudable front-end solution that addresses the full spectrum of insurance functions, and eBaoTech is viewed as being an aggressive company that has excelled at building brand awareness,” added Chew.


Focus on core business and cost savings main drivers of IT outsourcing – HiberniaEvros

October 29th, 2009

The ability to focus on core business and cost savings are the primary reasons for IT outsourcing according to a new survey by Irish-owned Hibernia Evros Technology Group. Half (51%) of the companies surveyed were Irish small and medium sized enterprises (SMEs) employing between 1-250 people. The results of the study were revealed at the announcement by HiberniaEvros of a new infrastructure outsourcing service for SMEs called OmniSource.

63% listed ‘focus on core business’ in the top two reasons for outsourcing. Cost saving was the second most popular reason, mentioned in their top two choices by 51%. ‘Releasing internal IT staff for more strategic work’ was highlighted by almost half (47%).*

“Irish firms have an increasingly sophisticated approach to outsourcing,” commented John Kennedy, marketing director, Hibernia Evros Technology Group. “Market perception has been that Irish companies have been reluctant to outsource but the results of this survey suggest otherwise. 71% already outsource some element of their IT. It may be that the economic downturn is encouraging companies to focus more on their core business and explore ways to reduce internal costs.”

The most common IT function outsourced is hardware support (72%) followed by web hosting (41%). Network management and security/virus protection (both 38%) are in the top four outsourced IT functions.

The Hibernia Evros survey asked those firms who do not outsource the reason why. The primary reason is that firms have sufficient in-house IT staff which is cited by over a third (39%). A quarter said it was cheaper to manage IT in-house. Fear of loss of control was cited by just 12% of those who do not currently outsource.

41% of the total sample said they had no fears about outsourcing while a third said that they did.

Of those who had fears, the number one barrier was security/confidentiality which was highlighted by 46%. 29% said they were reluctant to rely on an outside supplier while 28% referred to the difficulty in finding the right outsourcing partner.

“At a time when companies are looking to control costs we see increased interest in outsourcing. But there are genuine fears by those who do not currently outsource and these need to be managed by strict Service Level Agreements (SLAs) and perhaps initially outsourcing part of their IT infrastructure,” commented John Kennedy of HiberniaEvros.

“The survey suggests that many IT Managers are looking to develop into more strategic business roles than simply keeping the lights on.” Over 40% of respondents were at IT Director, CIO or IT Manager level.

OmniSource, the new HiberniaEvros outsourcing infrastructure service geared specifically to the SME market, is aimed at companies with between 25 and 250 employees. HiberniaEvros says that it can boost efficiency and cut IT costs by 20% or more as well as helping to avoid costly downtime and emergency repairs.

107 IT professionals participated in the outsourcing survey which was conducted by Ellwood Market Research on behalf of Hibernia Evros Technology Group. A donation of €1,000 will be made to the National Children’s Hospital in Crumlin as a result of the responses.


Egypt Strengthens Position As A Top Global Offshoring Destination

October 29th, 2009

In the latest Top 50 Emerging Outsourcing Cities report conducted by Tholons, Cairo has been recognized as one of the world’s top ranking offshoring cities.The report cites Cairo’s multilingual workforce, business analytics and testing services as its strongest key functions.

This year’s report featured nine new entrants, with Egypt’s Alexandria breaking into the top 50 for the first time.

“With increased competition among service providers offering similar services, distinction has become difficult to achieve, placing a greater emphasis on location. Businesses are not only looking for cost-effectiveness but are also seeking a location which offers a strong, multi-talented workforce,” said Dr. Hazem Abdelazim, CEO of Egypt’s Information Technology Development Industry Agency.

“Investment in the ICT (Information and Communication Technology) sector has been key to the growth of Egypt’s industry. As a result of this, we have developed Cairo into one of the world’s top outsourcing cities and with Alexandria entering the list, it’s clear to see the benefits this investment is having on attracting new companies to Egypt,” adds Abdelazim.

Smart Village, the Egyptian ICT hub located in the suburbs of Cairo, offers facilities for more than 35,000 people and is home to a growing number of regional and international technology vendors including Vodafone, Ericsson, Microsoft and Oracle. Additional Smart Village offices are being planned for Alexandria to accommodate the countries fast-growing ICT industry, ultimately creating space for over 100,000 ICT personnel.


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