Archive for February, 2010

What Budget 2010 has for IT Inc

February 28th, 2010

Has Finance Minister Pranab Mukherjee’s budget 2010 missed Indian IT industry? Yes if one thinks of Indian IT industry’s long- standing demand for STPI scheme extension.

The much-anticipated extension of SEZ benefits for STPI units did not come through (once again) in FM’s budget. In addition, the rise in MAT from 15% to 18% will impact the industry, especially small and medium size software firms.

Small and mid-size outsourcing companies function from STPI units and tax benefits under the STPI scheme are getting phased out in 2010-11.

Most large outsourcing firms have set up in SEZs and will not be impacted significantly. “I am very disappointed. There was no mention of mirroring of SEZ benefits for STPI units,” said Ashank Desai, chairman of Mastek Ltd.

The mirroring of SEZ benefits for STPI units was one of the demands of the software industry. Exports from SEZs are eligible for exemption for a period of 15 years in all — 100% of profits are tax exempt in the first five years, 50% in the next five and 50% in the last five years provided the profits are invested in specified areas. “The top 50 software companies contribute 60-65% of the revenues of the industry and 90% of the profits. When they grow their business, they will grow into SEZs.

Many of their older units have already come out of the tax benefits offered under STPI because they are over 10 years. It is the smaller firms that have set up STPI units in last few years that will be hit though the government will not gain much in terms of tax inflows,” said a Nasscom official.

However, IT companies focussed on the domestic market will gain from the IT mission mode projects announced in the budget. The allocation of Rs 1900 crore for UID project and the announcement of the modernization of national employment exchanges are some moves that would help the IT industry as a whole.

Refunds for IT/BPO companies have also made easier. Over Rs 4,000 crore refunds are pending and just last month there were some changes made to make refunds easier. The budget gives it further filip.


IT Outsourcing in 2010: smaller deals, higher volume

February 27th, 2010

Last year the economic downturn caused some organizations to temporarily scale back on IT outsourcing efforts while they tackled more fundamental issues like keeping the company afloat.

This year, IT outsourcing is making a comeback… in Asia.

Dell Services  Chairman Jim Champy predicts the Asian IT outsourcing market will grow much faster in 2010. “IT outsourcing is set to rise in Asia as the region’s companies begin to modernize business processes and technology systems in a build-out that could last decades. We see, as most providers do, the Asian markets growing faster – clearly more than Europe, and certainly faster than the US,” explains Mr. Champy.

Offshore service providers who made significant investments in technology-related matters may have made the right move at the right time. As firms are already taking steps to outsource some information technology functions. One of them is U.S.-based commercial aircraft equipment manufacturer, Spirit AeroSystems , where some of its employees affected by the outsourcing plan will be offered jobs with International Business Machines Corporation  or Hewlett-Packard  –the providers taking over Spirit’s IT work, both of which have operations in Asia. Spirit spokesperson Ken Evans admits to not ruling out additional work that may be sourced out to offshore providers in the future.

A report from KPMG and the Asian-Oceanian Computing Industry forecasts that Asia will account for 26.3% of the total consumption of IT and BPO services in the next 10 years. In the last quarter of 2009, Accenture and Capgemini expanded their presence in Asia particularly in the IT services segment. This proves that clients and partners remain attracted to the abundance of technical skills at a low cost.

KPMG’s forecast may happen in the long-run but for the time being service providers are feeling the recovery at smaller proportions but at a higher volume of job requests. According to IBM and Accenture executives, “IT consultants are probably already feeling it: the start of a rebound in business. But there’s a difference this time. The rebound is coming mostly in smaller deals rather than in gigantic ones… customers are contracting for a higher volume of smaller jobs.”

Small deals comprise a significant fraction of IBM’s and Accenture’s total revenue stream. So it no longer came as a surprise when Accenture acquired RiskControl, a privately held IT consulting company. The acquisition is expected to improve Accenture’s set of risk management services as it tries to gain a strong foothold in the IT offshoring market.

Interestingly, technology vendors acquired technology consulting firms at a quick pace in 2009. Others who made similar acquisitions were Affiliated Computer Services or ACS , now a Xerox  company, and Perot Systems I guess they may all be getting ready to grab a chunk of the incoming deals.


Concierge communications adds DirectPointe to its managed services portfolio

February 27th, 2010

Concierge Communications, a national business communications services consulting company, announced the addition of DirectPointe to its expanding Managed Services portfolio.

The company will be DirectPointe’s first master agent and the companies will team up to offer businesses a complete collection of IT outsourcing tools and managed IT services to enable manage its computing infrastructure in a more efficient and controlled manner.

Concierge Communications is a no cost, national consulting, business communications and technology solutions broker, which represents more than 40 different business communications providers. It offers a single source for a variety of business technology requirements.

Clark Atwood, vice president of Concierge Communications, said that officials were happy to add DirectPointe’s products and services to their portfolio along with their track record of nine years. DirectPointe’s managed IT services and data products will complement Concierge Communications’ success in managed voice services. In 2010 companies are looking at doing more with less, and they wish to eliminate many of the technical management burdens and high costs associated with technology.

DirectPointe rounds out the firm’s service offerings for managed voice and network services and hosted services. DirectPointe’s model lets them offer managed desktop services, LAN services, virtualization services and much more.

Direct Pointe will support Concierge Communications and its agents in a combined effort with the help of DirectPointe’s sales team.

Dan Atkinson, vice president of marketing and alliances said that DirectPointe has been known for developing strong tie-ups by providing quality customer service and convenience. As a pioneer in the managed IT services industry, it was important for them to deploy these types of partner programs so that they could service customers with unique IT outsourcing requirements. Atkinson also said that closely working with Concierge Communications will allow the firm promote and provide more comprehensive outsourced IT solutions to the Concierge dealer network.

Key points of the master agent program include generous commissions for the life of the customer, DirectPointe sales and marketing resources, the ability to add new services without an upfront investment, and the ability to increase bandwidth needs for current clients. The actual benefit of the master partner relationship is the provision to offer IT services to customers with a single reliable source to manage all of their IT requirements on a regular basis and for one predictable monthly fee.


Indian IT jittery, disappointed

February 27th, 2010

The Union Budget 2010 has left the IT industry disappointed and rushing to the finance minister seeking clarifications over the continuance of
the STPI status for software companies.

The apex organisation of IT companies, the National Association of Software and Services Companies (Nasscom) initially did not issue any comment for hours after the Budget speech. A Nasscom spokesperson also indicated that the Association would be seeking certain clarifications from the government.

The Finance Minister, in his Budget speech, did not mention anything about the Indian IT industry’s long-standing demand of granting extension to Software Technology Parks of India (STPI) scheme beyond 2011.

In its Budget last July, the government had extended tax benefits for units in STPI by a year to March 2011. Units set up in these parks are eligible for a 10-year tax holiday, besides other perks.

A number of small and mid-size outsourcing companies function from designated STPI units. As things stand, tax benefits to such units will be phased out after the fiscal year 2010-11.

The BPO industry, in particular, could not hide its dismay. “I am disappointed that the tax holiday under Sec 10A and 10B has not been extended. The BPO industry is a young industry as compared to the IT industry. A longer term extension of the tax holiday would have certainly been beneficial considering our export-oriented revenues have been affected by the global recession as well as pressure on price,” said Ramachandra Panickar, Chief Financial Officer, Intelenet Global Services.

However, many large outsourcing firms have set up shop in special economic zones (SEZs) and will not be impacted significantly. Exports from SEZs are eligible for exemption for a period of 15 years in all – 100% of profits are tax exempt in the first five years, 50% in the next five and 50% in the last five years provided the profits are invested in specified areas.

“The top 50 software companies contribute 60-65% of the revenues of the industry and 90% of the profits. When they grow their business, they will grow into SEZs. Many of the older units have already come out of the purview of tax benefits offered under STPI because they are older than 10 years. It is the smaller firms that have set up STPI units in last few years that will be hit though the government will not gain much in terms of tax inflows,” according to a Nasscom executive.

Noting that the IT industry had hardly found any mention in the Budget this year, Infosys director TV Mohandas Pai said that the industry’s “main request to extend the STPI exemptions had not been considered.”

In its official reaction, Nasscom too noted that there was no move towards announcing parity of incentives between the STPI and the SEZ scheme which is necessary for small companies and development of tier 2 and tier 3 cities. “In line with our recommendation, the IT Taskforce formed by Department of Technology (DIT) had also strongly recommended that the STPIs be brought at par with the SEZs,” read the statement.

“Tax benefits under the STPI Scheme are available till March 31, 2011 and we will engage with the government and through the Ministry of IT to represent for an equitable benefit to the SME sector,” it added

According to Munish Gupta, vice-president, India Operations, GlobalLogic, “IT industry has nothing really to look forward. Though during the
current fiscal year, the IT sector witnessed a significant revival in revenue and the growth is upbeat for the coming calendar year, also there was no mention of extension of a tax holiday scheme for software firms in the minister’s speech.”

The government had introduced the Software Technology Parks of India (STPI) scheme in 1991 to encourage software exports, which helped make India one of the world’s leading hubs for software and business process outsourcing.

While hailing the Budget as “positive overall”, Nasscom also expressed disappointment that the increase in Minimum Alternate Tax (MAT) will result in a burden on small and medium businesses who are still struggling with the impact of the global recession.

According to Pai of Infosys, “The increase in MAT will not impact the larger companies as much but will impact smaller and medium enterprises (SMEs), particularly in the IT sector, as they would have to pay more.”


NII Holdings appoints HP in ITO contract

February 26th, 2010

Mobile communication services provider NII Holdings has signed an IT outsourcing deal with HP Enterprise Services.

Under the agreement the outsourcing service provider will manage NII’s IT applications and technology infrastructure support services throughout Latin America and its headquarters in the US.

Technology giant, HP aims to standardise processes, consolidate technology infrastructure support services and employ new technology to assist NII’s customer offering.

It will also provide applications development, management and testing services that include NII’s software development processes, billing systems and applications support.

Alan Strauss, chief technology officer of NII, said: “Using the expertise of HP and the experience of our employees, we will standardise our processes and leverage the opportunities to increase our operational flexibility, improve cost efficiencies, and improve our service quality.”


Punjab and Sind Bank signs IT outsourcing contract with Wipro

February 26th, 2010

The partnership assumes significance in view of the Punjab and Sind Bank’s objective to become a INR1000bn bank by 2011 by increasing its branch networks and services.

Through this partnership, PSB will be able to leverage technology to compete and achieve operational excellence. Wipro will be responsible for system integration, provisioning and management of Finacle core banking solution and enterprise applications. This would include management of the entire underlying IT infrastructure covering computing platforms and networking.

As part of the program, Wipro will also undertake commissioning and management of the Data Centre and the Disaster Recovery centre, and Service and Support for the Bank. The solution is expected to completely transform the bank’s IT landscape in terms of improved agility for offering innovative banking services.

Sardar GS Vedi, chairman and MD of Punjab and Sind Bank, said: “The vision of the bank is to leverage technology to achieve business transformation. We are re-engineering our IT processes and applications to deliver superior quality of service and products to accelerate business growth and achieve operational excellence. We are delighted to partner with Wipro in this journey towards business excellence, given Wipro’s track record in the BFSI segment, leadership position in India and strong IT and people processes.”

Anand Sankaran, SVP and business head of India and Middle East at Wipro, said: “Wipro’s Total Outsourcing Framework and strong programme governance will ensure the application suite and the underlying infrastructure is aligned to PSB’s business needs. Coupled with our deep domain knowledge, over two decades experience in the IT space and knowledge of global best practices, we are confident PSB will set new standards in Banking services and Customer Relationship Management in the years to come.”

Reportedly, PSB has terminated an earlier agreement with Satyam in 2009 after the troubled outsourcing firm failed to fulfil its criteria.


Accenture wins five-year ITV deal

February 26th, 2010

Consulting and outsourcing services provider Accenture has won a five-year deal from UK broadcaster ITV to provide core IT service management, infrastructure and application management services. Financial terms of the deal were not disclosed.

As part of the deal, ITV plans to transition its desktop services, help desk, and data center management to Accenture later this year.

Richard Cross, group technology director at ITV, said: “ITV is transforming its business, and working with Accenture will provide us with the flexibility we need as our business changes. Our selection of Accenture affords us access to world-class capabilities that the Accenture Innovation Centre for Broadband can provide. Their deep experience in web TV, over-the-top services and the digital supply chain will help us as we look to transform our business.”

In October, Accenture won a five-year contract from QBE Europe, a subsidiary of QBE Insurance Group, to provide application development and maintenance services; a multi-year application outsourcing contract from Fiat Item, a subsidiary of the Fiat Group, to consolidate its information and communications technology operations; and a three-year deal from Nokia Siemens Networks to provide application management services.


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