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Archive for October, 2010

BPO sector set for rebound in 2011 – Ovum

October 29th, 2010

Like all other industries worldwide, the business process outsourcing (BPO) was not completely spared from the negative effects of the global economic crisis. But next year shows more promise for the industry as outsourced contracts set to expire will be more likely up for renewals. This, as companies see value in outsourcing as a cost-cutting measure.

According to Ovum’s IT Services Contracts Analytics, which tracks all IT and BPO contracts worth more than US$1 million, the BPO sector is set for a rebound as expiring contracts next year may spell new business opportunities for some players.

More than 200 BPO deals are set to expire next year with a total contract value of US$12.2 billion, according to Ovum’s ‘2011 Trends to Watch: BPO’ report. Despite the global recession, this value is 15 per cent more than the US$10.6 billion worth of contracts that are due to expire this year.

The largest opportunities in expiring contracts are in the manufacturing sector, with 31 per cent of total contract value, followed by banking (24 per cent).

With these contract renewals, Ovum said BPO is poised for faster growth than IT services. Ovum forecasts the BPO market to grow by five per cent this year, rising to 6.3 per cent in 2011. IT services, on the other hand, is expected to grow by five per cent in 2011.

Changing landscape

“While recovery from the global recession is likely to continue at a slow pace, the way the BPO market will address the changing needs and desires of potential customers will be more rapid,” said Patrick O’Brien, principal analyst, Ovum.

He added that companies now have more options in choosing BPO companies and some of them are in geographies previously untapped.

“Outsourcing back-office processes were once seen as a radical, aggressive move based almost completely on Indian labour arbitrage, but the market has become more complex and nuanced. The competitive landscape has changed dramatically, and the capabilities of vendors have improved drastically, while more and more geographic locations are positioning themselves for BPO work, opening up new low-cost possibilities for work in multiple languages.”

Among these geographies which are showing promise are the Middle East and Latin America, the Ovum report noted. India, however, will continue to dominate even as more countries are trying to position themselves as BPO locations.

Market shakedown

The BPO industry has also seen a wave of mergers and acquisitions (M&A), particularly in the sub-sector of human resource outsourcing (HRO).

Recently, the industry has seen HR units of BPO giants Hewitt, HP, Convergys, and ACS having been acquired “for knock-down prices”, Ovum noted. “That wave of consolidation appears to be over for now.”

“In 2011, Ovum expects M&A to be characterised by BPO players buying niche technology companies with software that they can develop into exclusive platforms for vertically targeted customers. We also expect to see some movement in the opposite direction of major software companies, as software and services companies are on a collision course to fight for each other’s business,” said O’Brien.

Ovum sees next year to be a buyer’s market and advises companies looking to renew or get new contracts to try to get the best deals possible.

Source:http://www.mis-asia.com/news/articles/bpo-sector-set-for-rebound-in-2011-150-ovum

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Offshoring: Smaller vendors take on Infy, TCS, Wipro, HCL

October 29th, 2010

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The boutique-sized , niche-focused outsourcing providers seem to be giving giants like HP, IBM, Accenture , TCS , Infosys , Wipro , HCL and Cognizant tough competition in terms of offering a greater degree of customer satisfaction.

A comprehensive poll of over 6,547 outsourcing clients worldwide found that smaller vendors are satisfying more clients, and to a much greater degree, in comparison with their big-ticket counterparts. The study carried out by the Black Book of Outsourcing – which was acquired by business research firm Datamonitor Group a year ago – has represented all outsourcing fields including IT, KPO, LPO and BPO.

Although feedback on the big names, such as IBM and HP, has been generally positive, the companies that have excelled in delighting the customers have been smaller players . For instance, the Philippinesbased ITES firm, American Discovery and Mysore-based legal process outsourcing firm, SDD Global Solutions have been ranked as the top two outsourcing companies in the world.

So what makes these smaller players stand taller in the global market? `Smaller outsourcing providers like SDD Global have been pushing their specialist knowledge and deep client understanding as their unique selling point for some time now, claiming that specialists provide a better service . While all outsourcers talk up their ability to specialise this survey suggests that SDD Global and other smaller players are best positioned to deliver on that promise,” said Eamonn Kennedy , who led the research for Datamonitor.

The study has assessed customer satisfaction using nine different parameters like requirements awareness , shared goals, financial benefits, risk mitigation, partnership approach , problem resolution, corporate reputation, skills and resources and future orientation.

Some 40 clients, including 20th Century Fox, HBO, Universal Pictures , Channel 4 Television Corporation , Media Rights Capital, of SDD Global were interviewed for the study. “Like the latest cutting-edge Indian IT engineers, our legal team has proven that India does not need to be a mere back office. In fact, our team has been performing critical front-office functions like sophisticated legal research , analysis and drafting wowing global clients,” said Russell A Smith , president, SDD Global.

Source:http://economictimes.indiatimes.com/tech/ites/Davids-take-on-goliaths-in-offshoring/articleshow/6825755.cms

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WNS announces second quarter fiscal 2011 earnings

October 29th, 2010

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WNS Limited , a leading provider of global business process outsourcing (BPO) services, today announced results for the fiscal second quarter 2011 ended September 30, 2010.

Fiscal Second Quarter 2011 Financial Highlights

Revenue for the fiscal second quarter 2011 increased by 5.6 percent to $154.2 million, compared to $146.0 million in the corresponding quarter in the prior fiscal year, and increased by 2.8 percent sequentially from $150.0 million in the fiscal first quarter of 2011. Revenue less repair payments* for the fiscal second quarter 2011 declined 6.6 percent to $93.1 million, compared to $99.7 million in the corresponding quarter in the prior fiscal year, and increased 4.3 percent sequentially from $89.3 million in the fiscal first quarter of 2011. Revenue less repair payments declined largely as a result of the change in pricing terms with a large travel client, the weaker British Pound compared with the second quarter of fiscal 2010, lower volumes in the insurance and travel businesses. These headwinds were partially offset by the positive impact of improved pricing with a large insurance client and ramp ups of business with existing clients. The sequential increase in revenue less repair payments was a result of a stronger British Pound, improved pricing with a large insurance client and ramp ups of business with existing clients.

Gross margin, as a percent of revenues were 21.5 percent in the fiscal second quarter 2011, compared to 25.3 percent in the corresponding quarter in the prior fiscal year and 17.8 percent in the fiscal first quarter of 2011. WNS’s adjusted gross margin excluding share based compensation expense*, as a percent of revenue less repair payments, decreased to 35.9 percent in the fiscal second quarter 2011, compared to 38.2 percent in the corresponding quarter in the prior fiscal year, and increased compared to 30.1 percent in the fiscal first quarter of 2011. The decrease compared with the corresponding quarter in the prior fiscal year was primarily due to the impact of wage inflation, a stronger Indian Rupee and the change in pricing with a key travel client, as mentioned above. The sequential increase in adjusted gross margin excluding share based compensation* was primarily due to a lower number of employees on a quarterly average basis, a stronger British Pound and LEAN initiatives which have led to operational improvements.

Selling, General and Administrative (SG&A) expenses, as a percentage of revenues, were 12.7 percent in the fiscal second quarter 2011, compared to 15.1 percent in the corresponding quarter in the prior fiscal year and 13.1 percent in the fiscal first quarter of 2011. Adjusted Selling, General and Administrative (SG&A) expenses excluding share based compensation expense and related fringe benefit tax*, as a percentage of revenue less repair payments, were 20.3 percent in the fiscal second quarter 2011, compared to 18.7 percent in the corresponding quarter in the prior fiscal year and 21.5 percent in the fiscal first quarter of 2011.

Operating income, as a percentage of revenues, was 3.6 percent in the fiscal second quarter 2011, compared to operating income of 4.6 percent in the corresponding quarter in the prior fiscal year and operating loss of 0.5 percent in the fiscal first quarter of 2011. Adjusted operating income excluding amortization of intangible assets, share based compensation and related fringe benefit tax*, as a percentage of revenue less repair payments, was 15.6 percent in the fiscal second quarter 2011, compared to 19.5 percent in the corresponding quarter in the prior fiscal year and 8.6 percent in the fiscal first quarter of 2011. Operating margins during the fiscal second quarter were negatively impacted, as compared with the corresponding quarter in the prior fiscal year, by a change in pricing with a larger travel client, wage inflation and a stronger Indian Rupee. Operating margins improved sequentially as a result of a price increase with a large insurance client, a stronger British Pound and LEAN initiatives which have led to operational improvements.

Net income attributable to WNS shareholders for the fiscal second quarter 2011 was $4.9 million or $0.11 diluted income per ADS, compared to net income attributable to WNS shareholders of $1.4 million or $0.02 diluted income per ADS in the corresponding quarter in the prior fiscal year and net loss attributable to WNS shareholders of $6.0 million or $0.14 diluted loss per ADS in the fiscal first quarter of 2011. Adjusted net income* for the fiscal second quarter 2011 was $13.8 million or $0.31 adjusted diluted income per ADS, compared to $13.7 million or $0.31 adjusted diluted income per ADS in the corresponding quarter in the prior fiscal year and adjusted net income of $2.2 million or $0.05 adjusted diluted income per ADS in the fiscal first quarter of 2011.

Operational Highlights

“This quarter, we made significant progress on the five-point plan I had elaborated on during our last earnings call. We are eliminating waste and are running a more efficient organization. We are now operating as a vertical-led structure and have added top-quality talent to our sales, vertical and horizontal teams. Our renewed focus on domain offerings and sales and marketing will continue to positively impact our pipeline while positioning us in larger and more sophisticated deals,” said Group Chief Executive Officer Keshav Murugesh.

“We still have opportunities to both streamline our business and expand our pipeline. We see tremendous growth potential in the global market and believe we are very well positioned to take advantage of these trends,” continued Murugesh.

Fiscal 2011 Guidance

WNS updated its revenue less repair payments guidance and reaffirmed its adjusted net income guidance for the fiscal year ending March 31, 2011 as follows:

Revenue less repair payments is now expected to be between $363 million and $378 million. This assumes an average GBP to USD exchange rate of 1.55 for the second half of the 2011 fiscal year, implying an average full year rate of 1.53. Adjusted net income is expected to range between $43 million and $46 million. This assumes an average USD to INR exchange rate of 45 for the second half of the 2011 fiscal year, implying an average full year rate of 45.5.

“We have significantly improved our profitability this past quarter compared to the fiscal first quarter. In spite of a stronger Rupee, we are still on track in terms of our ANI guidance as a result of operational improvements which have led to a reduction in costs, a stronger British Pound and our long-term hedging strategy,” said Alok Misra, Group Chief Financial Officer. “We are investing some of our cost savings back into the business, supporting our front end and increasing our hunting and farming resources.”

Conference Call

WNS will host a conference call on October 27, 2010 at 8:00 am (EDT) to discuss the company’s quarterly results.

Source:http://www.marketwatch.com/story/wns-announces-second-quarter-fiscal-2011-earnings-2010-10-27?reflink=MW_news_stmp

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5 questions with Chile-IT CEO Juan Carlos Munoz

October 29th, 2010

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Chile-IT is a non-profit organization that aims to give its home technology companies an entry into the U.S. market.

The small country, recently in the news for rescuing 33 trapped miners, has a bevy of technology companies that are known in Latin America but lack U.S. exposure. Enter Chile-IT, which is looking to court U.S. companies as customers and build outposts here.

Member companies include Datco, an IT consulting company; Eticsa, a data center design firm; Coasin Global Services, an applications development outfit; Excelsys, which makes online banking systems; Ki Technology, a Web development specialist; and Synapsis, which manages data centers for utilities.

We caught up with Chile-IT CEO Juan Carlos Munoz to talk strategy:

Where does Chile IT fit into the tech equation? Munoz noted that Chile specializes in software and services for the mining, industrial, financial and government markets. “Chilean IT companies are best of breed and we’re helping them open offices in the U.S.,” said Munoz.

Is this effort really just a nearshore outsourcing play? Munoz said that Chilean IT companies have grown their outsourcing market from zero to $1 billion a year in just four years. Munoz said Chile nearshoring can be a $5 billion market by 2015. However, Chile’s tech companies are looking to move onshore in the U.S. and hire staff here. For instance, Chile companies like Excelsys are experts in mobile banking, an area that lags in the U.S. Excelsys has been pitching its mobile banking software to the big banks in the U.S. “It’s a nearshore, onshore strategy, said Munoz.
Why hasn’t innovative mobile banking taken off in the U.S? I noted that other countries like Turkey and Chile can deliver money via text messages. Mobile banking is holding up your phone to an ATM. Chile has had a formula like that for years. Munoz said that volume and security may be a concern for the U.S. “In Chile, there are only 16 million people so it’s the perfect place to test things,” he said.

Are there political risks for Chile’s IT companies? Munoz noted that Chile has a bevy of free trade deals with the U.S. Chile also has a similar business culture to the U.S. and its small size isn’t likely to draw the political ire of a country like China.

How does Chile compare to other countries in Latin America, notably Brazil and Argentina? Munoz said that larger countries in Latin America are positioning themselves as general IT practitioners. “We want to be the neurosurgeons,” he said.

Source:http://www.zdnet.com/blog/btl/5-questions-with-chile-it-ceo-juan-carlos-munoz/40944

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Microsoft to land branch office in Jinan, Shandong Province

October 29th, 2010

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Microsoft (China) Co.,Ltd. signed a memorandum of understanding (MOU) with the Jinan municipal government Monday, projecting to build a branch office in the capital of Shandong Province, according to a newsletter released by the government Tuesday.

Microsoft will cooperate with the Jinan government on the development of the information technology (IT), service outsourcing, cloud computing and personnel training.

According to the newsletter, in the next five years, Microsoft will attract over 40 IT and outsourcing companies to Jinan, creating job opportunities for 15,000 people, and bringing revenue of up to 5 billion yuan ($748 million) to the city.

The company also plans to carry out similar projects with the governments of Dongguan, Xi’an, Qingdao and Nanjing in 2011.

Source:http://business.globaltimes.cn/industries/2010-10/586661.html

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Heritage Valley outsourcing jobs to India

October 29th, 2010

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Heritage Valley Health System will shut down its in-house medical transcription service, in favor of outsourcing the jobs to India.

About 25 people were told Monday that their transcription jobs would be phased out over the next six weeks. Five employees were told they were being let go immediately, said two workers, both of whom asked not to be identified because they feared they’d lose their severance packages.

Heritage Valley officials did not respond to requests for comment.

The employees, who all work from home, were summoned Monday to Heritage Valley’s human resources offices in Moon Township, where they were met by the health system’s leadership, including Chief Executive Officer Norm Mitry. The workers, who transcribe medical records for acute-care patients, were told that their jobs were being sent overseas because of the cost of maintaining the local department.

The jobs would be phased out according to seniority, and each employee would be given a severance package based on time worked in the system, the workers said. Heritage Valley would allow the workers to apply for unemployment benefits immediately, they said.

“I’m still shocked,” said one. “I know I can find a job as an independent contractor, but that’s not going to come with benefits. I don’t know what I’m going to do.”

Source:http://www.timesonline.com/bct_news/news_details/article/1373/2010/october/26/heritage-valley-outsourcing-jobs-to-india.html

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Unisys 3Q profit sinks 54 pct, server sales drop

October 29th, 2010

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Unisys Corp. said Tuesday its third-quarter profit tumbled 54 percent, as sales of the technology services provider’s ClearPath servers fell and revenue dropped.

The Blue Bell, Pa., company said it earned $28.3 million, or 65 cents per share, in the three months that ended Sept. 30. That’s down from net income of $61.1 million, or $1.48 per share, in the same quarter a year ago.

Revenue fell 13 percent to $961 million from $1.11 billion.

Shares of Unisys sank 22.6 percent, or $7.05, to $24.15 in Tuesday afternoon trading.

The company grew IT outsourcing revenue slightly, but U.S. revenue fell 15 percent to $438 million, and international revenue dropped 12 percent to $523 million.

“After three straight quarters of strong growth, sales of our ClearPath servers declined, impacting our net income comparisons against a strong third quarter a year ago,” Chairman and CEO Ed Coleman said in a statement from the company.

He also noted that the company’s operating expenses and cash flow improved “significantly,” which reflected improved efficiencies.

Selling, general and administrative expenses fell 12 percent to $142.4 million, and research and development expenses were down 22 percent to $18.9 million.

Source:http://www.businessweek.com/ap/financialnews/D9J3HOC00.htm

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