Archive for January, 2011

IBM’s net tops Street; outsourcing deals pick up

January 20th, 2011

IBM says its net income and revenue were stronger than expected in the fourth quarter amid a pickup in services signings, a key part of IBM’s revenue stream and an area of concern for some analysts.

Net income rose 9 percent to $5.26 billion, or $4.24 per share, topping analysts’ projections for $4.08 per share. In the year-ago period, IBM earned $4.81 billion, or $3.65 per share.

Revenue rose 6 percent to $29.02 billion. Analysts expected $28.18 billion.

Many analysts have been worried about a drop in IBM’s outsourcing business in recent quarters as rivals gained ground. In the latest period, IBM’s signings of new outsourcing contracts rose 24 percent. The company’s total backlog of services deals was $142 billion.

Source:-http://www.businessweek.com/ap/financialnews/D9KR0EAO0.htm

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Sebi to frame rules for outsourcing by market entities

January 20th, 2011

Market regulator Sebi plans to frame new rules for outsourcing of business by brokers, mutual funds, portfolio managers and other market entities and has asked stakeholders to submit their views on functions that can be outsourced and other modalities by February 5.

However, the Securities and Exchange Board of India (Sebi) has indicated that market players will not be allowed to outsource core business activities like customer verification and resolution of investor grievances.

Although some market entities already outsource some of their work to third parties, there are no formal guidelines on the businesses that can be outsourced and other terms and conditions for such outsourcing.

Activities currently being outsourced by market entities include data entry, record-keeping, despatch, front-desk customer services and KYC verification.

Noting that outsourcing of key activities will deter the regulation process, Sebi said: “… Key activities which are crucial to the intermediation service may be delivered by the intermediary itself.”

“The informal feedback indicates that the compliance with securities laws, investor grievance redressal and KYC must not be outsourced under any circumstance,” it said.

“The risks attached to outsourcing are numerous. They can be grouped into three broad categories: operational, reputational and legal risks,” the regulator said.

Listing out nine broad principles for outsourcing activities, Sebi said the board of the intermediary will need to take responsibility for its outsourcing policy.

In addition, the intermediaries would need to put in place a comprehensive risk management programme, a back-up plan, a mechanism to safeguard customers’ interest and regulatory requirements and a due diligence process before outsourcing of any work.

Sebi also stated that under the new rules, market entities will be responsible for reporting any suspicious transactions or reports in respect of activities carried out by the third parties and would need to prepare a caution list of third parties who have defaulted while servicing any of them.

Listing out the activities that cannot be outsourced, Sebi said that depository participants should not outsource core management operations and functions involving the Prevention of Money Laundering Act and other surveillance activities.

Furthermore, Sebi said that registrars and share transfer agents should not outsource record-keeping of their investor database, as well as finance and accounting functions.

Moreover, bankers to an issue should not outsource processing of applications, while brokers cannot outsource creation of client ID and passwords, market order management, operation of trading terminals, operation and monitoring of bank and demat accounts and payments.

Sebi also said brokers should not outsource maintenance and monitoring of clients’ databases and financial information, surveillance functions and IT infrastructure.

In addition, portfolio managers will not be permitted to outsource their fund and portfolio management activities and merchant bankers are barred from outsourcing their activities related to due diligence, pricing of issues and supervision of other intermediaries, Sebi has proposed.

Sebi also said that mutual funds should be barred from outsourcing all investment-related activities, including trading.

Sebi has proposed to frame guidelines for activities which can be outsourced, activities which cannot be outsourced, to whom the activities can be outsourced, the terms of outsourcing and responsibilities and obligations of the intermediary and the third party with respect to the clients, regulator and market.

Source:-http://economictimes.indiatimes.com/markets/regulation/sebi-to-frame-rules-for-outsourcing-by-market-entities/articleshow/7321905.cms

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Outsourcing to create 100,000 jobs every year

January 17th, 2011

At least 100,000 jobs in the ICT sector will be available for new graduates every year as the government moves to implement an ambitious outsourcing plan.
The announcement was made by Mr Aggrey Awori, the Minister of ICT, during the Third Business Outsourcing Process conference oganised by the Competitiveness and Investment Climate Strategy in Kampala last week.

The ambitious initiative-Business Process Outsourcing, according to Mr Awori, will see young graduates not only take charge of the front office outsourcing – which includes customer-related services such as contact centre services, but also do internal business functions such as human resource, research and accounting outsourcing. He said: “Beginning today we shall begin the process of training students in higher institutions of learning in BOP.”

“With this project, they will be able to earn at least $5 per day while doing the work at their convenience, including working at home,” he added.
BPO involves contracting operations and responsibilities of specific business functions (or processes) to a third-party service provider.

Worth noting is that the government will be encouraging its own agencies and institutions to outsource operations, as well as involve the private sector in the process of outsourcing. The project that targets to create about 100,000 jobs every year will be established upon putting up a call centre Makerere University.

Mr Peter Ngategize, the national coordinator of competitiveness and investment climate strategy, said for the initiative to take off as expected, local providers should train young graduates not only for the local market but also have focus on the global market.

Experts say the project, if well implemented will relax on the pressure of unemployment that is a major challenge to the Ugandan government. BPO is a fairly new global industry and one of the fastest growing sectors in terms of job creation.

Source:-http://www.monitor.co.ug/Business/Commodities/-/688610/1090938/-/bxk9iw/-/

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The big update: Telco networks in Queensland

January 17th, 2011

Telecommunication companies are currently struggling to restore their services in flooded Queensland territory, as access to damaged exchange sites is still denied and power outages prevent networks from operating.

Telecommunication companies are currently struggling to restore their services in flooded Queensland territory, as access to damaged exchange sites is still denied and power outages prevent networks from operating.

Back-up power generators, portable exchanges, cells on wheels and even an “army” of Telstra employees are all waiting for waters to recede in order to be deployed and restore services; while thousands of citizens are waiting for communication to be re-established.

Electricity provider Energex has estimated more than a hundred thousand customers have been affected by outages, spread across the Brisbane Valley, Lockyer Valley, Caboolture, Gold Coast, Sunshine Coast, Logan, Fassifern Valley and Ipswich. Outages are believed to be due in part to damage and in part to the provider’s choice to disconnect areas at risk.

Telstra maintains power and access to its damaged infrastructures are vital to restore its services. As of this afternoon, the telco has not managed yet to get to most of its affected exchange sites and needs to wait for waters to recede.

A document leaked this morning shows the telco has been unable to reach some 260 of its exchange sites due to flood waters. Furthermore — according to Telstra’s official updated report today — new sites in the greater Brisbane and Ipswich areas had lost power either from damage or from the power company disconnecting the areas for safety reasons; access to those sites is still denied.

“We have portable exchanges and Cells on Wheels, which are transportable mobile base stations, that we will use where possible to have services up and running quicker,” Telstra said in its statement.

However, the telco said power had been restored to some regional areas overnight and, as waters recede, efforts will be concentrated on repairs in the Brisbane Valley, Lockyer Valley, Ipswich and Gympie/Pomona areas, where mobile towers have been affected. One of the Cells on Wheels will be allocated to the Lockyer Valley, as soon as access becomes possible.

Furthermore, exchanges around Brisbane — Charlotte, Edison and Woolloongabba — have been manned to re-establish communication for emergency services. According to the telco’s bulletin, some extra staff, 130 Telstra employees, are ready to be sent where needed to help local teams, whenever waters permit.

“We are experiencing fault volumes at four times their normal level, so there will be delays in restoring services and we ask our customers to be patient during this time,” the company said.

Source:-http://www.itwire.com/it-industry-news/strategy/44351-the-big-update-telco-networks-in-queensland

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IT, a foundation for lasting peace – Lalith Weeratunga Sri Lanka’s IT Progress recognized in UN ratings

January 17th, 2011

Peace is, perhaps, not the most obvious outcome of an e-government master plan. But in Sri Lanka’s case, it is one of three pillars of a strategy to modernize a country that was in the throes of Asia’s longest running civil war less than a year and a half ago stated Secretary to the President Mr. Lalith Weeratunga and Chairman-ICT Committee of UNESCAP, to the December 2010 issue of FutureGOV Asia Pacific magazine.

The e-Sri Lanka programme was launched in January 2005 to find ways to use IT to lay the foundations for lasting peace, spur economic growth, and ensure equal access to the benefits of development particularly the 77 per cent of a population of 20 million that lives in rural areas, he said.

Sri Lanka’s progress [in IT] did not go unnoticed at the FutureGov Awards in October. The island nation’s haul of three awards all for e-Sri Lanka projects was matched only by that of South Korea, a country 110 places above it in the 2010 UN E-Government Rankings.

Mr. Weeratunga is the current Chair of the United Nations Economic & Social Commission for Asia and the Pacific (UN-ESCAP) – Committee on Information and Communication Technology, being elected for the next two years in November 2009.

Following is the full text:

Re- Engineering Sri Lanka

Sri Lanka has come a long way in a short time in the modernization of its public sector. Lalith Weeratunga, Secretary to the President, tells Robin Hicks that a bright future awaits a ‘smart island’ whose leaders believe in the transformative, peace-bringing powers of technology.

Peace is, perhaps, not the most obvious outcome of an e-government masterplan. But in Sri Lanka’s case, it is one of three pillars of a strategy to modernize a country that was in the throes of Asia’s longest running civil war less than a year and a half ago.

The e-Sri Lanka programme was launched in January 2005 to find ways to use IT to lay the foundations for lasting peace, spur economic growth, and ensure equal access to the benefits of development particularly the 77 per cent of a population of 20 million that lives in rural areas.

Despite the distractions of a war that raged for almost three decades, e-Sri Lanka has made progress in narrowing the digital divide and re-engineering government. It has also given credibility to the ‘Smart island, Smart people’ vision of building a knowledge-based economy, coined in 2002, a time when there was negligible activity in an IT services sector that is now the country’s fifth highest export earner.

Sri Lanka’s progress did not go unnoticed at the FutureGov Awards in October. The island nation’s haul of three awards all for e-Sri Lanka projects was matched only by that of South Korea, a country 110 places above it in the 2010 UN E-Government Rankings.

Lanka Gate, an integration platform that acts as a gateway for all e-services and electronic government information, was lauded by the judges as a progressive step towards building a connected government. The other two awards were for digital inclusion projects: Nenasala, a rural telecentre network that makes 1100 government services available online in more than 600 centres strategically placed in religious institutions, womens’ groups and rural schools, and the Sri Lanka GovSMS Portal, which gives Sri Lankans access to crop prices, weather information and railway timetables when they text the popular 1919 Government information Centre (GIC) number.

Support from the top

As well as funding from the World Bank, e-Sri Lanka has benefited from being run by an agency, the Information & Communication Technology Agency of Sri Lanka (ICTA), which operates under the purview of President Mahinda Rajapaksa, who is keen to use ICT as a force for reform. Last year’s Presidential taskforce to improve English and IT literary has, mostly through Nenasala (which was the President’s idea), helped increase e-literacy to 30 per cent this year- up from just four per cent in 2004. The taskforce also gave a shot in the arm to Sri Lanka’s promising Business Process Outsourcing (BPO) industry, which has been growing at around 20 per cent year on year. Colombo is ranked 7th among the world’s best emerging outsourcing cities.

One of the latest modernization ideas to emerge from the highest echelons of power is the concept of the government ‘Chief Innovation Officer’, which is also part of the e-Sri Lanka programme. This is the brainchild of Lalith Weeratunga, Secretary to the President, who spoke to FutureGov Asia Pacific at the President’s Office in Colombo in October. Weeratunga is the Republic’s most senior civil servant, and was Director, Re-engineering Government, at ICTA before he rose to his current role after a general election in 2005.

Government re-engineering is a “critical” function of Weeratunga’s role, the success of which depends on a particular brand of leadership, he says. Hence Chief Innovation Officers, not Chief Information Officers. “We may build structures and assign qualified teams to these structures, but that in itself is a challenge for leadership. Knowledge and skills of various specialist areas, including technology, is not enough. One also has to possess a positive attitude towards bringing about change. That is why we started breeding a new set of leaders who would act as change agents.

A team of 200 “e-champions” is now being trained at a top management school. These officers will hold a senior “second level of command” rank with enough clout to push through re-engineering ideas “to make their organizations more citizen-centric and cost-effective,” says Weeratunga. “Information management skills are, of course, important. But it is innovativeness and team effort that really matters in transforming traditional service delivering systems. We want to see ICT tools in the hands of creative people who will add value to every process, and so contribute to economic development directly and indirectly.”

‘Courteous’ Governance

With the Tamil Tigers defeated, the government has more freedom to focus on a new path for e-Sri Lanka and new ways to “change the face of government”- a big challenge, he concedes. In the latest World Bank ‘Ease of Doing Business’ survey, Sri Lanka ranked 102nd out of 183 countries- the same rank as last year- and 166th for how easy it is to pay taxes.

One area where Sri Lanka’s public sector falls short is ‘courtesy’, notes Weeratunga. “In the private sector, if the service is not good in one shop, you go to another. Which is why shops go out of their way to treat you well. The bureaucracy has tended not to be courteous, because it hadn’t had to be”.

Weeratunga wants this to change, and sees technology as a conduit. But he is under no illusions as to how difficult the transition will be. “Bureaucrats are very resistant to change. They don’t even want to switch the chair they sit in,” he says. “Change can be demeaning and challenges one’s sense of self and status. Therefore, it takes time for civil servants to see the value in ICT.”

With the Electronic Security Act in place, there is a legal framework to support the full use of ICT in government. There is also the political will- from the President himself- to see to it that all of Sri Lanka’s 1.2 million civil servants are ICT literate.

e-Society

Convincing citizens, even those in the poorer rural areas, will be easier, says Weeratunga. “Literacy is high, at 93 per cent. But even people who are completely illiterate are using mobile phones and ATMs. They will grab anything that helps their day to day lives. Rather than travel 200km to get information on how to apply for a passport, they can call or text 1919, which is available in three languages [Sinhalese, Tamil and English]. The GIC gets 3800 calls a day. People are beginning to believe in technology.”

Weeratunga has set a target of 75 per cent e-literacy by 2016, which chimes with President Rajapaksa’s pledge to have doubled per capita income by the same year. This aim is also to raise the digital inclusion of government e-services from 10 to 65 per cent, reduce the average waiting time for a government service (currently six hours) and improve citizen satisfaction with these services, which is now around 40 per cent.

Bu there is a long way to go. Sri Lanka has slipped in the United Nations E-Government Rankings, from 101st in 2008 to 111th in 2010 (further than India, which fell from 113th to 119th) and is below the global average for infrastructure, e-participation and online services, and above average only for human capital. Internet penetration is still only seven per cent. 74 per cent of Sri Lanka’s poorer rural population have never used the internet. And 23 per cent of these people do not even know it exists, according to LIRNasia research.

The expansion of the rural telecentres network to 1000 Nenasalas by 2012 is part of the plan to realise the ‘Smart island, Smart people’ vision. So is the launch of 10 e-life centres to develop entrepreneurship and e-involvement among young people, and a school PC lab network. Sri Lanka’s first rural BPO, Mahavilachchiya, an ‘e-village in the jungle’ which blends modern living with local cultural mores, is a sign of things to come- the government wants to slow the rate of urbanization, which is expected to have grown from 20 per cent in 2000 to 60 per cent by 2030.

“If a person can earn his or her living at the village level and can access other services for an improved quality of life, he or she will not easily be attracted to congested townships and end up in squalid slums with low sanitary conditions,” says Weeratunga.

The President’s Secretary also hinted that Sri Lanka could follow a similar path to India, Indonesia, and the Philippines by locally manufacturing a low-cost computer. However, digital inclusion, he says, is a challenge best tackled in concert. “We should be working closely with the likes of India and China to solve problems that are similar in nature.”

The future of e-Sri Lanka

For all Sri Lanka’s undoubted promise there is the chance, however unlikely, that terrorism could rear its head and put the country’s progress into reverse. Would this mean that ICT plans are scuppered? The end of war came about thanks partly to ICT, argues Weeratunga, which is partly why e-Sri Lanka has little chance of being derailed- no matter what the future holds. “The Defence Secretary is a Java programmer. That background helped him to revolutionise the way our armed forces worked, and win the war not just with guns but with information.”

The political leadership has become so “enamoured” with technology “there is no way we will ever turn back,” says the Permanent Secretary, who is never far from his iPad and Blackberry, which he uses to manage his diary and issue instructions to his staff. “ICT is being used to help build roads, connect communities and lift people out of poverty. We have made a flowerbed which has very fertile soil. Now it is time to reap what we have sown.”

SRI LANKA GovSMS PORTAL – “SMS TO 1919″

The ICTA launched the Sri Lanka GovSMS Portal in July 2009, and which was officially launched by the President on 2nd December 2009.

Now offering three services (crop prices, weather information and railway timetables) from three different government agencies, the solution has been built so that it can easily be scaled to handle any SMS based service offered by any public sector organization. They can do this for free because the mobile operators have agreed not to charge the government either for connectivity to the SMS gateway or the outgoing SMS. Citizens are charged the standard rate for a text message.

Since the solution is hosted in the government data centre, Lanka Government Network, to which all government organizations are connected, every agency will be able to use the service. The Department of Motor Traffic, Department of Emigration and Immigration, Examination Department and Registrar General’s Department are currently in discussions to adopt the service.

The service was developed to digitally include the 90+ per cent of Sri Lanka’s population that does not have access to the internet- more than 65 per cent of Sri Lankans own a mobile phone.

Source:http://www.island.lk/index.php?page_cat=article-details&page=article-details&code_title=16073

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Infosys numbers miss estimates

January 16th, 2011

Infosys Technologies uncharacteristically failed to meet the Street’s expectations of revenue and profits in the third quarter and sent a frisson of fear through the outsourcing industry by failing to match market forecasts for the crucial fourth quarter (January-March).

The triple whammy sent the stock tumbling and sparked jitters over the performance of the entire technology pack, which is usually treated as the poster boy for India’s service sector that accounts for more than 57 per cent of the country’s GDP.

Infosys indicated that it was well on its way to becoming a $6-billion company by the end of this fiscal, but that did nothing to assuage fears over the brittleness of India’s outsourcing story.

The Bangalore-based company clocked a net profit of Rs 1,780 crore for the quarter, a rise of 14.2 per cent over the corresponding period last year. But the number fell short of the Street’s consensus estimate of Rs 1,820 crore.

For the third quarter, Infosys reported revenues of Rs 7,106 crore, a jump of nearly 24 per cent over Rs 5,741 crore in the same period of 2009-10. However, analysts had forecast Infosys to report revenues of nearly Rs 7,200 crore.

To top it all, Infosys gave a very muted guidance for the fourth quarter and the full year ended March 31.

It said for the year ending March 31, 2011, revenues were likely to be in the range of Rs 27,408 crore to Rs 27,481 crore and EPS in the region of Rs 118.68 to Rs 118.90.

In dollar terms, revenues for the year are expected to be in the range of $6.04-6.06 billion, a growth of 25.7-26.1 per cent. The Street was looking forward to a growth forecast of 27-28 per cent in dollar revenues. For the fourth quarter, revenues are projected to be in the range of Rs 7,157 crore to Rs 7,230 crore.

Analysts said while the third quarter was generally a weak quarter for the sector, other internals did not make for good reading. For instance, a cause for concern was that the volume growth (that contributes to the topline) of 3.1 per cent was the lowest over the past four to five quarters. However, pricing increase of 1.6 per cent during the period was in line with analyst estimates.

“It (the numbers) was a tad disappointing because of lower volume growth and the muted outlook for the fourth quarter,” said Rohit Kumar Anand, analyst at PINC Research. Anand, who has a buy rating on the stock, told The Telegraph that he expected Infosys to do well in the next fiscal as IT spending in the US was expected to improve.

The top management of the IT services behemoth was more cautious in their outlook.

“The weaker economic recovery in developed markets coupled with high unemployment and risk of sovereign default could impact industry growth,” said S. Gopalakrishnan, CEO and managing director.

Investors pummelled the stock, which fell 4.82 per cent, or Rs 162.65, to close at Rs 3,212.30.

The company said it had added 40 clients in the quarter with a gross addition of 11,067 employees. As on December 31, the company had 1,27,779 employees.

Source:http://www.telegraphindia.com/1110114/jsp/business/story_13437975.jsp

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Infosys’ 3Q Results Underscore Setbacks for India as Outsourcing Destination

January 16th, 2011

While India is undisputedly the current top outsourcing destination in the world, an appreciating rupee, increasing labor costs and higher attrition levels are now weighing heavily on outsourcers with their businesses in India. The country is already falling behind in terms of call center outsourcing with the emergence of the Philippines at the forefront, and now with the release of Infosys’ (INFY) quarterly results, it has made these setbacks more evident.

India’s number two software exporter and outsourcing services provider, Infosys, released on the 13th of January its third quarter results for FY2011. The company reported a 14.2% rise in net profit, which fell behind analyst estimates, coming in at a profit of 17.8 billion rupees below the 18.2 billion estimate in a Reuters (TRI) poll. The company however still raised its dollar sales growth forecast for FY2011 in the year ending March to 25.7% – 26.1% from the 24% – 25% forecast in October.

There were high hopes for the company especially with the current uptick seen on the spending for outsourcing technology services in the past quarters. The major Indian outsourcing companies in the technology sector were expected to show robust growth with the increased demand for their services and to ramp up hiring and raise wages to meet the demand.

But as the Infosys results show, while forecasts were optimistic and demand is not waning, at least for the short term, the appreciating rupee still presents a significant hurdle among outsourcers. Expectations for other fellow outsourcers such as Tata Consultancy Services and Wipro will likely be affected as well. According to Infosys CFO, Vibin Balakrishnan, “Uncertainties related to sustainability of the global economic recovery could create greater currency volatility in the near future.”

It doesn’t help matters that competition is increasing among other global outsourcing providers such as Accenture (ACN) and IBM (IBM) as brought about by the increase in demand and the steady economic recovery. With the currency gaining strength and costs rising, the cost of outsourcing services will expectedly also rise.

Amid concerns however, the tide seems to be turning for India on the European front. Although the United Kingdom has proven to be a tough market to enter for India, local support in the form of the British council as well as Britain’s National Health Services Administration just might help Indian outsourcing companies to get their foot in the door and attract more business from the United Kingdom, thus creating bigger competition for other outsourcing companies in the region such as Logica (LON.LOG), Atos Origin (EPA.ATO) and Capgemini (Paris.CAP).

But while the tide may be turning, it did not help Indian outsourcing company, HCL Technologies to win a $600 million five-year outsourcing contract with European steelmaker ArcelorMittal (MT), which chose the Virginia based Computer Sciences Corporation (CSC) over HCL Technologies on the 13th of January. HCL Technologies alongside fellow Indian outsourcer Wipro (WIT), as well as HP (HPQ), IBM and Capgemini were CSC’s competitors in the bidding.

With the earnings reporting season just under way, there may be hope yet for India and its outsourcing companies to bounce back and beat market expectations. With 2011 barely begun and the economic recovery continuing, prospects for India may still improve. We’ll have to wait and see how the other companies fare.

Source:-http://seekingalpha.com/article/246621-infosys-3q-results-underscore-setbacks-for-india-as-outsourcing-destination

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