Archive for April, 2011

HCL Technologies Expects Deal Wins to Boost U.S. Sales

April 29th, 2011

India’s HCL Technologies Ltd. expects the improving economic climate in the U.S. and recently won large orders to spur revenue growth in its largest outsourcing market in April-June, after a blip in sales growth from the region in the just-ended quarter.

“The overall economic environment in the U.S. is looking positive and that should be reflected accordingly [in the ongoing quarter's revenue],” HCL America Inc. President Shami Khorana said in a recent interview.

HCL Technologies is India’s fourth-largest software exporter by sales and gets more than half its revenue from the U.S.

But even as the U.S. grapples with a bloated fiscal deficit and political discord on tackling the mounting debt, Mr. Khorana expects clients’ technology spending to gather pace, taking cues from positive economic data such as the rising stock market and climbing pending home sales.

HCL Technologies posted a better-than-expected 34% surge in January-March earnings, driven by strong 4.8% rise in business volume–touted to be the best in India’s software industry in the quarter–as clients continued to pour money into outsourcing technology services.

But revenue growth from the U.S. for the just-ended period was tepid as some contracts that matured were shipped to low-cost destinations, while others were in initial stages of generating income, Mr. Khorana said.

Sales from the U.S. grew just 0.7% to $496.6 million, much lower than the average quarterly growth rate from the country of more than 5%.
Still, the transformational projects the company has been winning in the region, coupled with a healthy pipeline of deals, indicate the average revenue growth momentum will continue in the ongoing quarter, he said.

India is one of the most preferred technology outsourcing destinations for companies in the U.S. and Europe. A recent report by research firm Forrester said technology spending in the U.S. is expected to increase 8% to $805 billion in 2011 and that the growth would come largely from businesses wanting to invest in IT projects.

The new orders from the U.S. are mostly discretionary or non-essential in nature and translate to projects that are for a limited period of time, Mr. Khorana said. This reflects the fast-pace recovery in the region from the slowdown, he added.

In contrast, revenue generated in Europe is mostly from on-going cost-saving projects, which are for longer duration, he said. Such projects are bread-and-butter type of contacts for software exporters.

Revenue growth in the U.S. continues to be driven by increased spending by clients in healthcare and pharmaceutical businesses, and regulatory changes in financial services, he said.

Uncertainty still prevails on the future of spending in telecommunications, said Mr. Khorana.

In a bid to address the rising demand for outsourcing, the company is making a “significant investment” to open a new office in Redmond, Washington, in May that will house its 400 staff currently working for software giant Microsoft Corp., Mr. Khorana said.

He expects to hire another 400 staff in this office in the next two-to-three years to service other clients in the region and increase its employee count in North Carolina to 500 from 100 in three years.

Clients in the U.S. have confirmed that their technology budgets for the year are either flat or expanding, whereas in Europe, the second-largest market, budgets are either flat or shrinking, he added.


Dell to Invest $1 Billion on Cloud Computing Solutions

April 29th, 2011

In an effort to increase investments in new technology solutions that will help foster customer innovation and drive business results, Dell (News – Alert) recently announced its plans to invest $ 1 billion in the current fiscal year to deliver leading solutions, services and cloud-based delivery options.
“Technology advances, delivery methods and the move to disruptive IT models like cloud are changing the fundamental way businesses operate,” said Steve Schuckenbrock, president of Dell Services, in a statement. “With this transformational shift, businesses are gaining benefits in terms of speed to market and organizational and compute flexibility.”

Schuckenbrock said that Dell is mobilizing to help customers capture these benefits and make the power of cloud computing accessible to more organizations and users. Dell has made and will continue to make significant investments to deliver technology that helps customers thrive in the Virtual Era, according to Dell officials.

Over the next 24 months, the company will build multiple highly efficient cloud data centers around the world to provide its customers access to public and private cloud technologies and its world-class IT outsourcing capabilities.

These new data centers will allow customers to take advantage of infrastructure- and virtual desktop-as-a-Service offerings as well as IT outsourcing.
Company officials pointed out that Dell will open 12 Global Solution Centers this year and is planning 10 more over the next 18 months, to better bring open, capable and affordable solutions to organizations around the world.

This global network of solution centers will provide a backdrop for customers to learn about Dell’s industry-focused solutions and domain expertise.
Dell also launched new Next Generation Data center, End-User Computing and Email Archiving solutions that enable efficiency and innovation from the core to the edge.

In other cloud computing news, NaviSite (News – Alert) achieved the Cisco Advanced Managed Services Certification, which recognizes the company’s initial investment in the ITIL processes, practices and tools necessary to provide high-quality managed services.

“This achievement represents an important milestone in the development and roll out of our cloud-based services,” said R. Brooks Borcherding, president and CEO of NaviSite earlier this month.


Indian IT lags global peers in healthcare vertical

April 29th, 2011

Indian IT majors have been slow to tap into the healthcare services vertical, which has in recent years has emerged among the fastest growing verticals after banking, financial services and insurance (BFSI). Being less affected by the recession and more open to IT spends, the healthcare space has grown in importance.

But there is no Indian IT company in the top 10 healthcare service providers’ list brought out by Healthcare Informatics, a healthcare advisory outfit, for 2010. Global IT majors like Dell, CSC and Cognizant now have over $1 billion revenues coming in from their healthcare IT practices. Cognizant, thanks to its erstwhile parent Dun & Bradstreet, which also owned IMS Health, has a strong lineage in the healthcare practice. CSC has an over three-decade presence in healthcare IT.

In contrast, Infosys does not even report healthcare revenues, as it is not significantly large. For TCS, Wipro and HCL, healthcare in 2010 contributed less than 10% of total revenues, and ranged between $200-500 million.

But Indian IT majors are now looking to catch up with their global peers in the $100-billion global healthcare IT market. Wipro recently made a leadership change and is recruiting senior healthcare experts to tap the space. India’s largest IT services company TCS recently announced that it is aggressively looking for healthcare acquisitions in Japan and Germany.

Chaitanya Ramalingegowda, director for globalization advisory in Zinnov Management Consulting, said that Indian companies need to build domain expertise in the space to tap into it. Infosys CFO V Balakrishnan agrees that compared to other verticals, domain expertise in healthcare is vital due to the various regulatory compliances and complex nature of the space. He added that the company’s US subsidiary set up in 2010 is building a strong healthcare management team with local talent and is getting closer to potential customers.

Acquisitions are one way that global IT companies have in the past penetrated into the space. Dell through its acquisition of Perot Systems, a leader in healthcare IT, has been able to make significant gains.

Gopi Natarajan, CEO of BPO/KPO firm Omega Healthcare, said that the major healthcare IT outsourcers are insurance firms, pharma companies and service providers like hospitals. He added that the market is highly under penetrated and opportunities are huge as only 2% of total costs in the healthcare sector go towards IT.

According to Abhishek Shindadkar, IT sector analyst at ICICI Securities, “The US healthcare reform bill will throw up more healthcare IT outsourcing contracts. The country is the biggest outsourcing market for healthcare IT services followed by UK and APAC.”

The new US law seeks to expand healthcare coverage by expanding medical aid eligibility, subsidizing insurance premiums, providing incentives for businesses to provide healthcare benefits, prohibiting denial of coverage and denial of claims based on pre-existing conditions, and establishing health insurance exchanges.


Randstad to focus on pharma, IT

April 29th, 2011

The Netherlands based human resource services company Euro 14.2 billion revenue Randstad is betting big on large banking financial services and insurance (BFSI), information technology (IT) and pharmaceutical companies for its new service.

‘Our focus is trained on Fortune 500 companies in India operating in BFSI, IT and pharma sectors. Globally we are looking at emerging economies for this service,’ Kelly Quirk, managing director of Randstad Corporate and Managed Services, told IANS.

According to her, the RMS endeavours to manage the human resources supply chain of large multinational corporations (MNC) and this offering fetches Randstad revenue of around Euro 2.5 billion.

Quirk said under RMS the company offers two solutions, Managed Services Programme (MSP) and Recruitment Process Outsourcing for companies that take on board large number of people either as temporary or permanent workforce.

She said the MSP will provide around 5-10 percent cost savings and value addition to large companies through increased efficiencies, reducing duplication in efforts and time and reduced attrition rates.

The financial services, pharma and the IT sectors are the leading adapters of the MSP model in the US and the potential in India is huge as these sectors are logging good growth, she felt.

The global market for MSP that addresses a company’s need for contingent work force is around $30 billion.

‘Around 25 percent of the contingent work force spends in US and nine percent in UK is done through MSPs. The market is expected to grow fast in Europe and in the rest of the world,’ Quirk said.

She said Randstad has around 250 clients globally for this service.

Speaking about the other offering – Recruitment Process Outsourcing- Quirk said it would help corporates to manage their supply chain of large permanent work force intake and improve process efficiencies in hiring.


Graduates lead Uganda’s IT charge

April 29th, 2011

Information technology companies and the telecommunications sector in Uganda are hopeful that a recent batch of outsourcing graduates will help bolster the country’s efforts to increase IT infrastructure and progress in the country.

Some 500 students of the Makerere University graduated with certificates in Business Process Outsourcing, a one-year course aimed at developing new outsourcing experts in Uganda.

Isaac Moami, one of the students, said that he hopes that the certificate “will give us all an opportunity to help Uganda position itself as a leader in Africa for international firms to set up stations in the country.”

The minister in charge of Information, Communication Technology (ICT) Aggrey Awori presided over the graduation ceremony held at the Faculty of ICT.
Business Process Outsourcing is the process of hiring an outside company to handle a business’ activities.

Awori applauded the graduates for taking the initiative saying it is going to “broaden their employment opportunities in the this global technological era.”
The Business Process Outsourcing is being fronted by the National Information Technology Authority Uganda, which is part of the ICT ministry.

A ministry official, who was not authorized to speak to the media, said that “outsourcing experts are a vital part of our future as a country that can draw international companies in and help make Uganda a leader in this sector.”


India’s financial services business process outsourcing market may reach $250 billion

April 29th, 2011

A report by the global consulting and research firm Everest Group has predicted that India’s global business process outsourcing (BPO) in the financial services market has the potential to grow into a $250 billion market, according to Supply Chain Magazine.

“India continues to play a key role in the [financial services] BPO space and offer attractive arbitrage opportunities compared to onshore locations in [the] U.S., U.K. and Europe,” said Everest Group partner Vikash Jain, as quoted by the news source.

The report identified India as a mature location for finance-related outsourced business process management, alongside China and the Philippines. India’s market – which has grown at a rate of more than 30 percent over the past six years – would have to grow by nearly 15 times its current size in order to meet the predicted $250 billion.

The Everest Group analyzed global sourcing phenomena across banking, capital markets and insurance segments in order to predict the maturity levels of the functions achieved by each vertical, according to ITVarNews.


CIOs must take steps to manage risk and unexpected costs during cloud sourcing revolution, says Gartner

April 29th, 2011

The $820bn IT services market is changing quickly and dramatically, as cloud computing and offshoring become mainstream, and CIOs should take steps to manage inherent risks and unexpected costs during the cloud services revolution, according to Gartner, Inc.

During the next few years, market dynamics will determine whether cloud-enabled outsourcing will be the demise of traditional outsourcing, if it will lead to the convergence of services and products currently marketed ‘as a service,’ or if it will result in next-generation outsourcing.

Cloud-driven business and IT services include all types of solution that are developed, bundled and packaged as outsourcing service offerings for which the business or IT service provider uses one or more cloud computing technologies within the solution’s overall architecture. Gartner refers to these services as ‘cloud-enabled outsourcing service offerings.’ These services can be delivered directly by a cloud provider or via a service aggregator for the delivery of pre-engineered and configurable business solutions in a timely and cost-effective manner.

“Cloud service sourcing is immature and fraught with potential hazards. The hype around cloud computing services has increased interest, as well as caution, for CIOs trying to determine where, when and if cloud services can provide valuable outcomes for their businesses,” said Frank Ridder, research vice president at Gartner. “Cloud computing is driving discontinuity that introduces exciting opportunities and costly challenges. Organizations need to understand these changes and develop realistic cloud sourcing strategies and contracts that can reduce risk.”

Mr. Ridder said that traditional IT services often find organizations locked in, fighting with rigid delivery or hesitation to change when engaged in traditional IT services deals. Innovation seldom materializes and solutions fail to scale, and service providers often struggle with their profits.

In the new cloud services scenario, however, flexibility, agility and innovation are design principles and, over time, service providers will succeed in delivering on these principles. The market also expects scalability, cost-efficiency and pay-per-use pricing models from cloud services solutions. Although cloud services already provide these, service providers manage their risks through terms and conditions that are still immature. However, Gartner believes that solutions and their commercial terms are maturing quickly.

To avoid the potential pitfalls and hidden costs of cloud sourcing, Mr. Ridder said that organizations need to ensure they understand the short- and long-term implications of cloud services, on the demand and supply side, as well as on the sourcing life cycle itself. The services sourcing life cycle includes four crucial elements: sourcing strategy, vendor selection, contracting, and management and governance.

“The life cycle is a critical area to plan and manage, regardless of whether organizations source their IT services through internal or external resources. Our forecasts indicate that organizations spend 53% of their IT services budget on external services, and that spending is growing 3.9% per year, while new categories of services are experiencing double-digit growth,” said Mr. Ridder. “Organizations can use Gartner’s extensive analysis of changes in delivery, pricing, investment and cost to more effectively develop their cloud sourcing strategies, negotiate their cloud services contracts and manage the performance of their providers.”

More-detailed analysis is available in the Gartner Special Report on Cloud Sourcing. The Special Report includes extensive research around key cloud sourcing issues related to emerging market trends, offerings, contracting, and pricing. There are also links to Gartner’s Talking Technology series, as well as links to recent and future webinars.


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