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Archive for December, 2011

Tata Consultancy Services not keen on Lufthansa systems buy on profit concerns

December 27th, 2011

India’s biggest software services firm Tata Consultancy Services is not pursuing the acquisition of Lufthansa’s IT arm actively anymore on concerns of profitability and hassles of reaching an agreement with the airline’s labour union, at least three people familiar with the discussions said.

European companies such as Lufthansa, who already outsource their IT services work to vendors including TCS and NIIT Technologies, are under pressure to shed non-core assets. For Indian tech firms seeking to grow their business beyond the top market US, such transactions promise to bring sustained revenues with local staff.

However, European labour laws, aimed at protecting local jobs, make it tough to relocate existing projects to cheaper delivery locations such as India. “It’s a marriage mostly seen as win-lose here in Europe, especially with the danger of most work getting shipped offshore,” said a senior official at one of the Indian tech services firms based in Europe. His company was among bidders looking to acquire a stake in Lufthansa Systems.

Another person also based in Europe and familiar with early talks between TCS and Lufthansa said the two companies could still rework a transaction based on renewed structure. “Instead of a complete buyout, a joint venture with TCS can be among possibilities,” he added. Lufthansa Systems, the IT arm of Europe’s second biggest airline had 2010 revenues of 4,105 core (almost $780 million) with some 3000 staff and counts its parent apart from several other airline companies among top customers. In August this year, Lufthansa had confirmed reports of restructuring its IT unit including plans to seek a partner.

“I have heard rumours about talks between Lufthansa and TCS. Of course we will take care of our colleagues and no one will be left alone. We are always concerned about job losses in acquisitions as this is usually passed off as synergy effect but these people are highly trained and skilled individuals and any job loss is absolutely unacceptable,” said Arne von Spreckelsen, a spokesperson for the Lufthansa trade union with some 2.2 million members.

When contacted by ET, a TCS spokesman said his company does not comment on market speculation. Lufthansa Systems officials had not responded to an email query sent by ET on Monday. TCS was not the only bidder in race to acquire Lufthansa Systems; rival Wipro, apart from several European outsourcing firms have had dialogues with the airline over past two years. A successful acquirer will get the expertise to target nearly $10 billion global airline IT market. Experts say labor troubles would continue to derail any large acquisition bids by Indian tech firms in Europe.

“European labor issues are a structural impediment to acquisitions of larger firms by offshore firms which is precisely why none have happened so far,” said Peter Schumacher, Chief executive of European think-tank Value Leadership. “These issues cut across Europe, as the recent strike by more than 400 Danish employees of CSC shows,” Schumacher added.

Under pressure to shed non core business assets, European outsourcing customers such as Lufthansa are also being asked by the labor union to raise wages. “We have asked Lufthansa group companies for a 6.1% compensation hike for their employees, this includes Lufthansa Systems. We will start negotiations on January 13th and we are confident that we can arrive at a conclusion on good terms as what we are asking for is fair,” Mr. Spreckelsen said.

Over the past three years, tech firms including Wipro, Infosys, Patni and several others have had discussions with potential targets such as Globant of Argentina, Ciber in the US and IDS Scheer of Germany. While Software AG acquired IDS Scheer earlier this year, both Globant and Ciber decided to discontinue their dialogues with potential acquirers. In 2008, Infosys made a $753-million offer for UK-based SAP aggregator Axon. However, it backed out when domestic rival HCL made a competing bid, bettering Infosys’ original 600-pence offer, and finally completed the acquisition.

Source:http://economictimes.indiatimes.com/tech/software/tata-consultancy-services-not-keen-on-lufthansa-systems-buy-on-profit-concerns/articleshow/11262626.cms

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Wipro hardens as ADR gains

December 27th, 2011

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Wipro rose 0.52% to Rs. 407.40 at 9:20 IST on BSE after the company’s American depository receipt, or ADR gained 1.6% to settle at $10.18 on the New York Stock Exchange on Friday, 23 December 2011.
Meanwhile, the BSE Sensex was up 66.74 points, or 0.42% to 15,805.44.
On BSE, 4,391 shares were traded in the counter as against average daily volume of 1.89 lakh shares in the past one quarter.
The stock hit a high of Rs. 407.50 and a low of Rs. 404.15 so far during the day. The stock had hit a 52-week low of Rs. 310.20 on 19 August 2011. The stock had hit a 52-week high of Rs. 496.30 on 28 December 2010.
The stock had outperformed the market over the past one month till 23 December 2011, gaining 11.03% compared with the Sensex’s 0.25% rise. The scrip had also outperformed the market in past one quarter, surging 19.63% as against 2.62% fall in the Sensex.
India’s third largest IT company by sales has an equity capital of Rs. 491.62 crore. Face value per share is Rs. 2.
On a consolidated basis, Wipro’s net profit fell 2.55% to Rs. 1300.90 crore on 6.2% growth in net sales to Rs. 9094.50 crore in Q2 September 2011 over Q1 June 2011.
Wipro provides comprehensive IT solutions and services including systems integration, information systems outsourcing, IT enabled services, package implementation, software application development and maintenance and research and development services to corporations globally.

Source:http://www.indiainfoline.com/Markets/News/Wipro-hardens-as-ADR-gains/4086766838

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A good deal for Infosys

December 27th, 2011

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Infosys Ltd has made another small acquisition, this time of an Australian-based outsourcing company. Portland Group Pty Ltd is a provider of strategic sourcing and category management services, with revenues of A$31.3 million (US$31.7 million) and an employee count of 113.

The acquisition price isn’t steep at around 1.2 times revenue and 5.7 times earnings before interest, tax, depreciation and amortization (Ebitda). According to a report by Prabhudas Lilladher Pvt. Ltd, Portland operates at an Ebitda margin of 21% and a net profit margin of 14.5%. Based on these numbers, the price-earnings multiple also looks reasonably cheap at 8.2 times. Given the state of the markets currently, it’s not surprising that Infosys has managed a good deal, especially for a company that operates on healthy double-digit margins. It’s a deal that works out to be earnings accretive.
Having said that, there’s nothing much for investors to get excited about. The acquisition won’t even consume 1% of Infosys cash balance of $3.5 billion (end-September cash balance at current exchange rates). And similarly, Portland’s revenue will be merely a drop in the ocean when compared to Infosys’ large size. Now that the company has been underperforming in the past many quarters, investors will clearly be looking forward to a substantive acquisition, which will drive the company back to industry-leading growth.

Still, the Portland acquisition is a move in the right direction and it’s heartening to note that Infosys is looking for companies to acquire and plug the gaps it has in its service lines. Portland will help the company increase its presence in the Australian region, as it counts several ASX 200 companies (an index of top Australian companies) as its clients. According to the Prabhudas Lilladher report, Portland has assisted around 50 of the ASX 200 clients as well as some other large customers in Australia and New Zealand.

On a year-to-date basis, Infosys shares have performed in line with the markets, falling by over 20%, even while shares of its top competitor, Tata Consultancy Services Ltd, have remained flat. This is because of the latter’s superior growth parameters in recent quarters. Some analysts believe Infosys’s financial underperformance will soon end and its shares will do better vis-à-vis peers. Investors, however, are yet to be convinced. Even in the past one month, the company’s shares have underperformed.

Source:http://www.livemint.com/2011/12/26223052/A-good-deal-for-Infosys.html

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5 Tips for SMEs looking to Outsource Work

December 27th, 2011

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Whether you are a single small business owner or part of a major global company, outsourcing work to freelancers and overseas workers can provide you with more time in the day to get to work on more important matters.
Outsourcing is still regarded as a challenge for many small and medium-sized enterprises (SMEs), however the internet is making it much easier to find professionals on your doorstep as well as overseas.

While there are potential pitfalls involved in outsourcing work for your business, these five top tips will help you find workers with the exact skillsets you require.

Know what you want

Quite possibly the most important factor to outsourcing work is to ensure you know exactly the results you need. One of the biggest mistakes SMEs make when outsourcing work is to provide freelancers with vague, open-ended instructions. Be sure to provide your freelancer with as much information so they can engage with your vision for the project.

Use a contract

It is highly recommended to draw up a working agreement that details the terms of employment. Be sure that your service provider understands how you intend to use the deliverables they are agreeing to provide. SMEs should also never agree to pay their provider in full until the job is complete.

Review portfolios and testimonials

Before accepting the proposal of a freelance professional, be sure to examine their previous work or portfolio. It is important to check their work meets your expectations for quality and style. You may find a professional that is very keen to win your business may consider providing you with an initial concept of what they can provide. However, no professional expects to work for free!

Maintain a strictly working relationship

Another mistake some small business owners make is to become friends with freelance professionals. It can be much more awkward to hire and fire a freelancer you have become emotionally attached to over the course of several months of projects. As cold-hearted as this may seem, if you are truly planning on being successful, you need to be sure your livelihood is not harmed for the sake of a friendship.

Never hire just by price

Although the temptation is there for small businesses with smaller budgets to outsource their work to the cheapest vendor, it often transpires to be the most frustrating option. If work from cheaper providers arrives in your inbox requiring amendments at your end this only adds to your time and money invested in the project.

Successful outsourcing can be a very fast, easy way of expanding your business, allowing you to focus on what you do best, competing with larger organisations whilst maintaining your independence.

Source:http://www.noobpreneur.com/2011/12/26/5-tips-for-smes-looking-to-outsource-work/

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Why FG Should Leverage On ICT Sector

December 27th, 2011

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Nigeria’s aspiration to become a digital economy could be realised through massive investments in information and communications technologies (ICTs) tools, infrastructures deployments, skills development and knowledge creation.
The country popularly referred to as the giant of Africa has come under serious searchlight as its influence on the continent continues to dwindle despite having the largest population.

Egypt, Tunisia, Mauritius and South Africa are now far ahead of Nigeria in the ICT Development Index. To prove that we are still far behind our peers, Lagos was ranked bottom of the largest cities in the world on the use of ICT to better the lives of its citizens in a research conducted by Arthur D. Little Institute and Ericsson.

Making Nigeria a digital economy has become the singsong of government since President Goodluck Jonathan won the presidential election in April 2011. Last week, the Minister of Communications, Mrs. Omobola Johnson, went a step further by coming out with a roadmap which if religiously followed, would the lead the country to the Promised Land.

Broadband for all

Broadband is really about getting fast internet all over Nigeria in both urban, semi urban and rural areas, according to Johnson. USA, Britain, Japan, Sweden, Norway and Singapore are digital economies courtesy of massive broadband investments. Johnson since assuming office has nudged the Nigerian Communications Commission (NCC) to come up with broadband policy to take internet to all rural communities in the country.

According to her, government was “Working to enable fibre optic deployment, complemented by Microwave and Satellite to enable access to core underserved areas. NigComSat 1R that was launched in China is an important milestone and a key part of the resources that we will have and will compliment fibre optic and micro wave infrastructure that we have in the country particularly to get internet to underserved and semi urban and rural areas that we have in this country today.”

The priority according to her is to get fibre to Universities and Schools and ensure they are connected to high speed broadband. “We believe that if we can get fast broadband to every university in this country, we will have an explosion in terms of research that can be done and knowledge that can be captured and innovation and creativity that come with accessed resources”

Digital Creativity
Mr. Leo Stan Ekeh, chairman, Zinox Technologies Limited, said government needs to invest about N750 billion in the ICT broadband internet connectivity through terrestrial fibre optic infrastructure, ICT tools and training such as computers, tablets, internet facilities for primary and secondary schools in the country.

The investment should subsidise computers for students, workers and development of internet access through building of wireless fidelity (Wi-Fi) and municipal internet coverage across major cities, schools and public institutions at very affordable rates for users. This way, the government will make ICT available, accessible and affordable to millions of Nigerians thereby raising the IT literacy level, equipping the youth and the unemployed with skills to be self sufficient and employers of labour themselves. “Government should create digital activity that would educate Nigerians through PC and Internet subsidies. We can wipe out poverty through software and hardware skills development, IT outsourcing and others,” said Ekeh.

Developing IT Parks
Already, the ministry is looking at harnessing software skills of young Nigerians through the development of IT parks in the country. “We will build IT parks, but for now in setting up IT parks, we are looking at places where there is already infrastructure and we see that in a number of places.”

Already, NITDA is set to sign an MoU with the Cross River State Government to leverage its Tinapa infrastructure to develop a knowledge city in Calabar, Cross River state. Nigeria can achieve greatness by replicating the success made in the telecom sector in other sectors of the economy.

Source:http://www.leadership.ng/nga/articles/11639/2011/12/27/digital_economy_why_fg_should_leverage_ict_sector.html

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Tags: ICT Sector

GM firm Syngenta sows seed of large IT outsourcing deal

December 27th, 2011

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Syngenta, a pesticide and genetically-modified seed firm, has inked an outsourcing deal with Infosys, covering all 90 countries of its operations.

Under the deal, Infosys will standardise systems and processes at the Swiss company and operate IT under a single global shared services agreement.

Infosys will also work to plan Syngenta’s future business architecture.

Martin Walker, head of business services at Syngenta – which employs 26,000 people – said IT services were “critical to our success and competitiveness” in all markets, across five continents.

Syngenta, which has faced serious controversy over its stance on genetic crop engineering, has agreed to appoint Infosys as preferred bidder on any future business transformation initiatives.

Source:http://www.pcadvisor.co.uk/news/small-business/3324737/gm-firm-syngenta-sows-seed-of-large-it-outsourcing-deal/

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Too early to speak about next year for IT industry

December 27th, 2011

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Mr Kiran Karnik, one of the guiding forces behind the Indian IT outsourcing story and former President of National Association of Software and Services Companies (Nasscom), is now one of the association’s trustees. Prior to joining Nasscom, Mr Karnik was the Managing Director at Discovery Networks in India. Currently a part of the Government-formed panel on private-sector graft, he is also a member of the Prime Minister’s National Innovation Council (NIC).

In Kolkata recently, Mr Karnik spoke to Business Line on issues relating to the global slowdown and its impact on IT industry in India, the positives for IT companies and on the subject of corruption in businesses.

Excerpts:

Do you see recessionary trends in Europe and the US affecting the IT industry in India?

So far, there is not much impact (of the recessionary trends). However, if suddenly something untoward happens in Europe, then we will be in deep trouble. Despite this year being a bad year, the industry may achieve its growth target in exports — the latest indications suggest an 18 per cent growth.

Has the previous order-book position been a reason for a muted impact?

No. There has indeed been some momentum from the past. Given the fact that both Europe and the US are now in trouble, things seem to be pretty okay. However, it is too early to speak about next year’s scenario.

What are the growth projections for 2012-13 ?

Next year (2012-13) growth projections are likely to be more or less similar to that in the current year … perhaps, marginally lower — maybe a percentage point lower than this year.

Indian companies had earlier in the year expressed their interest to hike prices. Do they have pricing power left?

A hike in prices is difficult at the moment. But there has not been a drop in prices. On the other hand, depreciation of the rupee over the last six months (by nearly 18 per cent) absorbed, not all, but a large part of the costs.

IT companies are moving more into the banking, financial services and insurance (BFSI) verticals. Do you see overcrowding in the segment?

Yes, you are quite right. BFSI is big business now. And it continues to do well. But companies, which were focussed on a particular sector, for example telecom, have taken some beating in recent months.

So overcrowding won’t be a problem?

No. I don’t think that overcrowding would be a problem. In fact, even within the BFSI segment more new areas are opening up now.

Are Indian companies hedging a smaller part of their interests considering the volatility in the rupee and global economic scenario?

No. Not that I know of, because there is continuing concern about the volatility of the rupee. While hedging, two-way currency movements are to be kept in view. If an IT company had not taken any hedge (against rupee appreciation) during the recent rupee depreciation it would have made huge gain.

You are a part of the committee formed by the Government to look into issues of corporate corruption. What is your personal thought on corruption in India Inc?

On the issues of (corporate) corruption, I think that industry and industry associates will have to do more. There has to be some peer pressure on companies involved in corrupt practices. You cannot depend only on the law and when something is being done (to punish them).

Source:http://www.thehindubusinessline.com/industry-and-economy/info-tech/article2749572.ece?homepage=true&ref=wl_home

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