Archive for June, 2012

As rupee falls, IT companies under pressure to cut prices

June 29th, 2012

Indian IT companies are coming under pressure from clients to renegotiate rates downwards for older projects and drop rates for new ones, given the gains that the vendors are making from the sharp drop in the rupee value against the dollar.

Contract values are typically in dollars and those that were signed when the rupee was at, say, 45 to the dollar in August last year, would today deliver 26% higher revenues in rupees to Indian vendors, given that the rupee has fallen to that extent since then.

“Many global tech buyers are watching the day-to-day drop in the Indian rupee. Some already have asked for a ‘cut’ from the rupee windfall,” said the CFO of a leading IT company who did not want to be named because his company is in the silent period ahead of its June quarter results. He said it would be tough for IT companies to resist such demands. “Some IT companies may be willing to share a part of the gains,” he said.

The CEO of a mid-sized IT firm said the buyers were asking for a share in the rupee gains because many of them were in deep trouble themselves on account of the slowdown/recession in Western markets. “If we don’t give them a cut, they may not renew the contract or move to another vendor,” he said.

Analysts also believe customers would put pressure on tech vendors to drop prices and renegotiate contracts. Pradeep Udhas, executive director in consultancy firm KPMG, says this could pose a new challenge for tech firms. But he also says many of the vendors may be able to resist this demand by pinning their arguments on inflation.

Inflation in India has for long been close to double digits, leading to all-round increase in costs, including for the IT vendors for whom much of the costs are in rupees. So the benefit from the rupee fall would be reduced to that extent, and the profit gains would not be as significant as the revenue gains.

Hari Rajagopalachari, leader for the technology sector in consultancy firm PwC India, says the fundamental reason for the fall in the rupee is hyperinflation in India. “So the advantage we get from rupee depreciation will get neutralized in high inflation. Indian tech providers may well argue their case of inflation if they are asked to share their profitability with clients,” he says.


Banking industry under IT cost pressures

June 29th, 2012

IT budgets are under pressure across the Australasian retail banking industry, with CEOs mainly focused on agility, customer centricity, mobility, and digital innovation, according to one technology industry analyst firm which says that cost and efficiency continue to be the key considerations for investment decisions by bankers.

In its latest report examining the major issues in retail banking from different functional levels and perspectives, Ovum found that cost and efficiency ranked highest on CIO and CEO agendas.

According to Denise Montgomery, Ovum’s Research Director Financial Services and author of the report, agility and improving customer experience were highly ranked by CEOs and CIOs, but “cost and efficiency remain the underlying focus.”

Montgomery stresses that efficiency and cost management continued to be the key decision-making criteria for any large investment in capability or innovation, and as a result banks were returning to functional centralisation and rationalisation of duplicate processes and activities. “With investment priorities increasingly favouring online processes and products, large back-end, enterprise-level initiatives are being deferred due to cost management concerns.

“Outsourcing and offshoring are still on CIO agendas, and are seen as key strategies in reducing costs and improving efficiency. Most banks are also building regional hubs, and enterprise-wide programs are being cut in response to cost pressures,” Montgomery concluded.


Indian outsourcing of IT jobs gets massive backlash in UK

June 29th, 2012

Indian outsourcing of IT jobs is once again in the limelight, after a week-long IT debacle at Royal Bank of Scotland and Natwest, that left customers locked out of their accounts for a week, is estimated to cost the bank a large chunk of cash in fees.

Shares slumped 9.1 %, meaning over £1.7billion was wiped off taxpayers’ 82% stake in the bank since the problem started last Thursday.

RBS has cancelled its plush corporate hospitality expenses at Wimbledon, chief executive Stephen Hester has announced senior management will face the music, and the bank, which was bailed out by the UK government and is part taxpayer-owned, faces an FSA investigation.

Reports in the UK media peaked Wednesday quoting “bank insiders” as saying that the entire problem was kicked off by an inexperienced CA-7 IT operative at RBS’ Hyderabad back office, who wiped out vast swathes of crucial data while performing a routine upgrade.

Ca-7, a routine banking software produced by Computer Associates, is reported to be at the root of the problem. According to some reports, RBS is considering legal action against CA, an American backbone It provider as well.

The link between an alleged inexperienced Indian in Hyderabad and a major meltdown of taxpayer value in the UK, has kicked off a massive backlash against outsourcing to India in the UK media.

As a senior Indian IT professional points out: “Most of the explosive reports are not in the financial or technical papers, but in the general media.” In the midst of a double dip recession, while outsourcing may not be as bad a word in the UK as it is in US, local media is quick to look for a scapegoat to blame.

RBS officials, including chief executive Stephen Hester, categorically stated that the problem has nothing to do with outsourcing, in a number of official statements and TV interviews. “We have been clear we will fully investigate the causes of this incident. But we hope people will understand that right now our complete focus is on fixing this problem and helping our customers. The management and execution of the batch process is based in Edinburgh, UK at the Fettes Row Data Centre, as is all of the current work to resolve the problem.”

“It has been unnecessarily linked to outsourcing. Accidents can happen anywhere. The unions are trying to make it an outsourcing issue,” a senior Indian It observer told ET.

The Union, however, says it has not. While almost all Uk media reports have gone to town reporting that Unite, a major Union in UK, which represents RBS employees, blamed job-cuts and shifting of jobs to India for the debacle, Saba Edwards, a spokesperson for Unite, told ET that the union is not blaming Indian outsourcers.

“That is not what we have said. Other have said it, but not us,” she told ET. Unite’s statement, available on their website, says: “Following some 30,000 job losses at the bank and extensive outsourcing of functions, the union has grave concerns that staffing challenges are exacerbating the problems facing the bank.” Its full statement is available on its website, and does not mention India.

There seems to be some confusion as to what operations RBS actually has in Hyderabad. Bank insiders told ET that RBS does not have any operations in Hyderabad, which totally contradicts all media reports in London.

UK media reports said that the bank had independently advertised and hired CA-7 experts in India, after slashing jobs in the UK. Som Mittal, the president of Nasscom said that “The company itself has said it is not an outsourcing issue and their main centre is in the UK. Such incidents happen once in a while, which gets technologically resolved.”

A senior Indian IT professional in the UK say that this is an explosive situation, because the huge problem in RBS can quickly be shifted to blaming Indian IT, given the current economic and political environment. As a senior UK media observer not in the banking industry put it: “It’s easy to find a foreign hand and shift the attention from one’s own errors.”


Outsourcing could save €1bn, claims Chambers Ireland

June 29th, 2012

The Government could save €1 billion over 10 years by outsourcing 30,000 public service jobs, according to business lobby group, Chambers Ireland.

The organisation, the umbrella body for the Republics chambers of commerce, yesterday published a paper on the Croke Park deal between the Government and public service unions.

The document recommends outsourcing 30,000 public service jobs, which would save €1 billion over 10 years.

It also argues that service increments, to which more than one in six civil servants are entitled, should not be paid for three years.

Increments last year cost the Exchequer €250 million.

Seán Murphy, Chambers Ireland deputy chief executive, acknowledged that the Croke Park deal had achieved savings and greater flexibility.

However, he argued that given the straitened nature of the State’s finances, it would be hard to justify paying the increments.


Dot Com Infoway Launches New Corporate Website for the Netherlands

June 29th, 2012

Dot Com Infoway (DCI), a premier IT company in India providing offshore IT outsourcing solutions to businesses across the globe, is proud to launch – a website designed to officially announce the company’s exclusive services in the Netherlands. The launch restates the company’s efforts to keep up with the growing needs of the industry and fulfill the business needs of its clients.

Dot Com Infoway’s Netherlands launch is part of its global expansion and comes ten months after its launch in Australia. The corporate site for the Netherlands will offer both local and international outsourcing for a range of services that include Mobile Application Development, Search Engine Optimization, Web Development and content management solutions like Magento and Joomla.

DCI had hired a Sales Manager last year for its office at Amsterdam, to gain a better foothold in its business overseas. The company is continuously working on acquiring better understanding of European markets to develop its business in new and existing markets worldwide. The launch of DCI’s corporate website for the Netherlands will support its corporate growth and rising market share and acceptance as a leading IT service provider, in the Netherlands and other major international markets.

Speaking at the launch of the website, Mr. C. R. Venkatesh, CEO of DCI said, “After the launch of our services exclusively for clients in Australia, we felt the growing need to connect with our clients in their native languages. The Dutch version of our corporate website is the first step in providing this support, serving existing customers in that region and attracting new ones. It is important that our clients in the Netherlands know that we have both a world-wide and a local presence in the market.”

The company’s service offering has been designed to cater to the exclusive requirements of the Dutch market.


Business Process Outsourcing Firm TMone Drives Jobs in the USA with Tommy Baldwin Racing at Kentucky Speedway

June 29th, 2012

TMone, a Business Process Outsourcing (BPO) firm and leader in driving new jobs in South Dakota and Iowa, is jumping on board with Tommy Baldwin Racing (TBR) and the No. 10 Outsourcing in the USA @TMone Chevrolet driven by David Reutimann in this weekend’s Quaker State 400 at Kentucky Speedway. TMone’s NASCAR Sprint Cup Series (NSCS) campaign will focus on driving jobs in America and highlight the difference between Outsourcing and Offshoring.

TMone, with locations in the Midwest and Northern Great Plains, delivers new jobs to America’s hometowns. American businesses, such as TMone, are the start-up success stories of job creation and are built upon a dream that owes its success to the energy and commitment of the employees who work at TMone. Outsourcing is a people business, and TMone is in the business of augmenting and supplementing other companies human capital needs. TMone has grown to over 500 employees and is on Inc. Magazine’s Honor Roll List of Fastest Growing Privately Held Companies for the last five years in America.

Most of TMone’s growth has been as a result of supporting companies that are driving forward with new initiatives in uncertain regulatory environments, therefore, not one of TMone’s new jobs has resulted in the loss of a job held elsewhere. TMone helps service and sell legacy and additional customers so our clients can focus their human capital on their core businesses, which in return drives jobs internally and externally.

“We drive sales, and we drive service by waking up and fighting for jobs every day,” said Anthony Marlowe, TMone’s President. “We are proud of our Outsourcing in the USA Company. The more than 500 employees of the TMone community find it intentionally misleading when people tie the outsourcing work we do in our Iowa and South Dakota call centers to negative connotations, some of greatest leaders and business people of America created value for millions of people and yes outsourcing is a part of the strategy.”

Saturday night’s Quaker State 400 will mark TMone’s fifth sponsorship of TBR and the 17th consecutive NSCS team sponsorship this season. Reutimann will pilot the No. 10 Outsourcing in the USA @TMone Chevrolet in the 17th race of the NSCS season.

“We are very happy to have Outsourcing in the USA come on board the No. 10 Chevrolet as primary sponsor and to have TMone expand their program with us,” explained Tommy Baldwin. “I went to TMone’s website, and they are hiring, sponsoring NASCAR teams and helping companies grow which means everyone is winning. TMone’s mission is ‘Our clients growth is our growth’ which aligns well with our team’s outlook, so it is a fitting partnership for all of us.”


Texas State CIO Bets Big On Controversial Outsourcing Deal

June 29th, 2012

Wanted: Experienced CIO to take over struggling IT organization with flailing outsourcing relationships, data centers in disarray and a disheartened internal staff.

As Governor Rick Perry’s director of administration and technology, Karen Robinson was charged with finding candidates capable of meeting that challenge. But the only one the chief of staff trusted to take over the Department of Information Resources (DIR) was Robinson herself.

“It was not one of the positions where you say, ‘Ooh ooh, take me!’” Robinson, now Texas State CIO and Executive Director of DIR, admits. But through her work with policy analysts and others to assess what went wrong during a public battle between IBM and Texas over their $863 million data-center-consolidation contract, she knew as much as anyone could about how to fix IT outsourcing.

Robinson spoke to leaders of the agencies DIR serves, created an executive leadership committee to guide IT decision making, and launched an 18-month process of rebidding the IT work. “The DIR does so much more than data centers that outsourcing was the only way to go,” says Robinson. “But I feared no [vendors] would apply.”

Even the ugliest outsourcing efforts often succed on the second attempt, but to be sure this one worked, Robinson embraced a different approach–the services integrator model. She signed a deal potentially worth more than $1 billion earlier this year, whereby Xerox and its outsourcing division (formerly ACS) will take over five towers of IT service, subcontract some of the work to vendors, including Unisys and Cisco, and Capgemini will be the master service integrator.

It’s an unproven tactic–one outsourcing provider managing its real-world competitors’ end-to-end delivery. But Robinson felt the potential rewards were worth the risk. “The other model–IBM telling IBM what to do–wasn’t working,” she says. “This is going to offer more flexibility and visibility. We have Capgemini there to oversee what’s working.”

There is pent-up IT demand from customers underserved by the previous five years of outsourcing. But “with the new contract, we opened the door to new secure, sustainable and cost-effective technologies like cloud computing, so customers don’t have to wait for servers to be delivered,” Robinson says. “We can have something built in 20 minutes.”

Successful outsourcing relationships take longer than that. Many have their eyes on Texas to see how this model works, particularly Robinson’s public-sector CIO peers, who have struggled with IT services deals. “It could be a landmark deal or it could be a disaster because so much is unknown,” says Esteban Herrera, COO of sourcing analyst firm HfS Research.

“I’ve gotten lots of ‘Good lucks,’” says Robinson. “I expect some hiccups. But I’m tired of having unhappy customers.”

The biggest benefit Robinson is looking for is increased transparency of IT delivery and improved service. She’ll know the new deal is working, she days, when her phone finally stops ringing.


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