Archive for August, 2012

ITO firms struggle with increasing costs

August 31st, 2012

China’s information technology outsourcing providers are rushing to consolidate and adapt their marketing strategies, as they struggle to survive amid rising labor costs and competition from major multinationals.

Chinese ITO companies VanceInfo Technologies Inc and HiSoft Technology International Ltd announced in early August that they had signed an agreement under which the two companies will complete a tax-free, all-stock merger of equals with a combined equity of about $875 million.

According to the agreement, VanceInfo and HiSoft shareholders each will own about 50 percent of the joint venture, whose shares will continue to be listed on the Nasdaq Global Select Market.

The combined company is expected to have revenue in 2012 of more than $670 million, which would make it the largest China-based offshore IT services provider.

The merger is one example of how ITO companies are expanding their economies of scale, as they seek to stem the current profits decline in the industry, experts said.

Jin Yongqing, HiSoft software marketing director, said that since last year, some small service outsourcing companies began to see their profits drop because of rising labor costs and a lack of bargaining power compared with behemoths like Microsoft Corp, IBM Corp and Huawei Technologies Co Ltd.

Currently, China has more than 16,000 software outsourcing companies, most of which are small, with a production value of less than $100 million.

Data from the Ministry of Industry and Information Technology show that China’s software industry saw revenues of 1.10 trillion yuan ($173 billion) in the first half of the year, up 26.2 percent from a year earlier.

Industry profits totaled $117 billion yuan for the first six months, increasing by 10.6 percent, 24.6 percentage points lower than that of the same period last year.

Market research data from China International Capital Corp Ltd show that after salary increases of 115 percent in 2011, the average labor cost of ITO industry rose 5 to 7 percent in 2012, resulting in a profit drop for most ITO companies.

The company said labor costs usually account for 60 to 70 percent of ITO providers’ total costs. ITO providers’ profits decreased 1.5 to 2 percent with every 5 percent increase in labor cost.

Competing fiercely on price, ITO companies can’t transfer labor-cost increases to their buyers, and also have to shoulder surging production costs that lead to shrinking profits, according to the research.

“The era when ITO providers made profits through the low cost of software engineers has gone, and we should promote a business model that will keep the company profitable,” said Liu Jiren, Neusoft Corp CEO.

As China’s second-largest ITO provider, Neusoft is establishing its cloud computing platform, which will be used on its service outsourcing business.

“Neusoft is planning to establish its health-industry zone in Shenyang city; developing businesses including research and development of medical equipment, health management and service; and forming a new business sector combining the Internet and health services,” Neusoft Vice-President Lu Xiaoxia said.

Another Chinese IT service provider, iSoftStone, is also focusing on business diversity and expansion.

“Compared with merger and acquisition activity, which may cost a lot in terms of human resource integration, iSoftStone prefers concentrating on expanding its business to finance, urban development and telecommunications to maintain stable growth and reduce the effect of surging production costs,” said Wang Li, senior vice-president of iSoftstone.

Since 2011, the telecom equipment manufacturer Huawei has planned to establish joint ventures with its IT service providers iSoftstone, VanceInfo and ChinaSoft International Corp, setting its foothold on the IT outsourcing industry.

ChinaSoft announced in January its plans to set up a joint venture with Huawei, in which ChinaSoft will have a 60 percent stake and Huawei owns the rest.

“The merger with Huawei will help us learn a lot about IT service buying, through which ChinaSoft can integrate our IT resources and improve comprehensive competitiveness,” ChinaSoft said in a statement.


Reduce` Mphasis; target Rs 340: Emkay

August 31st, 2012

Mphasis, the provider of applications services, Infrastructure services, and Business Process Outsourcing (BPO) services globally, reported gross revision of USD 252 million (-5.2% QoQ) with revenue decline led by 11% sequential decline in rev from HP channel (HP ES rev declined by 13% QoQ) as Direct business grew by 2.8% QoQ.

Margins at 19.7% were flat sequentially aided by 9.6% QoQ currency depreciation as company implemented wage hikes/promotions from May 2012 onwards.

Overall HC increased by 460 people QoQ to 38,000 albeit led by additions in BPO as Apps/ITO HC declined, providing no confidence on revenue recovery.

Management expects pressure and decline in the HP channel to continue, Direct business (proportion of direct business has increased by 1200 bps over the past 4 quarters to 45% of revision in could see moderation in growth driven by the macro uncertainty as deal closures take longer.

Further Emkay sees limited room to improve margins at Mphasis given continuous revenue pangs, no room to improve operational levels like utilization and need to step up S&M investments as company intends to drive growth in the direct business.

“Moderation in revenue growth in the Direct business will amplify the decline in HP channel business ahead.“ said Emkay.

It retains Reduce with an unchanged target price of Rs 340.


Outsourcing industry hits back following bad PR caused by failed deals

August 31st, 2012

Concerned about a public backlash about outsourcing in the wake of failed government IT contracts and other struggling outsourced projects, the National Outsourcing Association has launched a campaign to try and win back support for putting out work to external providers.

The National Outsourcing Association (NOA) has launched its Outsourcing Works campaign to “fight back against the negativity surrounding the sourcing industry following recent high profile failures”.

From iOS vs Android to the timeless PC vs Mac. As Samsung and Apple take the headlines, we look at the other classic battles.

It says Outsourcing Works will “unite the industry into one coherent voice that will elucidate the value that outsourcing brings to the UK, both in terms of job creation and efficiency gains”.

NOA survey finds 80% of public believe outsourcing hinders British businesses Fewer outsourcing contracts going around, research shows Outsourcing to G4S still under consideration by three police forces

The NOA claims the UK outsourcing industry is the second biggest employer in the UK economy, employing over three million people. “Although the NOA is aggrieved at the recent lambasting of our industry, we understand the need for outsourcing to prove its worth”, it said.

The NOA said the public wanted to see evidence of the “macro-economic advantages that outsourcing brings”, such as its track record of job creation and its positive contribution to the UK economy, which is what the campaign will aim to do.

The campaign will also involve the distribution of best practice guides and the NOA aims to work with the government to help reduce youth unemployment. There will also be an Outsourcing Works Symposium in June 2013.

NOA chairman Martyn Hart said, “One very high profile deal goes awry and outsourcing is squarely back under the microscope. Outsourcing only arouses interest when it goes wrong.”

Hart said, “Of the hundreds of outsourcing deals that make up the Olympics, only one gets a mention [the failed G4S Olympics security contract]. To combat this depredation of our industry and address misunderstandings, the NOA is calling upon the entire outsourcing industry to champion the fact that Outsourcing Works.”

Three police authorities in the UK are still considering outsourcing their organisational support services to G4S, despite it coming under fire for under-supplying security staff for the London Olympics.


Achievo Named to the Global Services 100 for Second Consecutive Year

August 31st, 2012

Achievo Corporation, a leading provider of global software and information technology solutions, has again been recognized as a 2012 Global Services 100 provider. The 2012 Global Services 100 list represents companies that demonstrate excellence in delivering global IT services while using matured models of service delivery.

“The global service provider landscape is increasingly getting complex; buyers are looking at vendors with scale, skill, or both in delivering business outcomes and not cost-savings alone. The companies on the Global Services 100 list have demonstrated their ability to deliver complex solutions and services, manage global customers, and sustain successful financial performance,” said Ed Nair, Editor of Global Services.

Lead by a seasoned management team with a strong track record in the software outsourcing industry, Achievo has the unique advantage of being a U.S. company with a built-in organization structure to market, sell and build customer relationships, and deliver services multi-nationally.

“We are very honored to be recognized as one of the best leaders in software and IT services. This award recognizes not only our abilities as a solution provider, but also our employees and clients who have been the foundation of Achievo’s success,” said Darryl Quan, CEO of Achievo.


Pironet NDH AG startet ins zweite Halbjahr mit kräftigem Gewinnplus aus dem Cloud-Geschäft und bestätigt Jahresprognose

August 31st, 2012

Erfolgsmeldung zum Halbjahr: Nach Umstrukturierung des Konzerns legt die Pironet NDH AG mit ihrem Zwischenbericht einen Gewinnzuwachs von 45 Prozent vor. Die Unternehmensgruppe steigerte ihr Betriebsergebnis (EBIT) auf 1,14 Mio. Euro zum Halbjahr 2012 (Vorjahr: 0,79 Mio. Euro). Das Ergebnis vor Steuern (EBT) verbesserte sich um 57 Prozent auf 1,5 Mio. Euro (Vorjahr: 0,9 Mio. Euro). Der Umsatz wuchs leicht von 26,2 Mio. Euro auf 26,4 Mio. Euro. Dabei konnte die Pironet NDH AG Einmaleffekte im Software-Geschäft aus 2011 im laufenden Geschäftsjahr durch Zuwachs in anderen Segmenten mehr als ausgleichen. Als Wachstumsmotor erwiesen sich vor allem die Cloud-Computing-Dienste, die das Unternehmen für Geschäftskunden anbietet. Für 2012 bestätigt der Konzern seine Prognose, einen Umsatz über Vorjahresniveau und ein Betriebsergebnis (EBIT) von mehr als 2 Mio. Euro zu erzielen.

Kontinuierlicher Liquiditätsaufbau

Trotz Auszahlung einer Dividende von 10 Cent pro Aktie in Höhe von insgesamt 1,5 Mio. Euro konnte die Pironet NDH bei der Netto-Liquidität abermals zulegen. So wuchs der Bestand an liquiden Mitteln im Halbjahr 2012 um 15,3 Prozent auf 18,1 Mio. Euro an gegenüber 15,7 Mio. Euro zum Ende des vorherigen Geschäftsjahres.

Strategischer Ausbau des Cloud-Computing-Geschäfts

In Deutschland zählt Pironet NDH seit Jahren zu den führenden Cloud-Anbietern im Mittelstand. Um zusätzliche Wachstumschancen zu schaffen, will sich das Unternehmen in diesem Markt breiter aufstellen. So bietet Pironet NDH neuerdings auch Beratungs- und Integrationsleistungen an: Neben zentralen Diensten aus der Cloud erhalten Geschäftskunden nun zusätzlich Unterstützung bei Planung, Aufbau und Betrieb lokaler IT- und Cloud-Systeme in ihrem eigenen Rechenzentrum.

Im Rahmen der Geschäftsfelderweiterung wurden die Organisations- und Gesellschaftsstrukturen im Konzernsegment ITK Outsourcing entsprechend ausgebaut. Die neuen Bereiche konnten schon im ersten Halbjahr Neukunden gewinnen und führen bereits Projekte mit positivem Beitrag zu Umsatz und Ergebnis der Unternehmensgruppe durch.

Innovative Lösung für Publishing der Zukunft

An neuen Lösungen und Angeboten arbeitet Pironet NDH auch im Segment Content Management: Mit ihrer Hilfe werden Unternehmen in Zukunft deutlich einfacher und kostengünstiger als bisher Inhalte über eine Vielzahl von Online-Medien, Social Networks wie zum Beispiel Facebook sowie über mobile Endgeräte bereitstellen können. Dabei helfen Technologien wie Targeting dem Kunden, ausgewählte Zielgruppen automatisiert mit den jeweils passenden Inhalten und Botschaften anzusprechen.

Vorstand bestätigt Prognose für 2012

“Bei allen unternehmenspolitischen Entscheidungen und Entwicklungen in unserer Gesellschaft bleibt die nachhaltige Verbesserung unserer Profitabilität die oberste Maxime”, sagt Felix Höger, Vorstandsvorsitzender der Pironet NDH AG. Für das laufende Geschäftsjahr hält Felix Höger trotz Konjunktureintrübung an seiner Prognose fest: “Mit den Ergebnissen des Zwischenberichts liegen wir bei unseren Zielen für das Gesamtjahr voll im Plan. Für 2012 erwarten wir daher einen Umsatz über Vorjahresniveau und ein Betriebsergebnis (EBIT) von mehr als 2 Mio. Euro.”


Secure-24 Recognized with EMC® Journey to the Cloud Award

August 31st, 2012

Secure-24, a leading provider of cloud computing, application outsourcing and enterprise hosting services – has become a recipient of the 2012 EMC® Journey to the Cloud Award.

The award is given to EMC partners, customers or individuals who drive innovation, business value and performance through the use of virtualization as the transformational pillar for the move to cloud computing.

Secure-24 offers over 150 clients with operations around the globe managed hosting solutions on its enterprise private cloud. As a Certified SAP Partner and an Oracle Gold Partner, the company provides customized infrastructure solutions for ERP systems in a highly efficient, secure and redundant infrastructure.

An independent panel of judges recognized Secure-24 for successfully implementing cloud solutions and transforming business by delivering innovative solutions, product integrations and applications to create business value and agility.

“We are honored to receive this award. It reinforces our commitment to provide relevant innovation that drives business forward. We work with our partners and clients to understand current and future needs, and then design and execute solutions to specifically address challenges,” said Secure-24 Chief Operating Officer Volker Straub.

As a Silver EMC Velocity™ Service Provider, Secure-24 has a long standing relationship with EMC to build solutions that accelerate customers’ IT and drive business transformation.
“Secure-24, an innovative partner, is leveraging EMC technologies as the underpinning of differentiated solutions for their customers,” explained Michelle De Hertogh, Senior Director, Global Alliances and Service Providers Marketing, EMC Corporation. “Secure-24 is committed to helping its clients transform their IT environment for competitive advantage which was the impetus for the creation of the EMC Velocity Service Provider Program.”

Secure-24 supports the global operations of mid-market companies and Fortune 100 enterprises in growing industry segments, including manufacturing, technology, consumer goods, chemicals, financial services, construction, healthcare, pharmaceuticals and transportation.


BT Group Sells Stake in Indian JV

August 31st, 2012

BT Group PLC Thursday sold a 14.1% stake in India outsourcing company Tech Mahindra Ltd. to raise about 158.6 million pounds ($250.7 million), as the British telecommunications company continued to pare its ownership of the Indian joint venture with local auto maker Mahindra & Mahindra Ltd.

The sale through block deals on Indian stock exchanges left BT Group with a 9.1% stake in the computer-services provider for the telecom industry.

BT Group has been the biggest customer of Tech Mahindra, but the U.K. company has been selling the stake in phases in recent years and an analyst said this was part of the company management’s strategy to cut costs and raise funds to reduce debt.

“BT’s current top management is now very focused on where they have capital deployed and how they can reduce costs,” Darren Ward, an analyst for London-based Echelon Research and Advisory, said in a telephone interview.

Four or five years ago BT aggressively expanded its global services business, and this had led to accounting issues and in turn management changes, he added.

However, since Chief Executive Ian Livingston took over, the company has maintained a much more measured approach to its IT services business, particularly where these activities weren’t closely enough related to its core telecom services business, added Mr. Ward who advises his clients to buy BT stock.

BT, which said in a statement that it sold about 17.9 million Tech Mahindra shares to institutional investors, without naming the buyers, said it may consider further stake sales in the future.

The deals were priced at an average 777.73 rupees ($13.90) a share, lower than Tech Mahindra’s closing stock price of 835.60 rupees on the Bombay Stock Exchange Wednesday.

The shares ended Thursday down 5.2% at 792.15 rupees, when the benchmark Sensitive Index rose 0.3%.


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