Archive for December, 2013

Upper hand for IT firms in engg hires

December 31st, 2013

A drop in attrition, a rise in the joining rate of freshers and a significant jump in the supply of engineering students, has increased the bargaining power of information technologycompanies, with real wages for entry-level employees at its lowest in 15 years.

Mid-size companies such as Tech Mahindra and Hexawarehave been able to postpone pay rises without a significant increase in attrition. Tata Consultancy Services’ official forecast (‘guidance’) of entry-level hires is the same as in 2008-09, despite twice the overall employee base and a vastly different outlook (more positive) on the demand environment. Joining salaries offered at many engineering institutes have remained in the range of Rs 3.1-3.5 lakh per annum for some years.

Outsourcing9“There has been a significant improvement in supply of engineering talent. Engineering college capacity has seen a 20-plus per cent compounded annual growth rate over several years. While the quality of some of this increased capacity might be varied, the bargaining power of companies has increased,” said Anantha Narayan and Sagar Rastogi of Credit Suisse in a recent report.

At TCS, the joining ratio rose to 73-74 per cent last year against 69-70 per cent earlier. Ajoy Mukherjee, its executive vice-president and global head, human resources, said the company expects joining ratios to go up this year, too.

The company visits around 350 colleges to hire from across India. For FY15, it has said it would hire 25,000 freshers. “Our hiring target for FY15 is the same as FY14. Even then, we will be visiting all the campuses in our list. The colleges where we are not able to go, we will look for off-campus recruitment, generally in January-February,” said Mukherjee.

Narayan and Rastogi say changes in the business model are helping IT companies to strengthen their position. “Higher automation and the use of tools can mean that non-engineering graduates can be used for certain service lines. The focus on non-linear avenues of growth by companies can help to some extent,” they said. In non-linear avenues, revenue can grow much faster than headcount.

Further, with the process of software development becoming less complex in certain areas due to the re-usability of code, and the development of tools and platforms, a number of positions can be filled with non-engineering graduates.

Besides, Indian companies have also stepped up hiring from abroad. With IT companies entering new areas of services, where local talent and expertise become important, and with potential immigration issues and the difficulty in getting visas, companies have expanded hiring onsite. It eases the pressure on wages domestically.

Added to this is the Indian economy’s slowing and the competition for engineering talent from other sectors reducing.

Also, industry sources said total campus hiring will be tepid for 2014. “Companies are going to campuses but the total number of hires will be less. Also, as productivity per employee has been going up, many companies are also focusing on non-linear growth, which will impact hiring,” said the personnel head of a large IT services company.

Industry body Nasscom has already hinted that hiring for FY15 will be slow and companies might opt more for just-in-time hiring. According to Nasscom, attrition declined between FY 2011 and 2013, from 19 per cent to around 14 per cent, in the IT, engineering and R&D services and knowledge process outsourcing sectors. In BPM (voice) companies, the attrition levels have come down from 43 per cent to 33 per cent.

Given this scenario, engineering graduates would either have to explore other sectors for employment or opt for higher studies, say engineering institutes.

While this may be good for the IT companies, engineering colleges from where these institutes recruit in bulk are not very positive about the salary packages being doled out to their students.


Samsung, Oracle and Flipkart top employers at IITs in 2013

December 31st, 2013

Where is the country’s top engineering talent heading to in a year of subdued hiring? Samsung, Reliance Industries (RIL), Oracle and Flipkart topped the hiring charts for the class of 2014, according to data from the top IITs at the end of the first phase of this placement season.

With 271 offers, almost a 100 more than the second-largest recruiter, Samsung is the clear winner so far. This number includes 69 pre-placement offers (PPOs) and 28 postings in Korea.

Outsourcing21The South Korean conglomerate has ramped up hiring numbers by as much as 71% from 158 last year, emerging as the biggest recruiter at the IITs so far. It had made 23 international offers last year.

“We focused on campus hiring for multiple reasons — strengthening our core competency in embedded computing and buildiSamsung, RIL, Oracle and Flipkart top employers of IIT graduates this yearng new skills/capabilities in UX design, enterprise software and data analysis,” said a Samsung spokesperson in a written response to ET. Out of 243 candidates selected for India, 211 are from software engineering and 19 from UX design.

RIL, another regular recruiter, made 177 offers, lower than last year’s 202. Students have been taken on in the roles of graduate engineer trainees (GETs).

“Other than some 45 PPOs, RIL has hired 132 students from 8 IITs – Delhi, Bombay, Roorkee, Kharagpur, Guwahati, Madras, Kanpur and IITBHU. In addition to this, Reliance Jio hired 5 GETs, one from IIT-Hyderabad and 4 from IIT-Indore,” said a Reliance Industries spokesperson in a written response.

These numbers reflect hiring at the end of the first phase of the placement season in which roughly 50-60% of the batches have been placed across IITs. The second phase will start in the first week of January and will cover the remaining students.

Tech major Oracle was another big recruiter, taking on close to 135 students across almost all IITs. While its overall campus hiring numbers remained fairly consistent over the last three years, it made a few US-based offers for the first time this year.

“Oracle has a number of different business groups internally and we hire students across a variety of positions.

Many students will join Oracle, working in product development roles across our hardware, software or industry-specific based groups,” said a company spokesperson.

E-commerce major Flipkart, as reported earlier by ET, has been a big draw at the IITs during the first phase of placements. The company increased hiring from around 100 last year to 118. “Campus hiring is strategic for us. It helps us identify and bring new talent,” Sachin Bansal, co-founder, Flipkart, told ET.

“Past experience has shown us that talent from tier-I colleges like the IITs and IIMs and the way they meet the challenges posed by a high-growth environment like ours has been remarkable — and a great fit for an organisation like Flipkart that stresses on ownership and innovation,” added Bansal.

Several other companies emerged as strong recruiters, according to hiring data from six of the older IITs at Bombay, Kharagpur, Madras, Roorkee, Kanpur and Guwahati.

Business process outsourcing company EXL Service, for instance, made 97 offers across 7 IITs this year compared to just 46 across 5 IITs last placements. The increase in the number of campus hires in the roles of consultants and analysts is to power the company’s analytics business, which has been growing at more than 30% for the last few years.


IT sector shines bright on bourses in 2013 but will the halo continue?

December 31st, 2013

The IT sector index was the best performer among ET sector indices in 2013. It earned a whopping 57% return by the end of the calendar year, faring way better than the most other sector indices and benchmarks. For instance, the second best return was 25% given by the ET Teleservices index followed by ET Pharma with 23% return. The benchmarks such as S&P BSE Sensex, CNX Nifty and ET100 earned 5-8% during the said period.

The big question is what lies ahead in 2014 and whether investors can expect a similar performance by the IT index? While the demand scenario continues to look bullish for the Indian It outsourcing players, the stock returns may be subdued considering that their current valuations largely reflect the future growth expectations.


The stock valuations for frontline large cap and midcap IT stocks have surged sharply over the past few months. For instance, the price-earnings ratio of Tata Consulting Services ( TCS) has shot up to 27% from 19.9% within a year on a trailing basis. For Infosys, it has gone up to 21.4 from 14.2. A similar trend is found among mid-tier players. The trailing P/E of KPIT Technologies has increased to 14.7 from 11.6. For Hexaware, it has gone up to 11.6 from 7.2.

Another factor is the slow growth in the third and the fourth quarter of a fiscal for IT players due to seasonality. Also, a stable trend in the rupee against the major currencies as seen during the December quarter, if continues in the near term, will not boost the toplines. IT exporters were benefited by the sharp rupee depreciation during the first half of the fiscal. These factors are likely to impact a further increase in IT valuations in the near term.



Red Ten NYC Remains Dominant in US Market despite Surge in European Competition

December 31st, 2013

The rise of outsourced marketing competition in Europe has not impacted American-based firm Red Ten NYC due to their commitment to restricting their trade to American-based suppliers only. The New York-based firm trade solely with American suppliers and contractors, and managing director Tommy Smithbelieves this is one of the reasons why many American businesses choose to outsource their marketing duties to Red Ten NYC. “Our clients appreciate this about us. Outsourcing carries a certain reputation and for us to be able to proudly promote our commitment to being an American-based outsourcing firm who solely trade in the US is very appealing to many brands and has become a key marketing tool,” says managing director Tommy Smith.

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The “certain reputation” of outsourcing that Tommy Smith is referring to is predominately a negative one. In 2009, authors Srinivas Durvasula and Steven Lysonski published a report titled ‘How Offshore Outsourcing is Perceived: Why Do Some Consumers Feel More Threatened?’ ( The report discusses how multi-national firms in Europe and North America have experienced many difficulties in justifying their offshoring activities to the general public. The general consensus of the public is outsourcing causes “job losses and damage to domestic industries.” Managing director Tommy Smith strives to keep his clients and customers a business priority. By empathizing with their concerned view of outsourcing he ensures that, at Red Ten NYC, no outsourcing is carried out overseas. By maintaining this loyal relationship with his clients and customers, managing director Tommy Smith has led Red Ten NYC to be a ‘go-to-service’ for businesses looking to extend their marketing reach and improve sales figures.

Red Ten NYC is an outsourced sales and marketing firm based in New York. The firm specialize in direct marketing methods as this allows them to build loyal and trusting relationships with their customers. Red Ten NYC is a leading outsourcing solution for American businesses operating in the telecommunications, fundraising, home improvements, entertainment and financial services. Businesses have been known to recommend Red Ten NYC’s service for their local trading policy as well as for their guaranteed ROI, high customer retention rates and their cost-effective campaign management.


Great prospects for outsourcing in Belarus

December 31st, 2013

Belarusian Prime Minister Mikhail Myasnikovich believes that the development of outsourcing has great prospects in Belarus. The Premier made this statement at a solemn ceremony to award winners and laureates of the nationwide competition Best Businessman 2012 that took place in the National Library of Belarus on 30 December, BelTA has learnt.

The Premier admitted that outsourcing is non-existent at a number of major domestic companies. “The government sees great opportunities here in terms of the number of people involved and the gross domestic product,” Mikhail Myasnikovich said. In his view, entrepreneurs and business unions should actively offer these services (including to big companies). This will help relieve the workforce of companies from important, but unrelated duties.

Outsourcing25“Not always small and medium-sized businesses should produce only the final product. Intermediate services are in great demand today. You should work more efficiently on it,” the Premier said addressing the business community. “Thanks God, here in Belarus we do not have any disagreements between small, medium-sized and big business,” the Prime Minister added.

Outsourcing involves subcontracting a business process to a third-party.


Outsourcing again under investigation

December 31st, 2013

Your article (Serco to repay pounds 68m for overcharging on tagging, 20 December) says: “A wider Cabinet Office review of the contracts held bySerco and G4S, published yesterday, found ‘potentially significant’ errors or irregularities in three payment-by-results contracts for the Department for Work and Pensions work programme to support the long-term unemployed.”


The review states: “The review found three cases (the DWP work programme contracts) where the possibility of errors or irregularities and their impact was felt to be potentially more significant.” There is a possibility of error and/or irregularity on any contract. The report rightly identifies that this possibility and risk is higher in very complex contracts like the work programme. Observing that there is a possibility of error and irregularity is not the same as finding errors and irregularities. I can categorically state that there are no irregularities on the G4S work programme and no material errors.

G4S’s work programme has helped more people into sustained employment than every one of our competitors in every single area in which we operate. Well over half of the young people who complete our work programme are going into work. To date we have helped nearly 35,000 long-term unemployed people to find jobs.


Tech Beat: outsourcing comes at a price

December 31st, 2013

Investors are still making investments in cutting-edge technology for high-speed trading but demands on the independent companies that develop the tools are also rising.

Despite the bashing that high-frequency trading has received, investment has continued this year in the ceaseless quest to cut the time it takes to trade.


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The latest development came in early December when Perseus Telecom, a US trading technology group, announced that it had created a microwave network that connected up all of London’s main financial markets data centres.

Microwaves, its proponents argue, can cut around a third off standard trading times.

Investors for whom speed is critical will be able to trade small batches of data between the markets of the Liffe derivatives exchange, the stock markets of London, Bats Chi-X Europe, Paris and Amsterdam, as well as ICAP’s EBS currency trading platform and the London Metal Exchange.

But Perseus is building it for other investors, not for themselves.

Jock Percy, chief executive and founder, calls it “a level playing field of shared access” to high-speed tools.

“What we’re now seeing is customers saying ‘we want the increased efficiency but are not prepared to stand ten or twenty million to pay for it’,” he adds.

The jury remains out on microwave trading but the industry is arguing that hosting of these types of cutting-edge trading services is becoming more common.

A recent report from Aite Group, the financial markets consultancy, estimated that there were only five institutions in the world for whom every microsecond counts.

The rest of the market, Aite argued, relies on standard tools. Infrastructure was moving from a competitive advantage to a more commoditised business as cast-conscious investors still required high-speed connections and disaster recovery.

But that shift is also coming accompanied by more vocal demands by investors and regulators for higher standards.

“Offering prospectuses now routinely list not only the fund administrators these funds rely on but also their technology service providers,” says Ken Barnes, senior vice-president of corporate Development at Options IT, a US trading technology provider.

“Leading brands are implicitly conveying the promise of proper disaster recovery capabilities and proper day-to-day service availability.”

Those demands on financial technology providers are set to be reinforced by new guidelines for systemically important financial institutions (Sifi) such as exchanges and clearing houses.

Earlier this month, a working group overseeing global efforts to strengthen the financial market infrastructure proposed guidelines for Sifis to better assess those companies that provide critical technology services.

The proposals from the Committee on Payment and Settlement Systems (CPSS) and the International Organisation of Securities Commissions (Iosco) cited information technology and messaging providers as likely to fall under this framework.

“There’s no question that these sorts of firms falling under the systemically-important umbrella will look to mirror their risks on to the backs of their service provider contracts, and the Volcker rule’s insistence on chief executive compliance guarantees will only accelerate the trend,” says Mr Barnes.

For some the trend has already started.

Donal Byrne, chief executive of Corvil, a US technology group, says: “In the past, there was a perspective that if the problem was with the third-party service provider, then the systemically-important financial institution was somehow less to blame for operational mishap. That has changed completely in the past 12 months.”

The group runs a real-time electronic trade monitoring platform used by the New York Stock Exchange, Nasdaq OMX, CME Group and Deutsche Börse, and a host of broker-dealers.

Independent companies now face tougher scrutiny.

“Some Sifis have gone so far as to contractually demand that the third parties adopt similar operational risk policies as used internally within the Sifi,” says Mr Byrne.

But rather than shut the providers out, cost-conscious market infrastructure operators are considering more outsourcing in coming months.

”Some service providers will undertake a greater level of responsibility for the operational risk in return for greater levels of the business,” he adds.

Yet that may come with a price. Mr Barnes says: “It’s happy days for those with the scale and maturity to respond to the call. The rest will struggle to cope with the financial and operational demands of a far more Darwinian marketplace.”



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