Archive for February, 2014

Lack of technical manpower & infrastructure hurts IT growth in Northeast

February 10th, 2014

Narendra Modi may want information technology companies to flock to the Northeast but software services firms are saying the BJP prime ministerial candidate’s wishes are unlikely to be fulfilled any time soon.outsourcing58

The absence of technical manpower , exacerbated by the lack of infrastructure, prevents development of IT in the Northeast, insiders in India’s $108-billion outsourcing industry said, reacting to Modi’s exhortation. “Why can’t Manipur be made into an IT hub,” Modi asked, in a speech in Imphal, blaming the Congressled government for the Northeast’s woes, including crumbling infrastructure and persistent “insurgency .”

“There is no harm in considering the Northeast. In fact, wherever IT industry goes, it gives people highpaying jobs,” said Rostow Ravanan , chief financial officer at Bangalore-based Mindtree, which is setting up its largest training centre in Bubhaneshwar. However, “at this point of time, I don’t see many IT firms setting up their centres in the Northeast because there aren’t too many engineering schools,” Rostow Ravanan said.

The reasons for the IT industry shunning the region are fairly simple , according to industry insiders: “It is no rocket science … beyond the existence of an airport, if there aren’t good schools, hospitals and entertainment that the IT talent looks for,” the region won’t attract the industry, said one executive, who didn’t want to be named. “Forget the Northeast, there’s hardly any IT presence in Kolkata ,” the person said.

Sops Key for Expansion for Technology Firms

As long as smaller cities don’t offer the type of availability of talent and infrastructure needed for the IT industry, young people will continue to flock to bigger centres such as Bangalore or Hyderabad. “It’s primarily because of the physical and social infrastructure and the availability of talent and opportunities. The opportunity actually feeds off on the first three and then it becomes a cycle … because there is a lack of opportunity the other three don’t develop, so it’s a little bit of a tricky situation,” the person said.

This means, once people decide not to move, then it’s impossible to achieve scale in an industry such as the IT sector. Given the right incentives, however, not just India’s large technology firms but even midsized companies would be willing to expand to tier-2 cities, which often bring their own advantages, such as people staying longer at their own advantages, such as people staying longer at their jobs, being more satisfied as they stay closer to their families and so on.

The lack of technical manpower is the single most important reason for the industry to shun the region, and concerns such as less-than-stable governance seem to be more secondary. “The challenge lies in attracting large pools of technical manpower in the Northeast ,” said Ganesh Natarajan, CEO of Pune-based Zensar Technologies. “The Centre should first set up four large universities in Guwahati, Shillong, Manipur and Arunachal, focused on employable skills,” Natarajan said.

Between 2011 and 2021, the region will have close to 17 million job seekers and only 2.6 million jobs, half of which will be in Assam alone, according to a January 2013 report by the Indian Chamber of Commerce and the consultancy PricewaterhouseCoopers . The National Association of Software and Services Companies, the industry’s lobby, has tried getting the central government to consider a two-tiered incentive policy to encourage the IT industry to push deeper into smaller cities and towns. Such a policy is yet to materialise.

Incentives could include support on capital investments, tax holidays and employment-generation based subsidies. India could even follow what China is attempting in trying to develop its interior provinces , where for each person a company hires, the government offers some incentives , industry insiders said. One executive, who didn’t want to be named, said “we don’t need incentives to work in Hyderabad, Bangalore or Chennai anymore.

The industry needs incentives to work out of a Bhopal or Bhubaneswar and then gradually even a place like Guwahati may start looking attractive, but by choice I have no illusions about the industry moving to the Northeast anytime soon.”


BPO Converga acquires Speedscan

February 10th, 2014

NZ Post subsidiary Converga has acquired of Speedscan Group Holdings to extend its reach in its core markets in Australia, New Zealand, the United States and Philippines.
According to Converga chief executive Brian Roberts, “Speedscan’s breakthrough technologies and business solutions not only strengthen our customer base, they bring broader expertise that will open up new opportunities in new industries for the combined Group.

“The rising trend in both the public and private sectors to find new ways to increase productivity is leading to an expanding role for business process outsourcing (BPO),” Mr Roberts added.

Speedscan is expected to enhance and expanding Converga’s workflow and document management capabilities.

“Converga continues to successfully grow, realign and innovate. We have made a series of strategic investments in the past four years including investing in leading edge document automation technology and expanding our operations into Asia and the USA. This has enabled us to transform paper processes to digital, increasing processing capacity which has firmly established us as a leader in business process outsourcing.

“The acquisition enables both companies to build on their strengths to the ultimate benefit of their customers and their people,” said Speedscan chief executive, Mark Josman, who will remain with the merged operation.

“I think there is increasing complexity and there’s increasing reliance on BPOs of scale and robustness, and so as that trend continues and large organisations outsource more and more mission critical processes, they’re looking for larger and more complex solutions from larger and more complex participants.

“Our combined groups will see over 1,350 people across those locations and annual revenue over $A100 million.”

Founded in 1994, Converga specialises in Business Process Outsourcing with a focus on paper to digital document conversion.

The Speedscan Group was founded in 1997, and today incorporates businesses in Sydney, Melbourne, Manila, Auckland, Wellington and Christchurch.


Business Process Management to touch USD 50 billion in next six years

February 10th, 2014

The BPM industry has indeed transitioned from the delivery of simple, repeatable processes of non-core functions at offshore locations as BPO to driving business outcome of clients’ complex, industry-focused processes from global locations.outsourcing56

“The industry that has demonstrated resilience in the face of economic uncertainty by constantly re-inventing itself to meet market needs, is forecast to touch USD 50 billion by 2020 from the present USD 21 billion,” Nasscom BPM Council Chairman and WNS Group CEO Keshav R Murugesh told.

An integral enabler for growth in these times has been the industry’s smart use of technology to create innovative solutions, Murugesh said.

The world of BPO or business process outsourcing as it was known, has evolved into a brand new identity – Business Process Management (BPM), Murugesh said.

“While BPM 1.0 in the late nineties was centered on cost efficiencies and productivity, BPM 3.0 in late 2000 focused on specialisation, process re-engineering, technology-enabled platforms and taking BPM to the rural areas. I believe that the era ahead is that of clients and
providers working together even more closely on disruptive innovations,” he added.

Commenting on the focus of the Nasscom BPM Council, Murugesh said, “We have a rather audacious goal ahead of us as a Council. We are looking to rebrand the image of the industry from BPO to BPM to signify the evolution and the value that it creates for client companies globally.”


Nasscom predicts Information Technology industry growth at 13-15 per cent in fiscal year 2015

February 10th, 2014

Software industry lobby Nasscom is widely expected to forecast a pick up in technology services exports in fiscal year 2014-15 on Tuesday, as worldwide spending on outsourcing is set to accelerate through 2015 after two years of slowdown.outsourcing55

Expectations of higher growth forecast come as Nasscom members – which include large software companies such as Tata Consultancy ServicesBSE -0.61 %, InfosysBSE -0.03 %, WiproBSE 0.87 % and HCL TechnologiesBSE 0.99 % – have indicated an increase in client spending this year.

Of the seven analysts polled by ET, five expect Nasscom to say that IT exports will grow 13-15% during fiscal year through March 2015, compared with the 12-14% range for the current fiscal year.Two analysts said they expect the industry body to maintain its forecast.

“Assuming better constant currency global IT services growth in CY14. Also market share pull by Indian IT vendors is likely to be higher than last year due to greater re-bid deal pipeline,” said Apurva Prasad, analyst at Mumbai-based equity research Bonanza Portfolio.

Based on commentary from the top companies, Prasad expects there will be improved opportunities for “new scope” deals also, as discretionary spending picks up. “But any significant rupee strengthening post electoral out come may pose margin challenges.”

Every year, Nasscom compiles forecasts from member companies by January, and polls top analysts before announcing annual growth projection for the upcoming fiscal year in February.
“At this point, it would be fair to say qualitatively we certainly expect 2014 to be a better year,” Nasscom president R Chandrashekhar had said last month. He, however, cautioned that there “would not be a dramatic step-up” in growth.


Council ABS plan aims to take fight to outsourcers

February 10th, 2014

London local authority is considering applying for two alternative business structure licences in a bid to pre-empt local authority work going to commercial outsourcers.outsourcing54

The first ABS would be wholly owned by the London Borough of Lambeth, with the possibility of a tie-in with another local authority, and will aim to provide legal services to third-party organisations such as charities in the borough.

The second ABS is intended to be run as a joint venture with a law firm and provide legal services to other local authorities.

Mark Hynes, head of legal and director of corporate affairs at Lambeth, told the Gazette that separate licences would help the council avoid risk.

Councils are under pressure to innovate in the face of back-office services being outsourced, he said. ‘We need to keep an eye on the market. Outsourcers are now themselves applying for ABS status. I can envisage a scenario where [they are] bidding to handle the back office and we would not be masters of our own destiny anymore.’

Hynes, who chairs Lawyers in Local Government, said that local political leadership was irrelevant. ‘There is a perception that Conservative authorities might be more receptive to outsourcing. But I think all authorities will put politics aside to look at the business case and savings [they have to make] with savage cuts,’ he said.

‘We’d be pre-empting that scenario as we could already say we are providing a cost-effective [service]. The bottom line is there needs to be something in it for the local authority.’

Having an ABS would also mean the legal department could continue to provide legal services in a scenario where other council functions are outsourced.

Several local authorities have applied for ABS licences, but Lambeth would be the first to adopt a ‘double-barrelled’ strategy. Creating ‘ABS 2’ as a separate entity would mean that ‘if it does not fly, it is not like a deck of cards coming down,’ said Hynes.


Wipro looks at new acquisition target to fire its automation drive

February 10th, 2014

Wipro, India’s third-largest IT services exporter, has intensified its search for an acquisition target that will help increase its level of automation besides delivering a business solution in the market place. The IT firm is looking at a target acquisition that deals with advanced technology areas such as mobile, analytics, social and cloud.outsourcing53

Talking to FE, Satishchandra Doreswamy, chief business operations officer, Wipro, said, “We continue to look at these options and there is a continuous evaluation. There are multiple areas we are looking at which may either relate to the areas of business or technology.”

Wipro’s inorganic strategy over the last two years has witnessed them getting access to different kinds of technologies. In April 2012, it acquired an Australian firm Promax Applications Group (PAG) for A$35 million, giving it a strong foothold in the analytics space. Similarly, it acquired a US-based company Opus CMC in December 2013 for $75 million, providing them access in the mortgage space of the financial services sector.

However, the IT major has also gone about making strategic investments by picking up minority stakes in companies which will provide them the edge in emerging technology areas. In May 2013, it made a strategic minority investment of $30 million in another US-based big data analytics firm Opera Solutions.

On the various kinds of acquisitions made by Wipro, Doreswamy said, “We want to have access to these types of technologies which will help us innovate, integrate with our solutions and also build new things together.”
Wipro has been on the drive to automate its various business processes which not only brings in higher internal efficiencies but also the ability to showcase at the marketplace of the various business solutions they are able to bring to the table.

The traditional model of IT outsourcing and offshoring has witnessed a rapid change where the market is demands that they not only deliver a service but also provide them with a technology solution to their business problems.
Doreswamy said that some of new technology platforms built by them like ServiceNXT or FixOmatic leading to higher automation has resulted in a 20-30% uplift in their productivity. “Automation is becoming a key portion of our strategy,” he remarked.

The automation drive within Wipro has resulted in it becoming an important contributor towards improving the operating margins (OPMs) of the company. At the end of Q3FY14, it reported an OPM of 23%, a rise of 3% in the last nine months and the aim is to take it even higher.

The automation drive and building new technology solutions has also helped Wipro in bagging new deals in the market. Doreswamy said that it has helped in converting numerous business deals and they are positioning automation as one of its key strategic advantage.

Wipro is now ensuring that in the all new businesses being generated, automation, coupled with IT solutions & platforms, would act as a key differentiator. It is not only implementing the various new technologies in the way they deliver their services but also create solutions which would cater to different business verticals.


Job loss fears grow as telcos plan tower sale, network outsourcing

February 10th, 2014

There are growing concerns that the year 2014 will see significant job cuts from the ranks of an estimated 10,000 employees of telecom companies operating in Nigeria.outsourcing52

This is because the companies plan to further outsource the management of their core networks to equipment manufacturers as well as sell off their Base Transceiver Stations (BTS) to tower operators in 2014, industry insiders have said. They add that this will result in the shedding of a long train of direct staff and contractors.

The purpose of the outsourcing is to enhance margins by streamlining operations, BusinessDay learnt.

The telecom operators are increasingly adopting innovative cost-optimisation strategies to free up requisite resources for service and marketing-oriented activities and transform business models to further compete more effectively.

This move, analysts say, has become imperative in view of the need for telcos to enhance market share, revenue and EBITDA (Earnings Before Income Tax Depreciation and Amortisation) margins in an increasingly competitive environment. Falling voice tariffs, an offshoot of aggressive competition, is also biting deep into operators’ revenues.

Segun Ogunsanya, chief executive officer, Airtel Nigeria, however, says he does not think that this new operational direction will lead to retrenchment of staff.

“A few years ago, when we outsourced our call centres, the fear was that it would lead to staff retrenchment. The reverse is the situation, as many more people work in our call centres today. Selling towers will not lead to job loss. Running of the towers will be transferred to a separate organisation that knows how to do it well,” said Ogunsanya in an interview.

According to him, outsourcing would allow telcos to concentrate on their core area of competence, which is delivering superior telecoms services.

Kamar Abass, managing director, Ericsson Nigeria, attests to the fact of a growing number of managed services and outsourcing deals in the telecoms industry.

“We ended the year with a very big deal with MTN on managed service,” Abass said in an interview, adding that the deal was a harbinger of an important change in the industry.

In January, Etisalat Nigeria also signed a major Information Technology (IT) outsourcing deal. This, said Abass, is an indication of where the telecoms industry is going in terms of getting third-party support and engagement.

“We are building a formidable ecosystem in the telecoms space where we have major companies taking a significant part of the undertakings that were for a long time considered in-house and core activities of the mobile operators,” he added.

Bharti Airtel plans to sell most of its transmitter towers in Africa in a process that could raise up to $2 billion for the telecom operator, as well as help reduce its debt.

Airtel, which entered Africa with the $9 billion acquisition of the operations of Kuwaiti telecom group, Zain, on the continent in 2010, has already launched a sale process for its towers in Nigeria, two banking sources familiar with the process said.

Building and maintaining towers in Africa is typically more expensive than in other regions. This is largely due to high security costs and epileptic power supply, which often require cell sites to be powered by multiple generators. In 2012 alone, operators spent about N45.9 billion to fuel generators that power about 20,000 sites nationwide. Security officials monitoring towers also estimate that around 15-20 percent of total diesel consumption is pilfered. These operational challenges have prompted telcos to sell or lease towers to specialist firms such as Helios Towers and IHS.

“While other telecom operators have sought to offload towers in Africa because of the inherent difficulty in operating them, Bharti has the added reason of reducing their debt burden, most of which was taken up for the Zain acquisition,” one of the banking sources said. The company had a reported net debt of 638.4 billion Indian rupees on March 31, 2013.

Mobile penetration in rural Nigeria is relatively low, with analysts adding that a prime attraction for tower firms is to build new sites to reach unserved and underserved areas. Airtel is Nigeria’s third-largest telecoms operator, with a 19 percent share of mobile subscribers, according to the telecoms regulator, and some of its rival telecoms firms are also planning tower sales.

Etisalat Nigeria, a unit of the UAE’s Etisalat, has appointed South Africa’s Standard Bank as adviser. Market leader, MTN Nigeria, is also a potential seller, but Bharti Airtel’s sale appears the most advanced.

Prospective buyers are in the midst of conducting diligence, according to informed sources. Industry analysts told BusinessDay that any telecoms companies that sell first would have considerable first-mover advantage.

Etisalat Nigeria is estimated to have around 2,500 telecoms towers in Nigeria; Bharti 6,000; and MTN 9,000.

MTN last December agreed to sell, for an undisclosed amount, 1,228 towers in Rwanda and Zambia to IHS Holding Limited. The sale of the towers, according to industry insiders, is in line with MTN’s asset optimisation strategy, which is encompassed in its new strategic framework and builds on two previous deals with IHS in Cameroon and Côté d’Ivoire, for a total of 1,758 towers.

“In sub-Saharan Africa, especially Nigeria, the rising cost of doing business is becoming a source of concern to telecom operators and stakeholders alike, with increase in expenditure and constant reduction in profit margins,” said Chidi Esonwune, a telecoms expert.

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