Archive for the ‘News’ category

50 Saudi women to take part in global leadership summit

July 21st, 2014

A group of 50 Saudi female professionals from different sectors recently participated in a first-of-its-kind global leadership summit at Crotonville in the United States.Outsourcing31

The six-day summit included workshops, seminars and interactive sessions, which served as a platform for promoting female talents across different businesses globally, and was specifically created to define aspirational women role models who will inspire future generations.

The “Saudi Women’s Leadership Summit” at Crotonville Global Leadership Institute was hosted by General Electric (GE) to share global best practices in business leadership, said Naif AbuSaida, communications manager of GE in Saudi Arabia.

The active participation of Saudi women working in the public and private sector in such events, AbuSaida noted, will further enable Saudi women professionals to strengthen their skill sets and bring greater efficiency to the workplace.

Abdallah Yahya Al-Mouallimi, permanent representative of Saudi Arabia to the United Nations distributed the certificates to the participants.
“We are privileged to interact and network with them and share our learning and experiences,” GE said in a statement.

Highlighting GE’s focus on creating career opportunities for women in the Kingdom, the company has joined hands with Saudi Aramco and Tata Consultancy Services (TCS) to launch the first all-female business process services center in Riyadh. It serves as a building block to localize the business process outsourcing (BPO) industry in the Kingdom.


New sourcing norms key to IT turnaround

July 21st, 2014

The government needs to rework procurement norms for IT services to reboot the sector.Outsourcing30

Besides the slow pace of decision making, mounting dues from government agencies have slackened the growth in domestic IT business.

Nasscom has projected a flat growth of about 10-12 per cent for the market in the current fiscal, almost at the same levels as the previous year.

Government agencies account for 50 per cent of IT services in the country. ‘

According to the apex body for IT and business process outsourcing in India, an efficient timeline for project execution can restore confidence and fuel a turnaround for the local industry.

While the allocations in this year’s Union budget will give a significant push, the impact, if any, will only be felt next year.

The IT market grew 10 per cent to $32 billion in 2013-14. The 10 per cent growth was in rupee terms even as it was zero in dollar terms.

“The domestic market has been a big disappointment. There are many factors for this. One is the general slowdown in the economy and reduced investments by companies in the private sector. Investments have been delayed over uncertainties in government decision making because of the elections and other economic factors. Companies have huge dues from the government, even for executed projects,” R. Chandrashekhar, president of Nasscom, told The Telegraph.

The current outstanding is around Rs 4,000-5,000 crore from the government, both at the central and state levels, accumulated over the last three years. This has made companies reluctant to respond to government needs.

“In this year, we do not see any significant change in the growth rate of the domestic market. It will be 10-12 per cent.

“In exports, we are projecting a 13-15 per cent growth. But the domestic market will trail… there are huge issues with the whole system of procurement and payment. There are artificial barriers preventing growth from taking place. But the demand is very high,” he said.

Smart cities

The IT industry is betting big on the setting up of 100 smart cities announced in the budget. Such projects will require strong infrastructure such as broadband and adequate use of information and communication technology to manage utilities, power and online government services.

The turnover of the IT industry is slated to reach $300 billion by 2020 from about $118 billion now.

About 80 per cent of the industry’s current turnover of $118 billion come from 150 large companies, while the remaining 20 per cent are from start-ups and product firms.


Why Microsoft and IBM Jumped

July 21st, 2014

It was generally a good week for the S&P 500, which edged 11 points higher as earnings season has been generally positive so far. S&P tech giants Microsoft and IBM were worth a closer look this week. Outsourcing29

Job cuts and Intel results driving enthusiasm for Microsoft
Microsoft, the software giant well known for its Windows operating system and Office productivity suites, announced that it will lay off up to 18,000 of its 127,104 employees. Approximately 12,500 of these positions will be from the software giant’s freshly acquired Nokia handset division.

Investors were pleased with this announcement, driving shares up by as much as 3.7% during Thursday’s trading session. Note, however, that Bloomberg reported these rumors on July 15 and Nomura’s Rich Sherlund had issued a note on July 11 claiming that layoffs were imminent, so this headcount reduction may have already been baked to some extent into the stock.

Further, chip giant Intel reported results that showed strength in the business PC space as well as the datacenter. This bodes well for Microsoft, as it is not only exposed to the PC side of things with Windows and Office, but it is also exposed to the datacenter with its multitude of server- and cloud-based products, such as Windows Server, SQL Server, and Azure.

Microsoft is slated to report its third-quarter results after the close on July 22.

IBM still a cash-generating machine
Technology giant IBM reported its earnings results after the close on Thursday. Revenue came in at $24.36 billion, edging out analyst consensus by $230 million. Earnings per share was $4.32, beating consensus by $0.03. Full-year earnings per share of at least $18 was reiterated, pushing past the $17.87 consensus.

While revenue growth for the technology giant has been elusive, with revenues down 2% in the most recent quarter (1% excluding the company’s divested customer-care outsourcing business), the company managed to drive diluted earnings-per-share growth of 42% year over year and net income up 28%. This net income growth appears to be driven by lower operating expenses (down 14% year over year) and slightly higher gross profit margins. Earnings-per-share growth outpaced net income growth, as the share count dropped 9% from the year-ago period because of buybacks.

Though IBM will eventually need to return to revenue growth if is to drive net income up meaningfully in the longer term (cost-cutting only takes you so far), the stock isn’t exactly priced for growth at just under 11 times this year’s expected earnings. Further, the consistent and aggressive buyback program will help drive earnings-per-share growth even if net income remains flat.

IBM’s shares finished the week up 2.4%.

Leaked: Apple’s next smart device

Apple recently recruited a secret-development “dream team” to guarantee that its newest smart device was kept hidden from the public for as long as possible. But the secret is out, and some early viewers are even claiming that its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts that 485 million of these devices will be sold per year. But one small company makes this gadget possible. And its stock price has nearly unlimited room to run for early in-the-know investors.


TCS CEO N Chandrasekaran sends AS Lakshminarayanan to head TCS’ Japan business

July 21st, 2014

Tata Consultancy Services’ CEO N Chandrasekaran has deputed one of his top lieutenants, AS Lakshminarayanan, to head the company’s Japan business and grow its revenue as the largest Indian IT player looks to grow in that large and largely unpenetrated market.Outsourcing28,

Japan was a very small part of TCS’ business — with just about $100 million in revenue. But in April, the company announced it was acquiring Mitsubishi Corp’s IT arm, which has about $500 million in revenue a year, and about 2,400 employees. The deal, which closed at the end of June, gives TCSBSE 0.30 % the greatest scale of any Indian IT firm in Japan.

Lakshminarayanan, who joined TCS in 1983, has a history of being sent to build businesses from the ground up at the Mumbai-based company. He built the UK-business at TCS almost from scratch and since 2011 has been leading the emerging verticals business — including hi-tech and media and entertainment — which now accounts for over 10% of TCS’ revenue.

“I am moving from one island to another. It is a personal challenge and it is hugely exciting. In the UK, we built our platform there organically. In Japan, with the acquisition, I am being given a platform that has its advantages and challenges. We have to bring our Japanese workforce onto the TCS processes and the TCS way of doing things,” Lakshminarayanan told ET.

The challenge is not just a personal one. When Chandrasekaran offered Lakshminarayanan the job, he also issued a target — to double the company’s revenue in a set period of time.

“I can’t tell you the time frame but knowing TCS, you should know we always have plans and they are ambitious,” Lakshminarayanan said. Japan is the second-largest market in terms of IT outsourcing. Its total outsourced IT spending is about $109 bn and it has been tough for non-Japanese vendors to gain a foothold. Of the total, almost 70% is serviced by Japanese players. Indian IT’s share of business is less than 1%.

But analysts expect TCS to grow quickly after its acquisition. “I expect their internal target should be to grow that business to $1-$1.5 billion in the next three to five years,” a Mumbai-based analyst said. He declined to be identified because he is not authorized to talk to the media. TCS’ Chandrasekaran has said he expects Japan to grow to a billion dollar business in the next few years.

One of the reasons that Japan has been tough for Indian IT is the insularity of the culture. TCS is already taking steps – from town halls to translating the internal magazine to Japanese – to welcome its new employees.

“We held a town hall and there were about 2,000 employees. And a lot of young people came up to me and they were very excited about working for TCS. We’ve met clients and the initial feedback is that they are also happy. Now we have to work to convert that excitement to actual results,” Lakshminarayanan said.

Talking to employees will be an on-going process, to explain the company’s long term vision for Japan and working with the middlemanagement. Lakshminarayanan is learning Japanese and is encouraging his top management to speak in English, a language they know but aren’t very comfortable with, to smooth communication.

He is relocating to Japan from the UK for the next few years. His wife will join him once his daughter, who is in her final year at school, goes to university. TCS, through Lakshminarayanan, will be spear-heading the biggest push into Japan and growth in that new market will help the company retain its lead over the rest of the industry.

“The law of large numbers would catch up with TCS if the footprint and capability were the same as other Indian IT. The reality is that growth leadership will sustain; what sets it apart is that its addressable space is the largest among Indian IT and capabilities wellspread across the entire IT spectrum,” Kawaljeet Saluja, analyst with Kotak Institutional Equities said in a note after Mitsubishi deal was announced.


Cognizant hires senior experts for its IT infra

July 21st, 2014

Cognizant has hired in recent months a number of senior talent at rival companies for what is one of the most rapidly growing spaces in IT today — infrastructure management services. It’s the area that has helped HCL Technologies in recent years to dramatically raise its growth rates, and contributed to significant upsides for several others. Outsourcing27

The $8.8-billion Nasdaq-listed firm, one of the fastest growing among large IT companies in the world and which has been traditionally strong in banking and finance, and healthcare and life sciences, has roped in at least seven senior executives from IBM, Unisys, Capgemini, HCL and TCS to strengthen its capabilities in the infrastructure space.

Among these are Venu Lambu, former head of Continental Europe for HCL Technologies’ infrastructure services division, who has joined Cognizant as the VP of IT infrastructure services (ITIS) Europe; Sujit Pal, former program director of HCL America, who has come in as assistant VP; Sanjay Savla, former Unisys VP; K S Ganesan, former chief architect at IBM.

Cognizant’s ITIS division has over 15,000 employees and contributes around 7% to its overall revenues compared to HCL’s that contributes 36% to its revenues. The same figure for Wipro is 24.6%, for TCS 11.9% and Infosys 7%.

Over the last 5 years, ITIS has been growing at a scorching CAGR (compounded annual growth rate) of 50%, as per a Nasscom estimate. The Indian IT sector is estimated to have had an export revenue of $6 billion from ITIS in 2011 and the same is expected to more than double to $12.5 billion in the 2015 fiscal.

ITIS contracts involve data centre operations and services such as help desk support, desktop management, local and wide area network operations management, application development and maintenance and disaster recovery services. In recent times, the emergence of cloud computing, virtualization and mobility is changing the way IT infrastructures are designed, provisioned and maintained, and is forcing companies to be agile and flexible. This has encouraged outsourcing of these services to experts.

“We do not view infrastructure services through the traditional lens of labour arbitrage,” said Debashis Chatterjee, president-technology solutions in Cognizant. The company is leveraging on its consulting and SMAC (social, mobility, analytics & cloud) capabilities to deliver infrastructure services. Cognizant has developed platforms such as Cloud360, OnTarget and HybridIT to offer cloud-based services to enterprise computing and storage.

Cognizant owns data centres both in the US (Chandler, Arizona and Sterling, Virginia) and Europe (Slough, UK and Amsterdam, the Netherlands), apart from leveraging partner-owned data centres. The company believes there are significant market opportunities for infrastructure services in the US and more so in Europe due to competitive and cost pressures. “Most enterprise customers have currently exhausted several levers of business differentiation and understand the growing significance of technology in optimizing costs, enhancing customer engagement, and gaining market share,” Chatterjee said.

Cognizant has a multi-year agreement with Norwegian consumer goods major Orkla for IT infrastructure, applications and support services. Some significant wins in this space by other IT players include Wipro’s $100 million contract from Netherlands-based media company Sanoma, Capgemini’s 30 million euro contract from Denmark-based industrial company Danfoss, and HCL Technologies’ $400 million contract from Norway’s DNB Bank.


IBM Needs to Rev Up Revenue

July 21st, 2014

We maintain our Neutral rating on IBM as the fundamentals behind the business remain challenged. Our fair-value estimate is $190, lowered from $202, based on 9.5 times our fiscal 2015 non-GAAP earnings-per-share estimate.Outsourcing28

IBM  has struggled to grow over a number of quarters. The pattern of revenue deceleration puts added pressure on margin-expansion, a key factor in hitting long-term earnings targets. A return to consistent revenue growth and execution (solid footing) will be necessary to justify multiple-expansion from present levels.

Second-quarter results were slightly better than expected. Revenue came in slightly above consensus driven by better-than-expected hardware, which was down 12% year-over-year as System z, System x and Storage declines decelerated. Services grew 1% year-over-year excluding the Business Process Outsourcing (BPO) sale and including 1% growth contribution from SoftLayer while backlog was down 1% year-over-year (signings down 33% year-over-year attributed to difficult comp with signings expected to grow in the third quarter). Application outsourcing was down 9% year-over-year (consistent with last quarter) reflecting pricing pressure and a reduction in projects which contributed to Global Business Services (GBS) margins declining and an overall margin miss. Traditional package application implementation was a headwind for services. Software revenue was flat year-over-year with management guiding to mid-single-digit growth over the next two quarters. The negative results in Services are company-specific with IBM’s renewals being broken up into smaller pieces.

For fiscal 2014, GAAP EPS guidance remains at least $17.00 and non-GAAP EPS guidance remains at least $18.00. For fiscal 2015, management continues to expect at least $20.00 in non-GAAP EPS. Management guided to single-digit EPS growth in the third quarter and double-digit EPS growth in the fourth quarter. For fiscal 2014, we lowered our non-GAAP EPS estimate to $17.82 from $18.05 which reflects a lowered non-GAAP pretax margin estimate (23.0% lowered from 23.5%) on the miss versus our estimate in the second quarter partially offset by a lowered share-count estimate. For fiscal 2015, we lowered our non-GAAP EPS estimate to $20.05 from $20.21 on a lowered non-GAAP pretax margin estimate (24.4% lowered from 24.8%).


Combining Innovation with Business Process Outsourcing

July 21st, 2014

The business process outsourcing industry is a dynamic domain which meets the challenges of a very swiftly changing technology world along with business environment. There are a few things that have changed in the last two decades though. In the early 1980s outsourcing, and more precisely Outsourcing26offshore outsourcing, was incorporated by a few brave organizations. As they put their toes in the water with some anxiety, they naturally tried to preserve the maximum control, and the kind of work being outsourced was non-strategic. In the next stage, the software development procedures integrated outsourced services that have proved their worth. A larger span of responsibilities was assigned and the vendor was now expected to suggest enhancements to processes and systems & profitability

But we are not seeing a new exhilarating phase of software outsourcing procedure where vendors are developing to become partners in the quest for that Holy Grail: innovation. We only see the first few pioneers to this trend, organizations that leverage the technology proficiency that the outsourcing vendor has gained over their relationship, and working together with the vendor to locate the next big idea.

In the technology landscape, the customer and vendor have two diverse world views. The vendors are obviously closely aligned to the end user and market trends, which are the reason that original specs of products and solutions are defined. But the other element for coming up with the next killer product is a great mastery over technology, and some outsourcing vendors can contribute here. So we now see situations where vendors are utilizing their study of technology and trends to provide pointers to the future.

In recent years, the numbers of companies that outsource crucial business processes to outside suppliers have expanded exponentially. The business process outsourcing (BPO) has been projected to encompass activities comprising of finance and accounting, human resource management, procurement and legal services, and the overall volume is assessed to be growing at a rate of around 25 percent annually.

A lot of organizations introduced BPO as a part of an operational effort but it has changed into much more. Senior managers today expect more from BPO service providers than short-term cost savings and meeting minimum contractual requisites, but they are more cynical of big-bang enhancements. Companies want service providers to modernize constantly. In relationships that companies categorize as high performing, the service providers perform a series of innovation projects that deliver considerable long-term enhancements to the client’s operating competence, business-process efficiency and strategic performance.

Consider the Following Examples
A BPO assisted health care company to enhance the claims adjudication process by utilizing analytics to envisage claims likely to result in rework. The prognostic tool now interrupts more than 50 percent of claims that would have been reworked, saving the client $25 to $50 in administrative costs per overpaid claim and $6 to $12 per underpaid claim.
An aerospace manufacturer operated with its BPO provider to integrate new key performance indicators and processes to achieve third-party vendors. This allowed the client to enhance customer-order fill rates for new parts from 60% to 85% and turnaround times for delivering parts to grounded vehicles from 21 hours to 17 hours.
A supermarket chain worked together effectively with its BPO , to implement new forecasting tools, methods, and approaches that enhanced the client’s stock fill rate from 80% to 95%, reduced inventory by 27% and abridged error rates by 50%.

The cost saving criteria is now “a given” aspect and the emphasis is now gradually moving towards new priority areas including transforming businesses and strategic alignments.


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