It will take a while to get growth back, says Infy

August 27th, 2014 by Rahul Jain No comments »

Infosys Ltd, the country’s second largest software exporter, has said it is on track to meet its growth estimate of 7-9 per cent this fiscal despite macroeconomic volatility and lower demand from top clients, but added that it will take a while for the company to report higher growth.outsourcing19

Infosys’ growth estimate is much lower than the industry guidance, which, according to Nasscom, is in the range of 13-15 per cent for FY-2015.

Addressing Motilal Oswal analysts in Mumbai, UB Pravin Rao, chief operating officer, said: “We have definitely underperformed over the last few years and it will take a while for us to get growth back.”

The company’s margins are expected to be in the range of 24-25 per cent, lower than market leader Tata Consultancy Services’ 28.8 per cent. “Our focus is on growth and the company cannot sustain margins without growth,” Rao said.

Acquisition plan

Signalling the company’s intent to grow business through acquisitions, he added Infosys will look at buying firms in the life sciences and IT infrastructure management segments in markets such as Latin America and Japan.

On Tuesday, the company’s scrip closed marginally down at ₹3,620.60 on BSE.

‘Market is stable’

Infosys, along with other IT companies, believes demand for outsourcing continues to be strong and the situation looks better at this point compared to the year-ago period. “Our pipeline is good and the market is stable,” said Rao. Also, the company is seeing traction in financial services, communications and energy sectors.

Rao added that high attrition is an area of concern and it will take several quarters to bring it down to 14 per cent, from 20 per cent now. Rao attributed this to the distraction around CEO succession, coupled with a spate of top management exits. “With the new leadership in place, that distraction will go away.” Infosys, in June, appointed Vishal Sikka as the first non-founding CEO of the company.

Rao also maintained that the company would use its $100-million venture fund to invest in start-ups, something that Sikka has outlined as a part of his strategy since taking over the company.


Microland bets on hybrid cloud to land large deals

August 27th, 2014 by Rahul Jain No comments »

Bangalore-based Microland has embarked on a new strategy to get large outsourcing deals and has launched a new brand identity for itself.outsourcing18

This new strategy involves building on its capability of managing networks and other IT infrastructure of Fortune clients through a mix of private and public cloud, commonly known as hybrid cloud.

Hybrid cloud is a service that a combination of traditional IT, private, public and community cloud computing services, from different service providers such as Microsoft, Amazon and others. Companies like Microland take these offerings and integrate it with their existing business. Called version 4.0, Microland founder and MD Pradeep Kar told BusinessLine that it sees a multi-billion opportunity in this area, as companies are starting to consider vendors which have expertise in particular technologies.

In line with this, the company has come up with a new identity in its 25th year of operations. When asked about the impact of this new strategy on its business, Kar said the company will continue to grow three times faster than Nasscom’s projections for the 2015 fiscal. Nasscom estimates that the industry will grow 13-15 per cent. However, since it is a private company, Microland did not share revenue plans for the year.

Market for these services is growing, albeit not at a fast clip. The public cloud services market is expected to grow 17.8 per cent in 2014 to $153 billion, according to analysts. Forrester estimates peg the private cloud market at $15.9 billion, from $7.8 billion in 2011.

It has around 2,700 employees with 75 global clients and six global delivery centres – three in India and one each in the US, the UK and West Asia.


Indian IT firms eye opportunities in Japan

August 27th, 2014 by Rahul Jain No comments »

Nasscom to lead delegation to Tokyo following Modi’s visit this week
Information technology industry body Nasscom is taking a delegation to Japan in the coming week to coincide with the Prime outsourcing17Minister’s visit to the country. The delegation will interact with the industry leaders of Japan and talk on business opportunities for IT companies in both the countries. In an exclusive interview with BusinessLine, R Chandrashekhar, President, Nasscom, shares more details. Edited excerpts:

What would be the broad highlights/ agenda for this trip?

Indian IT provides a great value proposition for Japanese companies to fuel their innovation at competitive price by leveraging Indian talent in their global sourcing model. However, penetrating the second biggest IT services market in the world continues to be a major challenge for the Indian IT companies. Given the challenging situation, Japan considers India as one of its preferred partners and is warming up for much greater partnership post free-trade agreement between two nations. To further address these challenges, Nasscom is organising a delegation visit to Japan. The agenda of the delegation is to create awareness among the local companies about India and the Indian IT capabilities, as well as identifying potential business opportunities for our members.

How many people/ companies is part of the delegation?

Delegation will consists of over two dozen executives of around 20 companies specialising in offering IT outsourcing, business process management, engineering research and development — some of whom are based in Japan and some are travelling from India to be part of this trip. Delegation has a good mix of big and small companies covering spectrum of services.

The Prime Minister is also visiting Japan around that time (August 30 to September 4) so do you think this visit would bring in positive responses?

Japan is an important geography for the Indian IT-BPM Industry, and Nasscom considers it as one of the next growth geographies. Economic and political relations between the countries have always remained warm.

And, with the Prime Minister Narendra Modi’s emphatic win, the focus is back on relations between these two large economies of Asia. Therefore, the PM’s proposed trip to Japan will help strengthen the bilateral ties between India and Japan. Being a pro-business administration, this visit will additionally provide the necessary push for enhancing business potential between the two nations and will give India an opportunity to establish right value proposition and build trust.

Nasscom hopes to leverage the political goodwill created by the PM’s visit into more business opportunities and considers this the right time for India to make a strong pitch to Japanese corporations to move beyond in-sourcing and adopt outsourcing and leverage more of Indian talent in their global sourcing model.

What are your expectations from the Japanese firms as well as their Government?

Japanese companies are looking for high quality, proven and low-cost sourcing destinations as well as newer markets, which is provided by the Indian service providers.

Some of the largest companies from Japan already recognise this and are warming up to leverage Indian IT by partnering with Indian companies in Japan or by making direct investments into India by setting their own global in-house centres (GICs) to fulfil their IT and globalisation needs. Governments of India and Japan are aware of this opportunity for a strategic partnership and are facilitating increasing number of joint declarations, delegation visits and other business events between the two countries.


Banking and Financial Services Companies Turn to Outsourcing as Regulatory Pressures Squeeze Margins–Everest Group

August 27th, 2014 by Rahul Jain No comments »

The global business process outsourcing (BPO) market in the banking and financial services (BFS) sector witnessed sluggish growth of 9outsourcing16 to 10 percent in 2013. However, a rebound can be expected as the economy finds firmer footing and as service providers invest in emerging markets and high-end services such as analytics, digital banking solutions, and expertise in regulatory compliance and risk management.

New-age consumers of banking services–those who prefer banking using digital channels like the Internet and mobile apps–are forcing banks to change quickly, and these changes in turn are driving the shift for BFS BPO providers.

These findings and more are discussed in a new Everest Group report, Banking and Financial Services (BFS) BPO Annual Report 2014 – Low on Growth, High on Regulations – BFS BPO Adapts to the “New Normal.”

Download the Free, 11-Page Report Preview Deck
Registration required. Choose “login to view preview” and follow prompts.

In addition, a free Everest Group webinar on “Banking and Capital Markets ITO–Trends, Regulations, Technology” is available for viewing on demand.

“We’re seeing some holdover trends from 2013 picking up steam in BFS BPO in 2014,” said Anupam Jain, practice director at Everest Group. “For example, capital markets buyers are increasingly looking to service providers to help manage risk and assist in meeting regulatory requirements. We’re likely to see this accelerate, particularly in Europe.

“We’re also seeing emergence of onshore resourcing by service providers, mainly as a result of regulatory concerns, especially in lending. And in banking, we are seeing a strong emphasis on digital channels as these are finding increased favor with customers and banks continue to shutter brick-and-mortar branches.”

High-resolution graphics illustrating the report’s key takeaways can be included in news coverage, with attribution to Everest Group. Graphics include:

•  BFS BPO continues its steady growth path.
•  Increased activity from small and mid-sized players has resulted in declining ACVs in both banking and capital markets BPO
•  Adoption of complex services in BFS BPO
•  Regulatory downpour squeezing margins? Outsourcing to the rescue!


Outsourcing model to improve service quality for Nigerian telcos

August 27th, 2014 by Rahul Jain No comments »

outsourcing15As the Telecoms industry matures, competition has enforced the need for differentiation amongst Nigerian Mobile Network Operators (MNOs) and this, will ultimately lead to an improved value proposition and as a result; a dynamic shift from cost reduction efforts to efficiency enhancements.

There is an increasing trend in the adoption of several forms of outsourcing by Nigerian MNOs and the International Data Corporation (IDC) actually believes the evolution in business models employed by mobile operators in Nigeria is actually a step in the right direction.

“In the long term, we expect this trend to lead to a notable improvement in the quality of service (QoS) on the networks provided by these MNOs,” said Oluwole Babatope a telecommunications and networking research analyst with IDC West Africa.

Earlier this year, we saw MTN Nigeria and Ericsson sign a major five-year managed services agreement that had Ericsson assume full responsibility of the management, optimization and field maintenance of MTN’s network infrastructure in Lagos, Abuja, Enugu, Port Harcourt and Asaba.

Head of Managed Services at Ericsson, Jean-Claude Geha, said: “This agreement with MTN, Nigeria’s largest telecom operator, marks a milestone for Ericsson in Nigeria and in the region. In Managed Services, we bring our global expertise and experience to benefit our customers and ultimately their subscribers’ experience of the network.”

Competition amongst MNOs in Nigeria is no longer news. The exponential growth of the industry has led to the increased maturity and sophistication of individual MNOs and has also ushered in an intense level of competition amongst the industry players. Operators are now competing within an industry value chain that is significantly different from what it was just a few years ago. In other words competition is forcing down tariffs, legacy voice revenues are declining steadily and the average revenue per user is falling.

In an attempt to combat these dwindling profit margins, reduce operational cost as well as generate additional revenue streams, MNOs in the country have turned to boosting the provision of data services. Such efforts however, require additional capital and operational expenditure requirements and such costs are already impacting negatively on profit margins. As a result, MNOs have turned to various outsourcing models in collaboration with third-party infrastructure providers; a move that would increase focus on their core business which in turn improves QoS and eventually customer experience.

The CEO, of ETISALAT Nigeria, in a recent interview said selling 2,136 of its sites/towers to IHS Holding Ltd was actually part of a broader strategy to drive improvements in the quality of its network performance.

From just 400,000 lines in 2001, Nigeria’s mobile market has grown to over 120 million users today, with tele-density hitting over 92 percent today. But poor QoS remains the bane of the Nigerian telecommunications industry, with all four MNOs falling foul of the regulator at various times over the years.

On quality of service, Executive Vice Chairman of the Nigerian Communication Commission (NCC), Eugene Juwah, in an interview said “We would like to have done better but we’ve always been striving to do better”.

The quest to maintain profitability is not distinctive to Nigerian operators, but there are distinct forces at play within the Nigerian market that are making profitability ever more daunting for MNOs in the country. The likes of ETISALAT, AIRTEL and MTN have all in one form or the other signed some form of outsourcing contract with a telecom equipment vendor or telecom infrastructure provider; outsourcing non-core services to reduce operational costs.


TCS, Cloudera tie up to provide analytics services

August 26th, 2014 by Rahul Jain No comments »

Tata Consultancy Services Ltd (TCS), India’s leading software services exporter, has tied-up with US-based Cloudera, an enterprise analytics data management provider, to offer Big Data and analytics services globally.

As part of the deal, TCS’s global team of Big Data experts will be certified through the Cloudera Certified Professional (CCP) programme, and its products will be validated through the Cloudera Certified Technology Programme (CCTP), TCS said on Monday.

While Satya Ramaswamy, global head for TCS Digital Enterprise said Big Data “is playing a central role in helping enterprises re-imagine their businesses”, Tom Reilly, chief executive officer of Cloudera, said the TCS’s investment in Cloudera has made it “the world’s largest group of Cloudera certified professionals”.

TCS is banking on revenue from emerging technologies such as social, mobility, analytics and cloud (SMAC) to stay ahead of the pack. In June 2013, it set up a separate digital enterprise unit in Silicon Valley to club its SMAC computing technology services under a single roof. outsourcing12

Last month, TCS said in a global trend report that digital spending by enterprises globally is expected to be a $113 million in 2014, as these organizations see digital initiatives, such as Big Data, analytics, cloud computing, mobile and pervasive computing, social media, robotics and artificial intelligence, as being crucial to their business success in this decade.

According to a February report by research firm Offshore Insights, Global 2000 firms will spend 15-16% of their information technology (IT) services and outsourcing budgets on SMAC and India will export $15 billion worth of SMAC software and services in fiscal 2017, despite SMAC currently accounting for less than 10% of the revenue of IT services firms.

According to global research firm International Data Corp. (IDC), Indian IT vendors will generate at least $225 billion in SMAC-related revenue in 2020. TCS made the announcement after market hours. On Monday, shares of TCS closed up 2.42% at Rs.2,521.15 on the BSE, while the benchmark Sensex index rose 0.07% to close at 26,437.02 points.


India claws back BPO business from arch rival Philippines

August 26th, 2014 by Rahul Jain No comments »

Today, technology is the great enabler for pretty much every kind of business proposition being schemed. However everyone is more or less also aware of how brutal the rapidly evolving world of technology can be on the fate of existing businesses—somethioutsourcing14ng I wrote about here  when looking at the future of Xerox through the lens of the diverging fortunes of Kodak and Fuji. In India, the trajectory of former phone tzar and India’s most beloved handset maker Nokia illustrates this example more poignantly than any other company. But for an entire industry to go up in smoke almost overnight is surreal – and that’s exactly what seems to have happened to India’s Business Process Outsourcing Industry, especially its voice based businesses.

According to India’s top industry apex body Associated Chambers of Commerce and Industry of India (ASSOCHAM), the country witnessed a massive 50 percent flight of BPO business—currently pegged at around US$25 billion—last year. This figure includes both low-end voice businesses as well as back-office accounting and financial type work, but the main flight is in voice-based businesses. The primary culprit? India’s nemesis, the Philippines. Apparently, the Americans did a better job of colonizing them than the Brits did us, since the country’s large, English speaking populace there can speak the language fluently and with a natural American accent. Moreover, 30 percent of the graduates in Philippines are employable compared to 10 percent in India, where a lot of time is spent on the painful task of training new recruits in an industry where churn rates have reached an astonishing 55 percent.

It is ironic that the same disruption that India engineered in the West with its IT and BPO outsourcing model is exactly what is happening to it today, thanks to the Philippines. According to Tholons, a research outfit that tracks trends in this industry via its Top 100 Outsourcing Destinations for 2014 list, Manila is now the 2nd most important venue for BPO businesses after Bangalore, pushing Mumbai one step lower to number three. Sure, other Indian cities still have a strong showing on the list (Delhi is 4th, Chennai is 5th, Hyderabad is 6th and Pune is 7th), but Philippine cities are rapidly gaining prominence. Seven Philippine cities were in the Top 100 and two—Manila and Cebu, ranked 8th—were in the Top 10. Other parts of the world are also gaining traction in this sector such as Krakow, Poland (9th), and Dublin, Ireland (10th).

Assocham earlier this year also stated that as much as 70 percent of incremental Call Center and voice business in India for this year will also be lost to foreign competitors. And, it’s apparently only going to get worse. “It is estimated that in the ongoing decade, India might lose US$ 30 billion in terms of foreign exchange earnings to Philippines, which has become the top destination for Indian investors,” Assocham secretary general D S Rawat said. The new Indian government’s fixation with promoting Hindi over other languages may not help the situation any.

So it must be some sort of relief for Indian industry folk to see that the country has been able to claw back some businesses from the Philippines . Apparently, a high churn rate there along with a perception of increased risk in doing such a large volume of business in a small country have been some factors helping nudge some customers back to India. Also, apparently Indians in BPOs are also good at executing sales functionalities which companies are interested in tacking on today as they look towards going beyond just the cost-centre approach by milking their BPOs for some revenue. The Economic Times reports that Telstra and Best Buy are companies who have relocated to India because of this ‘sales’ factor. Aegis BPO, which is part of the Essar Group, apparently moved 600 jobs to India from the Philippines for this very reason.

Then, there’s the domestic business angle. Ten years ago, BPOs would turn their noses up at the thought of going after local business, but today it could very well turn out to be the lynchpin of their existence. Aegis, for instance, is looking to grow by a massive 5 percentage points just because of the boom in the banking sector thanks to the drive towards financial inclusiveness of the rural population. Adding 300 million bank accounts will mean an unparalleled deluge of BPO-related work. Consequently, Aegis has already begun snapping up business from India’s public sector banks including Bank of Baroda, Union Bank of India and Bank of India, including the setting up of a 1,200-seat delivery center in Bhopal and Gurgaon for Punjab National Bank earlier this year.

There’s also another emerging trend boosting the fortunes of India’s BPO future—one that leverages the very strength that made India an IT outsourcing hub in the first place. The days of pure-voice plays is fast fading. Companies are increasingly seeing a tech component to call center functionalities, starting off with email and chat integration into existing voice infrastructure setups and then more sophisticated and flexible delivery models such as Platform BPO and cloud based-Business Process as a Service (BPaaS).

Research outfit Tholons suggests that with these kinds of emerging innovations in the BPO realm, India will continue to dominate the world of BPO and in some ways prevent the demise of the sector that was otherwise imminent.


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