SoftBank betting $10 billion on Indian Internet market

October 29th, 2014 by Rahul Jain No comments »

Japanese telecommunications and Internet company SoftBank is planning to invest US$10 billion in India, the country’s government said after meetings with the company’s chairman and CEO Masayoshi Son.Outsourcing51

The SoftBank head met with India’s leaders including Prime Minister Narendra Modi and Minister for Communications Ravi Shankar Prasad during a visit this week to the country.

SoftBank also announced Tuesday an investment of $627 million in online retailer Snapdeal, making it the largest investor in the company. SoftBank is also leading an investment of $210 million in Ola Cabs, a company that links consumers with cab drivers through mobile apps, the Web and call centers.

SoftBank did not comment on the investment plan in India, although it said in a statement that it planned to “deploy significant capital in India over the next few years.” Son told a TV channel that he had a “strong wish and willingness to invest more like” $10 billion in India in the next 10 years.

The company hopes to benefit from opportunities for developing the country’s nascent online market, created by its large Internet user base. said in July it was investing $2 billion more in the country, attracted by the online retail opportunities. The online retailer did not say how or over what period it will make the investment.

SoftBank already has made investments in India, including in a joint venture in 2011 with Bharti Enterprises group, which has India’s largest mobile operator, Bharti Airtel, as a group company. Bharti Softbank Holdings is focused on the mobile Internet.


Buy Wipro; target of Rs 650: PLilladher

October 29th, 2014 by Rahul Jain No comments »

“Wipro reported weaker than expected performance for Q2FY15, with revenue and margin missing the expectation. Moreover, the guidance was softer than PLe/Consensus expectation. Management is still confident of improving growth momentum in H2FY15 on the back of large deal wins. Moreover, return of discretionary spend in the US and Outsourcing penetration in Continental Europe makes demand outlook healthier. Retain “BUY”.” Outsourcing50

“Wipro reported Q2FY15 results below expectation. IT Services (USD) revenue grew by 1.8% QoQ (3% @cc, PLe/Cons.: 3%) to US$1,772m (PLe: US$1,792m, Cons: US$1,795m). Overall revenue grew by 4.9% QoQ to Rs116.8bn (PLe: Rs115.8bn, Cons.: Rs116.8bn). Operating margins eroded by 175bps to 18.6% (PLe: 20.0%, Cons: 20.5%), due to wage hike and cross currency movement. EPS declined by 1% QoQ to Rs8.47 (PLe: Rs8.90, Cons: Rs8.61). H2FY15 likely to be stronger, but client specific issues drags near term: Management continues to assert for stronger H2FY15 than H1FY15. However, the weakness in Q3FY15 guidance was attributed to ramp‐down in selected clients in Commodity related sector due to weakness in price. However, there is no loss in wallet‐share with clients. The management sees improvement in deal pipeline along with improved win rate. We expect revenue growth to accelerate in Q4FY15 yielding stronger FY15 exit rate. Wipro total headcount grew by 4.6% QoQ, the strongest since Q3FY10. The company continues with their JIT hiring along with equal mix of fresher and lateral. We see strong employee addition as an early indication of planned ramp‐ups ahead. Moreover, the management sees uptick in utilization from the current level.”

“We see improvement in the win rate to drive revenue momentum in CY15, along with available margin levers that would accelerate earnings momentum. However, we see near term weakness in stock due to weaker than expected guidance. We retain “BUY” rating, with a revise TP of Rs650, 16x FY16E earnings estimate,” says Prabhudas Lilladher research report.


Infosys to step on the gas, consider big acquisitions

October 29th, 2014 by Rahul Jain No comments »

Displaying Infosys’s new-found confidence and aggression under a new management, Chief Operating Officer U B Pravin Rao on Tuesday said the company was ready to make “large acquisitions”, adding it was considering a few in strategic areas and regions.Outsourcing49

Rao said Infosys was open to acquiring companies with annual revenue of $600-700 million and wasn’t averse to bigger acquisitions. “There is no constraint (on how much the company will pay for acquisitions). At the end of the day, if it is in line with our strategy, if we think it will add value to our strategy and give us time-to-market advantage, we are pretty confident we want to do it,” he told Business Standard.

As of September 30 this year, Infosys had reserves of Rs 33,616 crore ($5.44 billion) in cash and cash equivalents.

Infosys has long been conservative, as far as inorganic growth is considered. Rao, who claims his leadership style is “optimistic” (not ‘cautiously optimistic’), said in the recent past, the company had considered a couple of large acquisition targets but did not proceed due to certain mismatches in terms of the overall strategy and valuation.

Unlike some of its other Indian or offshore-centric information technology (IT) services peers, Infosys is not perceived as aggressive in pursuing mergers & acquisitions (M&As). Since its inception, it has carried out only five acquisitions, the largest being Lodestone, a Switzerland-based management consultancy firm Infosys had acquired in September 2012 for about $345 million (Rs 1,930 crore). Two of the acquisitions – McCamish ($58 million) and Portland Group (A$34 million) – were in business process outsourcing.

In 2008, Infosys had offered to buy UK-based SAP consulting company Axon Group for about Rs 3,300 crore ($753.1 million), though it backed out after peer HCL Technologies bid a higher price.

It was learnt Infosys had also shown interest in acquiring TriZetto, a US-based health care IT solutions firm that was eventually acquired by Cognizant for a whopping $2.7 billion.

“We take risks but finally, we can’t be foolhardy. If you look at Axon, it made better sense for HCL than us at that stage. We wanted it but there was a limit on how much we wanted to pay. So beyond that, it did not make any sense for us. It was because we already had a dominant SAP practice; we still have the dominance today,” Rao said.

He added Infosys was eyeing large acquisitions in areas such as health care and the government business space in the US, where it already had a subsidiary, Infosys Public Services.

In terms of locations, the company is looking at the Nordic countries and Japan. Rao said the company was also looking at smaller acquisitions to acquire capabilities in new technologies such as automation, analytics and big data. “Probably, these will be smaller (acquisitions) because I don’t think there are many large companies in these spaces.”

In terms of M&As, Rao said Infosys could have done more captive acquisitions, akin to its peer Tata Consultancy Services, adding failure on this front was why the company had lost out in rapidly growing its core business. “That (captive acquisition) is an area where we have publicly stated we missed the boat.”

Rao said the new strategy unveiled by chief executive Vishal Sikka earlier this month had gone down well with clients, as well as employees. He said while from one perspective, the new strategy remains was almost the same as Infosys 3.0, the company was focusing more on execution. “We are quite clear there will be equal focus on the core business (application, development and maintenance, which the company often dubs the ‘bread and butter’ business), as well as new areas such as design-thinking, platform-centric services and automation.”

He added while the company’s attrition rate continued to be high, there was a drop in attrition numbers every month.

Under the new management, Infosys had launched the ‘murmuration’ initiative to crowd-source innovative ideas from employees. Rao said the company had received an overwhelming response to this, adding some of the ideas selected had been put to vote.

On the business environment, the chief operating officer said he believed some of the company’s “struggles” were past, adding he was now more “optimistic” about Infosys’s growth prospects.


IT workers better off with IT service provider, says Lufthansa CFO

October 29th, 2014 by Rahul Jain No comments »

IT professionals transferred as part of outsourcing deals could find more opportunities to develop their careers, says Simone Menne, CFO of Lufthansa.
Lufthansa is in final negotiations with IBM Global Services to outsource its IT infrastructure services in a seven-year deal. This will see the German airline’s IT services division broken with the infrastructure element sold to IBM. Besides providing IT services to the airline, Lufthansa Systems has 450 external customers.

With 1,400 employees from the Lufthansa System’s infrastructure division set to move to IBM, Menne said employees moving to IBM will have better job prospects.

“This will also give employees of the Infrastructure division clear job prospects and enable them to participate in future technological developments,” she said when announcing the IBM deal.

The division will continue to supply Lufthansa with IT infrastructure services and there will be opportunities for these staff to move on to other IBM projects.

Large global businesses are already heavy outsourcers with thousands of previously internal IT roles being carried out by third-party suppliers. Today’s trend appears to be mid-sized multinationals moving to outsourcing models, to reduce costs and keep pace with rapidly changing IT demands.

The number of recent transformative IT infrastructure outsourcing agreements in the mid-sized multinational sector is further evidence of this.

Recent deals saw South African diamond-mining and jewellery company De Beers announce plans to transform its global IT infrastructure through a deal with outsourced IT services company HCL. Last month also saw German company Vorwerk outsource its IT infrastructure and application development operations to Cognizant in a six-year deal to centralise and standardise IT.

Despite some examples of big companies, such as General Motors, bringing IT back in-house, it appears that the balance of IT professionals working at suppliers will continue to increase as in-house IT staff numbers decrease.

Modern IT infrastructures today, with developments around automation and cloud computing, will inevitably mean less manual work. Staff carrying out support functions might not be required in as high a volume. But people with IT skills and a good understanding of how IT works in business could play an important role in getting the most out of these new technologies.

There is also opportunities to work in different sectors with a service provider, where existing industry knowledge can be transferred to other sectors of new sector knowledge learned.

Sean Finnan, former head of Europe at IBM Global Services, said suppliers can be a good option and IBM rewards good staff well.

“If  you like a bit of variety in your job suppliers are good and IBM is a real meritocracy that rewards staff that work hard and know there stuff,” he said.

He said one day you can be working on a project for an airline and the next day for a bank.

This IT services sector can offer career development or IT professionals. It can broaden their technology and business skills.

In 2010, Computer Weekly spoke to one IT industry executive who flourished under a transfer to a supplier when his job was outsourced. Bob Scott, who got a mine manager certificate in 1987 and became a fully qualified mine engineer, joined the supply side when his role as part of a mathematical modelling team at British Coal was outsourced to Hoskyns in 1992, which was later acquired by Capgemini.

He has since been the head of Capgemini’s global testing business.

While working at Capgemini, Scott completed a masters at the London School of economics, which was supported and funded by Capgemini. By 1996, Scott was given the task of heading up business development for Capgemini in the UK. He relocated to Paris from 1997 to 2001 to take control of the new e-commerce and internet business at Capgemini. He has since held several senior roles at Capgemini including head of UK public sector business as well as taking charge of market strategy for services related to the police.


Healthcare IT Outsourcing Returns: Proceed With Care

October 29th, 2014 by Rahul Jain No comments »

Healthcare providers are starting to consider outsourcing options again. Here are some areas where it can work — and some to keep in-house.

As we enter the fourth quarter of 2014, once again we are experiencing a significant shift in the amount and type of demand for HCIT-related services. We have seen a dramatic reduction in demand for implementation services. Cost-cutting has surged, and consulting firms specializing in this have reemerged as the official experts on HCIT cost structures.Outsourcing49

The last time we saw a similar pattern — the late 1990s and early 2000s — there was a boon in IT outsourcing services. Back then, leading cost reduction firms frequently recommended broad-based IT outsourcing as a vehicle to reduce costs and get a better handle on the economics of IT. It was quite common to see entire IT functions outsourced under long-term contracts to firms like Perot (Dell), E&Y (Cap Gemini, then Accenture), First Consulting Group (CSC), ACS (Xerox), and CSC. These types of agreements peaked between 2002 and 2004 and have since been declining, but we are now seeing the trend reemerge.

The HCIT industry has been engulfed by significant regulatory changes. These changes have created fallout among the weaker HCIT software providers and a resulting consolidation of the market. The provider system reaction has been to replace their transaction systems with better solutions.

Fortunately, these better solutions also enable enterprise integration, even as those providers recognize the value of this integration to population health and wellness. Unfortunately, these solutions have accelerated IT expenses faster than anticipated, with no corresponding lift in revenue. In fact, because of outside market conditions and changes in healthcare, revenue has been disappointing, and margins have been severely strained.

This margin pressure has once again raised the question of outsourcing. The bad news is that vendors are once again offering outsourcing as a panacea for cost control. The good news is that we now understand the pros and cons of contracting for services far better than we did in the past. The remainder of this article will attempt to demystify IT outsourcing and discuss those areas worthy of exploration.

Outsource the obvious
Software development by healthcare organizations is no longer a topic of serious debate. We have completely outsourced EMR development to HCIT vendors. The few remaining provider organizations that were committed to homegrown development have succumbed during the last five years. Though the number of viable HCIT suppliers has gotten smaller, the software they manufacture and support is far more sophisticated, and much of it actually works. Providers must accept that they now purchase the vast majority of their software and learn to work more effectively with their supplier. Be a good customer by staying current and customizing as little as possible.

Data centers and business continuity is an area where the services market is already maturing. Data centers consume a great deal of capital to build and/or expand. Given the degree that providers depend on electronic workflows, real business continuity is no longer optional. We see two options emerging.

Co-location: Get out of the data center real estate business. You can now rent the space and buy the power. The staff can be yours or that of another organization. You get a relatively predictable expense stream and high availability.
Vendor co-location: Have your EMR vendor supply the service. This option, which is increasingly popular with provider organizations, lets you rely on your vendor to manufacture the code and ensure that the EMR system is available to your caregivers. One limitation with this option is that the vendor may not host all your systems. In that case, you will still need a secure data center — your own or a co-location — to run those other systems.

Billing and collections have long been candidates for outside services. Thirty years ago, every provider used shared services for billing. Since then, however, much of it has Healthcare providers are starting to consider outsourcing options again. Here are some areas where it can work — and some to keep in-house.

moved in-house. Clearing houses, bolt-on data scrubbing, and transaction processors continue to provide a third-party services layer at the edge of the organization. Outsourcing beyond this is becoming more common, depending on simple economics and provider organization capacity.

Be thoughtful with the rest
As an industry, healthcare will spend more on technology over time. Ideally, we can leverage that IT investment to recover expenses from other areas. The mandate is to improve quality, transparency, and population health while better managing healthcare inflation. IT and appropriate levels of medical technology are the best tools to make that possible. We have spent a fortune over the last five years replacing EMRs as quickly as possible, but we have not spent a commensurate amount of time or money improving workflow and measuring the value associated with these investments. We should complete this work before we seriously consider major outsourcing transactions.

All outsourcing contracts include three critical elements: scope, service metrics, and cost. Most providers focus on cost and become frustrated when they’re told that increased scope and/or service will cost more. Those same providers usually have a good handle on IT expenses but cannot forecast estate growth or articulate acceptable service levels.

Let’s quickly review some other areas that are typically included in IT outsourcing.

Outsourcing the entire IT shop: IT now serves as the nervous system of the provider enterprise. Turning the keys to the store to a third party that scrapes 25-40% gross margin off the top is both costly and incredibly dangerous. Remember that third parties can become hostile; I have personally assisted a provider through such a situation. In 2014, having a hostile third party parked between you and your nervous system is a frightening concept.

Application support: This is quite diverse, but for your core applications (EMR, revenue cycle), you already pay suppliers 15-20% per year for maintenance and basic support. Outsourcing proposals highlight 40% savings through labor arbitrage while quietly agreeing to pass a small fraction of that savings to you under specific conditions. Now is not the time for Byzantine cost structures and hidden fees. In addition, the interaction between application support and your optimization efforts makes it incredibly difficult to achieve high service levels when a third party must make all of changes.

Desktop support: This can work, but you must first define what is good service, and for whom. Replacing a terminal in the ICU is a different problem than fixing a printer in a rural clinic. The value and the risk are in the fine details.

Help desk: What problem do you want fixed? Do you want rapid pickup and 24-hour coverage? Do you want first-call resolution? These are very different problems. I have seen many organizations pay a lot of money for an 800 number that simply redirects problems to their current staff.

Security: This is not a good candidate for outsourcing. Consultation and independent review are incredibly valuable, but you simply can’t separate the serious security risks from your users and business operations. You already own this problem, and you must view it in a holistic manner.

Projects: Most IT-related projects following EMR implementation are “optimization” projects that require a collaborative team, including IT and operational people. You can readily contract IT staff if you need to, but if you outsource your project work as a whole, you will at best get a limited number of hours to handle all project-related requests. When this time is used up, get out your checkbooks. You will not want to pay 2-3 times your internal rate for ongoing optimization efforts.

From 1998 until 2006, I was president and CEO of a publicly traded HCIT company, where I was responsible for creating and managing the IT outsourcing division. From 2006 until 2009, I was an expert witness on five ITO international outsourcing arbitrations. I have seen the good, the bad, and the ugly. There is no magic to outsourcing, and there is no free money anywhere. Be careful and remember the lessons of the last 30 years.


BPOs, AEC seen key as country enters demographic window

October 28th, 2014 by Rahul Jain No comments »

As the Philippines enters its demographic window next year, a period of expected economic growth given a bigger employable population, the information technology and business process outsourcing (IT-BPO) industry and the Association of Southeast Asian Nations (ASEAN) Economic Community (AEC) are seen as key to providing the necessary job opportunities.Outsourcing48

“What’s good about the BPO industry is that for every job that they create, there is an additional 2.5 jobs created, that’s the multiplier effect,” said Zedric J. Matubis, vice-president for retail sales of Philam Asset Management, Inc. (PAMI) during a roundtable discussion with the media here last week.

“That 2.5 factor will be taken into consideration in economic growth prospects,” Mr. Matubis added, citing the consequent impact on food services and the retail industry, among others.

The demographic window, projected in the Philippines from 2015 to 2050, is defined by the United Nations as a period when majority of the population is within the productive ages of 15 to 64, while those below 15 years old comprise a maximum of 30% and those 65 and above are less than 15%.

Data from the Philippine Statistics Authority indicate a projected population of almost 103 million by next year, of which about 44 million are within the 15-64 age group.

“That will bring us to a higher level of economic growth because half of the population is earning,” Mr. Matubis said.

The IT-BPO industry registered one million employees as of mid-2014 with a projected increase of at least 120,000 new jobs annually within the next three years, according to the Information Technology and Business Process Association of the Philippines (IBPAP).

Meanwhile, the formation of the AEC — through the economic integration of the ASEAN member-countries — starting December 2015 is also expected to open more employment opportunities, especially given that the region is considered part of “emerging Asia”.

Dr. Brian Murray, chief economist of the Hong Kong-based AIA Group Limited’s Investment Department, said indicators within the emerging Asian countries point to a “zero risk of recession,” citing analysis from the International Monetary Fund (IMF).

“This is the region that will see growth,” Mr. Murray said.

IMF Working Papers on “emerging Asia” cover China, India, and the ASEAN member countries Indonesia, Malaysia, Philippines, Thailand, and Vietnam.

For the Philippines, he said foreign direct investments are expected to flow in considering the country’s strong economic fundamentals and improved perception on good governance policies.

Mr. Matubis added, “We feel that the economic growth will enable companies to invest more and hire more and new investors will come in.”

For PAMI, the investment arm of Philippine American Life and General Insurance Company (Philam Life) which is part of the AIA group, the positive outlook on employment and the Philippine economy as a whole is anticipated to give a boost to the fund management sector.

Ferdinand L. Berba, PAMI chief executive officer, said while Filipinos still by-and-large simply put savings in banks, the growth of their long-term fund portfolio is an indication of growing awareness on other investment options.

“The Philippine growth story will continue… the question is how do we take advantage of that? We provide options for our clients, and you don’t need a lot of money to invest (in mutual funds),” Mr. Berba said.

PAMI is currently holding a series of investment forums in key cities around the country and company officials said they will consider organizing a similar road show targeting college-level students who will soon join the employment market.


How’s TCS seeing the Digital future?

October 28th, 2014 by Rahul Jain No comments »

The emerging technologies are defining the future of almost the whole tech industry and all the IT & Tech players are striving to build their space in the future tech world. Outsourcing34

The largest Indian IT services company Tata Consultancy Services (TCS) has a clear vision for the future of transforming technologies and the industry. TCS is expecting digital platforms such as Big Data, Cloud and Mobility solutions to bring in cumulative revenuers of more than $5 billion in the upcoming years.

Earlier, TCS shared that it is expecting to do $5 billion growing business in the next three to four years on the digital opportunity.

“The way to see it is that, when originally I said so, I said that over the upcoming three to four years, we’ll do $5 billion cumulative. But now, I think we’ll do far beyond that on a cumulative sense,” said N Chandrasekaran, CEO & MD, TCS.

Its run rate won’t touch $5 billion mark, but it will surely touch a few billion dollars, he added.

The opportunity is enormous as much of the ADG work that’s getting replaced or being rationalized is moving towards digital, said Chandrasekaran.

“Most of the infrastructure contracts are coming up from the outsourcing of infrastructure for maintaining the services levels in a model of managed services, but with transformation thing, to move to the cloud infrastructure,” he added.


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