Posts Tagged ‘India’

Multi-billion dollar opportunity awaits India IT companies

September 1st, 2015

Several outsourcing contracts worth at least $1 billion (about Rs 6,500 crore) each from companies such as US retailer Gap and British telecom firm Vodafone are coming up for renewal over the next one year, providing an opportunity to home-grown software exporters such as Tata Consultancy Services and Infosys to grab the deals from incumbent multinational rivals such as IBM and Hewlett-Packard and further increase market share over these companies.Outsourcing35

According to data from outsourcing advisory ISG, at least six such deals are set to expire in 2016. Further, another nine deals with a total contract value of at least $500 million each from customers such as Arcelor-Mittal and BAE Systems will also come up for renewal during this period.

According to the report, about $250 billion worth of deals are set to be renewed over the course of the next 36 months.

“The increasing number of contract expirations each year directly results from specific market trends. We’ve seen the number of outsourcing transactions increase dramatically over time. At the same time the average duration of contracts has declined. As a consequence, contract expirations are occurring at a faster rate,” said Dinesh Goel, partner and India head at ISG.

Even as IBM and HP are expected to strive to renew these contracts, India’s top outsourcing firms fancy their chances, having already grabbed significant market share from their multinational rivals over the past five years.

According to another ISG report, Indian IT firms increased their share of the market to 27.1% during January-June, from 23.6% a year ago. This gain came at the cost of European rivals such as Capgemini and Atos, according to the report.

Executives from both Indian and multinational firms are currently eyeing Vodafone’s $1 billion contract with IBM which is set to expire early next year. Preliminary discussions to renew the contract have already started, according to executives involved in the deal.

“There is no question that incumbency isn’t what it used to be – the non-incumbent win rate on competitive restructuring and renewal deals stands at over 60%,” said Goel. “India-heritage firms have been the significant beneficiaries of this trend as a winning provider. But going forward, they have their own turf to protect as an incumbent provider of large expiring deals.”

Indian IT firms have aggressively snatched large contracts by adopting tactics such as heavy upfront payments while bidding for large billion-dollar outsourcing deals and also using price to undercut rivals.

At a time when investors are worried about the economic slowdown in China triggering a global meltdown and with technology spending set to drop at least 5.5% this year, India’s top IT services firms will chase these upcoming deals even more aggressively, executives said.

Source:http://telecom.economictimes.indiatimes.com/news/enterprise/enterprise-services/multi-billion-dollar-opportunity-awaits-india-it-companies/48744239

India prods China on IT, ITeS access

May 28th, 2015

New Delhi will soon send a reminder to Beijing on the hurdles faced by Indian IT/ITeS firms in getting greater market access in China. This follows concerns raised by industry bodies Nasscom and CII in meetings with the Union government about the difficulties in qualifying for bids put out by Chinese government and state-owned enterprises (SOEs) for IT/ITeS projects.Outsourcing10

In the aide memoire to be sent to China, sources said, India would also urge China to strengthen its intellectual property (IP) regime to protect Indian firms’ IP rights.

As per the 2013 Nasscom-KPMG study, of the estimated $46-billion Chinese IT/ITeS market, India’s share is less than $1 billion, despite its global reputation as a major export of IT-related services. China’s IT/ITeS market could cross $84 billion by 2020.

An aide memoire in diplomatic parlance means a note summarising in an informal manner (sans the usual courtesy phrases) the discussions between both sides. It is meant as ‘an aid to memory’, and a gentle reminder, seeking the necessary action on the points discussed. Indian IT firms operating in China include TCS, Infosys, Wipro, HCL, Tech Mahindra, NIIT (Education), Zenzar, Geometric, Mphasis, Mindtree, Birlasoft and KPIT.

In China, the government (at the federal and state/local levels) and SOEs are among the largest buyers of IT-related services. The Nasscom-KPMG study says by 2020 demand from SOEs is likely to be 45% of the total Chinese demand.

To qualify for bids of large projects, an applicant company needs to show that they have helped in the implementation of Chinese government/SOE projects of similar size. “We have suggested that China should ascribe more value to the experience of companies in government projects of similar sizes outside China, ” Gagan Sabharwal, director (global trade development), Nasscom said.

India had, on many occasions earlier and even during Prime Minister Narendra Modi’s recent visit to that country, taken up these issues with China. However, the fact that Beijing was yet to respond favourably to New Delhi’s concerns was recently discussed at a meeting held by the Indian commerce ministry, official sources told FE. The ministry then prepared the aide memoire and forwarded it to the Prime Minister’s Office to be sent to the Chinese authorities, they said.

Nasscom has also suggested that India and China should, on a reciprocal basis, allow easier movement of highly skilled professionals through long-term visas and work permits to enable Indian and Chinese companies to send across such experts to work in each other’s territory.

CII had pointed out that insistence on local entities in some provinces in China to avail subsidies was reducing competitiveness of Indian IT/ITeS firms. Besides, CII said, Indian IT/ITeS firms are facing challenges in staff mobility between provinces in China due to the ‘hukou’ system (a system of household registration that restricts internal mobility of people and ties their future prospects to their place of residence), necessitating local offices in each project area.

To showcase technological expertise of Indian IT firms, CII said certain pilot projects can be chosen to be jointly executed with Indian and Chinese companies. Also, both sides can jointly develop a platform on policy updates and business opportunities for Indian and Chinese companies, it said.

CII and Nasscom also want India to push for a totalisation agreement (on social security payments) with China. This, they said, will help avoid social insurance fees being paid twice by companies for Indian employees being deputed to China — once in India and then again in China. These industry bodies also want New Delhi to take up the issue of the lack of clarity in withholding tax imposed on repatriated profits. Among issues affected the Indian outsourcing firms, CII has pointed out resistance to outsourcing within China due to lack of understanding of benefits and perceived job loss fears in SOEs.

Entering the dragon
* Size of Chinese IT/ITeS market = $46 bn
* India’s current share = below $1 bn
* China’s IT/ITeS market size projected to be $84 bn by 2020
* Chinese govt & soes among potential big buyers of IT services
* By 2020, soes to make 45% of Chinese demand
* Indian IT majors in China: tcs, Infy, Wipro, hcl
* India seeks long-term work visas for IT workers in china
*  Totalisation pact with china proposed

Source:http://www.financialexpress.com/article/economy/india-prods-china-on-it-ites-access/77100/

Wipro, Infosys turn to AI, design thinking in subdued IT market

May 28th, 2015

India’s leading technology outsourcing firms Infosys Ltd and Wipro Ltd are banking on so-called design thinking and artificial intelligence (AI), respectively, to win large deals, as they struggle to raise revenue in a subdued market for information technology (IT) services.Outsourcing9

Bengaluru-based Infosys claims that design thinking, a creative and systematic approach to problem-solving by placing the user at the centre of the experience, has helped it win five large deals. Two of these orders exceed $100 million each in annual revenue. Meanwhile, cross-city rival Wipro plans to offer its AI platform Holmes to up to a third of its 1,000-plus clients in the next 24 months, claiming that it could be an “account opener and game changer”.

“We have won five big deals, two of them are over $100 million. Just in the last six weeks,” Infosys chief executive officer Vishal Sikka said in an interview last week. “We are not just responding to requests but being proactive and bringing clients to workshops. See, RFPs (requests for proposals) are controlled by third party… But then, you can always influence the client to become a strategic partner through design thinking.”

Infosys is trying to improve the effectiveness of its sales team by incorporating elements of design thinking, Mint reported on 29 April. Sikka’s push to drive more business comes after his company’s March quarter revenue fell short of forecasts.

Wipro, under chief executive T.K. Kurien, too, has been struggling to record a double-digit revenue growth for the last four years, and is now positioning Holmes in managing helpdesks for companies.

“In the next two-four years, one of the biggest disruptions will be (an IT vendor having) an AI-platform. I believe this will be as big as the Internet disruption. Customers have exhausted their levers of enhancing productivity. So, IT vendors need something which can promise productivity,” said K.R. Sanjiv, chief technology officer of Wipro.

Wipro is pitching Holmes against International Business Machines Corp.’s cognitive supercomputer, Watson, but according to Thomas Reuner, managing director of IT outsourcing research at US-based HfS Research, Wipro’s new cognitive platform, built with open source tools, also has features of New York-based IPsoft’s humanoid programme Amelia. All these platforms claim to improve productivity by allowing IT vendors to deploy fewer engineers for repetitive manual tasks.

Experts believe these measures reflect underlying changes shaping outsourcing deals, as customers across industries press IT vendors to help them with more “transformative changes” to improve their business operations.

Measures like AI and design thinking are needed for survival, said Sid Pai, partner and president of outsourcing advisory ISG’s Asia Pacific division. “A firm with a strong digital story and the ability to invest ahead of the curve on product bets in this space (fully accepting that some of these bets will work, while others will fail) will be able to gain market share in the evolving marketplace”.

“These are necessary strategic steps to position themselves for sustained leadership in the digital era,” said Bill Huber, managing director at Alsbridge, a US-based outsourcing advisory firm. “Winning will require innovation, customer centricity and business outcomes. Vishal’s design thinking campaign clearly has this in mind.

Similarly, the investment in Holmes should help Wipro transcend process centrism and move toward more natural fast integration of business insights into every operational process”.

For this reason, both Infosys and Wipro believe these technologies should help them match the revenue growth recorded by larger rivals such as Tata Consultancy Services Ltd and Accenture Plc.

“It (Wipro Holmes) will be an account opener and will be one of the key solutions through which we will lead into (winning new deals),” said Sanjiv of Wipro.
However, experts believe that even after taking these measures, it will be a tall task for Infosys and Wipro to get back to Nasscom projected revenue growth of at least 12% for 2015-16 as both are struggling to record even $1 billion worth of deals in a quarter.

“For companies of their scale, they need to have to have a quarterly TCV (total contract value) of at least $1.5-2 billion. So, will these measures help them get there? Difficult. It is not like others will be just sitting and watching the game,” said the head of research at a Mumbai-based brokerage, who did not want to be named.

“It could be tricky for Holmes to jump to 25% client usage in 24 months without an established pilot programme or deep-rooted AI partner network,” said Amy McLaughlin, a research analyst at US-based Technology Business Research Inc.

Typically, pilot projects take anywhere between six and nine months before a firm outsources a large deal to an IT vendor, according to industry executives.
“In a decelerating IT services market, combined with India-centric companies’ reputation as “fast followers” as opposed to market leaders, I’m not convinced that Wipro’s Holmes platform is in position to grow at such a rapid rate,” McLaughlin said.

Some analysts, like HfS Research’s Reuner, said though initiatives such as design thinking and AI are “important sign posts for the direction of travel for both the supply and demand side”, the “efficiency of the sales engine and the access to talent” are more important.

“Many of these initiatives will enhance offerings and will help to optimize margin but won’t be sold as stand-alone offering,” said Reuner.

Source:http://www.livemint.com/Industry/xP2D2XEOE0thyeZ5zMRMVL/Wipro-Infosys-turn-to-AI-design-thinking-in-subdued-IT-mar.html

CVC leads race for $400m Serco arm

May 27th, 2015

CVC Capital Partners, a global private equity house managing $71 billion in funds, has emerged the preferred bidder to acquire the Indian unit of business process outsourcing (BPO) major Serco Plc, valued at about $400 million, or Rs 2,500 crore, multiple people familiar with the matter said.Outsourcing7

CVC Capital and world’s largest private equity manager Blackstone Group had fired binding offers to acquire Serco’s Indian operations (formerly Intelenet) last month. Blackstone was making a strong bid to buy back Intelenet which it sold to Serco for $634 million four years ago, TOI reported in February this year.

In context, CVC Capital’s emergence as preferred bidder is surprising given that Intelenet still garners almost 15% revenue from some Blackstone portfolio companies like Hilton Hotels and Travelport. “CVC Capital is clearly the top bidder to clinch the deal, though Blackstone remains in the fray,” one of the sources cited earlier in the report said.

Senior executives from CVC Capital and its portfolio company — Philippines largest BPO company SPi Global —were in India recently to conduct due diligence on Intelenet’s centers and interact with the management. “We do not comment on transactions,” Serco Plc spokesperson Marcus Deville said in an emailed response. CVC Capital Partners could not be reached for immediate comments.

Sources said CVC Capital is exploring the possibility of merging Serco’s Indian unit with SPi Global to expand its footprint in India and the UK. The bid for Intelenet comes almost two years after it acquired Philippines’ largest BPO company SPi for over $300 million. This deal will be CVC Capital’s their first big bet on the Indian market, if they close the transaction without hiccups.

SPi operates an offshore-based model primarily serving US and Europe-based customers with more than 20,000 employees worldwide across 17 delivery locations in six countries including the Philippines, India, US, China, Vietnam and Nicaragua. It also operates a voice customer relationship management (CRM) business servicing both domestic and international customers.

Serco runs India’s third largest BPO operations after Genpact and TCS, employing over 40,000 people. It caters to customers in banking and financial services, insurance, retail, travel, telecom, healthcare, utilities and media. In November last year, Serco had announced it would divest private sector BPO businesses as part of a business restructuring plan that would see it focus on being a business to government providers across five core areas. The sale proceeds would be used to lower the net debt of the parent company.

Source:http://timesofindia.indiatimes.com/tech/tech-news/CVC-leads-race-for-400m-Serco-arm/articleshow/47435976.cms

MNCs bet big on their India IT centres

May 26th, 2015

Multinational firms continue to prefer setting up global captives, or global in-house centres (GIC), in India. According to a report, in the past two years, 70 companies set up GICs in India, taking the number to more than 1,448, with a headcount of 74,500.Outsourcing1

GICs are an integral part of the Indian IT-BPO (information technology-business process outsourcing) sector. GICs have been viewed as cost-saving centres for parent organisations. But, with the growth of the global sourcing sector, GICs in India are evolving into centers of excellence, profit centres, and program management offices.

Over five years, around 220 GICs have been set up, with firms from Europe and Japan showing higher inclination, said the study by Zinnov. These GICs will hit a revenue of $20 billion a year in 2015, a growth of 11 per cent over FY10. Of this, almost 52 per cent will come from software product development and embedded engineering services; 25 per cent from BPM (business process management) and 23 per cent from IT.

“Year-on-year, we have seen an increase in the setting up of GICs in India. Barring a year or two, the growth has been positive. In the past two years, 70 companies set up their GICs in India and this year, about 20 companies are in different stages of evaluation for setting up of GIC in India,” said Karthik Ananth, director, Zinnov.

Ananth cites growing instances of multinational firms from Europe and Japan wanting to set up centres in India. The total number of GICs from Germany has gone up from 28 to 39 from FY10 to FY15. In the case of Japan, the number of centres has gone up to 40 from 24 over the period. “While North America will continue to be the largest in terms of centres in India, firms from Continental Europe and Japan have also shown interest. Several firms from China are looking at India,” said Ananth.

He added that new players do have an idea of working with Indian IT players, but setting up a GIC in India is new for them.

“Earlier, an IT budget would have 70 per cent for maintenance work, which was outsourced; 20 per cent for growing IT; and 10 per cent for transforming the IT infrastructure. This break-up has changed: 50 per cent for maintenance; 30 per cent for growing IT; and 20-25 per cent for transforming the IT infrastructure. It is in this last segment that firms are looking at what stays inside in GICs and what gets outsourced,” added Ananth.

The report also points out that many GICs in India are enabling digitisation efforts of enterprises. India is emerging as the world’s leading centre for digitisation, with the world’s second-largest pool of digital talent and practitioners. Tesco, Honeywell, Schneider Electric, and Wells Fargo India’s centres are leading efforts on mobility. Microsoft, Amazon, Google, and IBM’s centre in India are leading efforts on machine learning.

MasterCard set up its GIC in 2013. The GIC will be an extension of the MasterCard Advisors’ analytics group in New York, which leverages big data and analytics to solve business challenges.

Singapore-based Redmart, with a revenue of $2 million in 2014, set up its GIC in 2014 to act as an analytics hub for making business decisions.

“India is no more just a outsourcing base. It is a huge market. So, for firms that are tech-enabled such as Uber and LinkedIn, India is a huge market. Twitter acquired Zipdial. With that they got a vibrant engineering ecosystem. It is natural that they will want to leverage this for growth,” said Ananth.

Ananth says only because the number of GICs are going up does not mean the role of third-party IT vendors will get affected. “Though firms are transforming, it does not mean everything changes. A lot of things will continue and for that you need partners. Also, there is a preference for a hybrid model,” he says.

But skill sets will be a challenge. The IT sector has created a skill ecosystem that is outside university education. Ananth believes it will be crucial for this ecosystem to grow and nurture relevant skills.

UNDERSTANDING GICs
$20bn: GIC revenue in FY2015, a CAGR of 11 per cent over FY10
745k: Number of employees; 5x growth since FY03
1,000: MNCs have GICs in India; 220 new MNCs set up GICs since FY10

WHAT IS GIC?
Global in-house centres (GICs) deliver IT-BPO services. These are set up by multinationals in countries where costs would be low. But GICs in India are evolving into centres of excellence, profit centres, and program management offices

Source:http://www.business-standard.com/article/companies/mncs-bet-big-on-their-india-it-centres-115052501487_1.html

India-based outsourcers captured 23% of top 100 outsourcing deals in 2014

May 22nd, 2015

International Data Corporation’s (IDC) analysis of worldwide outsourcing deals during the 2012-2014 time period reveals that India-based outsourcers captured nearly a quarter of the top 100 outsourcing deals in 2014.Employees at call centre provide service support to customers in the northeastern Indian city of Siliguri

The analysis also shows that the top five vendors in 2014 captured more than 50% of the total contract value (TCV) of top 100 outsourcing deals in 2014. This is up from 43% by the top five vendors in 2013, which included IBM with $13.8 billion, CGI with $2.8 billion, Cognizant with $2.7 billion, Capgemini with $2.6 billion, and Wipro with $2.3 billion. However, the average deal size continues to shrink along with fewer mega-deals (TCV of $1 billion or more).

IDC’s research shows that there has been a shift from public sector deals to commercial/private sector deals in 2014. An additional shift to fewer providers winning and potentially competing for the largest outsourcing deals is also occurring.

“India-based outsourcers are making significant inroads into the global top 100 outsourcing deals,” said David Tapper, Vice President, Outsourcing and Offshore Services. “The combination of effectively leveraging the offshore business model; incorporating new methods of service delivery such as hosting and cloud; investing in more transformative capabilities in areas such as analytics, social media, and mobility; and enhancing strategic local capabilities and resources has enabled the India-based outsourcers to effectively compete with well-established competitors in the outsourcing industry for the largest of large-scale outsourcing deals.”

Source:http://www.firstpost.com/business/india-based-outsourcers-captured-23-top-100-outsourcing-deals-2014-2255662.html

IT contracts worth $13 billion up for renewal this fiscal year

April 16th, 2015

Multi-billion dollar IT contracts are gearing up to be renewed. Due to this, one can expect a tough fight between Indian IT companies and global names Outsourcing26such as HP and IBM. Ovum, London-based IT research firm has made an estimate that $13 billion worth of contracts will be renewed this coming fiscal year. This will include the $3.7 billion IT outsourcing contract of NHS (National Health Service). The primary vendor of the contract is US-based CSC.

According to a Times of India report, an IT analyst at Ovum, Hansa Iyengar said a large number of these upcoming deals have a big infrastructure component. She said, “We have anecdotal evidence of Western incumbents walking out of the deals as they perceive them to be too risky for the given contract values and these are some of the deals that the Indian vendors are picking up.”

Contracts on such a large scale are usually not given to  a single entity any more, as clients choose to opt for multiple suppliers. Indian IT companies are known to lower their prices in order to win big contracts. But for this to not affect their margins, they employ automation tools as well as tweak their onsite-offshore ratios.

Source: http://indiatoday.intoday.in/technology/story/$13b-billion-worth-of-contracts-up-for-renewal-this-fiscal-year/1/429824.html

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