Posts Tagged ‘IT’

Now, leading IT firms like TCS and Wipro pay upfront to win big contracts

July 30th, 2014

The battle for winning information technology contracts is getting fiercer as leading software exporters are either paying money upfront or buying assets to swing the deal in their favour, a trend some industry executives and experts believe will gain traction in a year that has $55 billion (Rs 3.3 lakh crore) of contracts up for renewal. Outsourcing38

At least four large deals bagged by the country’s largest IT firms, including TCSBSE 0.18 % and WiproBSE -0.85 % this year, have seen the homegrown firms edge past competition from global outsourcing firms after innovative structuring of contracts.

“Any deal you do, there will be a certain level of structuring that goes in,” said TK Kurien, chief executive officer, Wipro, after the country’s third-largest software exporter paid about $200 million to buy the IT subsidiary of Canadian utility Atco as part of its single-largest outsourcing deal worth $1.2-billion.

In April, TCS signed an agreement with Mitsubishi under which the country’s largest software company merged its Japanese subsidiary with IT Frontier Corp (ITF), a unit of Mitsubishi. The deal was structured in such a way that gives TCS 51% holding in the new entity.

“It’s very much a trend,” said Sid Pai, who heads the Indian arm of outsourcing advisory TPI. “As deal economics move inexorably toward usagebased models to include the adoption of cloud technology, service providers will have to absorb an ever increasing portfolio of client hardware and software and human resource assets,” said Pai.

The strategy of paying cash upfront is not an entirely new trend. Back in 2007, when ABN Amro signed an over $1 billion contract with InfosysBSE 0.05 % and TCS, the deal involved transfer of people and assets, and some upfront payment. Then, in 2012, IBM beat both Infosys and Wipro to win a billion-dollar contract from Mexico’s biggest cement firm Cemex.

As leading IT firms now bid against global outsourcing firms, homegrown IT majors have started structuring deals to stay competitive. In May, the country’s fourth-largest software services firm, HCL TechnologiesBSE -0.95 %, bagged a $500 milion contract from PepsiCo for infrastructure management services, thereby pipping IBM. Experts said the Gurgaon-based company’s decision to sweeten the deal by putting in money upfront helped the company seal the seven-year deal. The money paid upfront to a client is a part of the sum which the IT outsourcer expects to spend over the total deal.

“It is not a standard kind of payment term,” said Suresh Senapaty, chief financial officer at Wipro, adding that buying the captive IT centre brings its own benefits. “Depending upon how the customer is looking at, it varies. I won’t say across the board but there are quite a few deals where you are able to protect your downside and able to structure the deal to take it forward by putting something upfront,” Senapaty told ET. However, some experts doubt if the structuring done by companies can be dubbed as a secular trend and said that taking “over assets and people is the DNA of outsourcing.”

“Given the maturity of the outsourcing market, most providers apply a portfolio management approach to sourcing large deals based on their penetration of specific verticals,” said Tom Reuner, an analyst at Ovum, a Londonbased IT research firm.


EMEA outsourcing market goes into overdrive

July 30th, 2014

The UK and EMEA’s love affair with outsourcing shows no sign of waning, with new figures suggesting the market is currently growing at a rate of nearly a third.Outsourcing37

According to market intelligence firm ISG, EMEA accounted for 51 per cent of the global IT and business process outsourcing market in the first half of 2014 after seeing the annual contract value of deals inked swell 32 per cent year on year to €5bn (£3bn).

Some 315 contracts were awarded in EMEA during the period, up 25 per cent year on year, ISG said, although its index looks only at commercial outsourcing deals with an annual contract value of €4m or more.

The UK, which is by far the most mature outsourcing market in EMEA, saw ACV jump six per cent to €1.4bn, despite a slight drop in contract counts from 92 to 83.

A glut of mega-deals ensured France leapfrogged Germany into second place with an ACV of €930m, despite the latter seeing ACV swell from €530m to €740m year on year.

“EMEA continues to maintain its leading position in the global outsourcing market,” confirmed ISG partner David Howie.

The total global outsourcing market rose 34 per cent to $12.4bn during the first half, with the Asia-Pac market doubling in size to $1.9bn. The Americas market grew by 21 per cent to $4.2bn.

IT outsourcing was the star of the show, growing 52 per cent to $9.5bn globally, while the value of BPO deals actually fell back four per cent – a picture that held for EMEA.

In a boost for the UK channel, local providers stand a better chance of bagging outsourcing contracts here than elsewhere in Europe, according to ISG, which picked out Kelway as one of the country’s “breakthrough” players. Some 54 per cent of outsourcing deals in the UK since 2011 have been awarded to EMEA providers, compared with only 25 per cent in DACH, 37 per cent the Nordics, 42 per cent in Benelux and 47 per cent in southern Europe.

“Overall, we’ve seen a good performance across EMEA this quarter – and not just because last year’s weak second quarter makes this year’s results shine,” Howie concluded.


Outsourcing a source of innovation: CII

July 30th, 2014

Unveiling the prowess of Indian outsourcing companies not only as a cheaper, better and faster destination but also a source of innovation, the Confederation of Indian Industry (CII), on Tuesday, began its two day event ‘Smart Outsource Expo &Summit 2014, Enhancing Business Excellence through partnerships’.Outsourcing36

Speaking during the inaugural session of the summit, CII Karnataka Chairman Sandeep K Maini said with the exponential growth of the global outsourcing industry, India has made a mark of its own globally.

“The dynamics of global business are changing, and outsourcing is no different. As markets worldwide are becoming knowledge-intensive, India has evolved to become the most preferred destination for knowledge services,” said Maini.  Banking on its skilled manpower, he said India developed knowledge process outsourcing as the biggest revenue generator and thus strengthened its position in the knowledge service industry.

Speaking on the MSME sector which comprise 75 per cent of Indian industry, Maini said small enterprises often look at outsourcing as being too expensive and beyond their means, however in reality it’s just the opposite. “India has a great many young companies that have an affinity towards building great global brands for which people are the key stakeholders and it is important to engage them better,” he said.

Besides the conventional  IT and ITES, domestic and global outsourcing market has expanded to include engineering and design, talent management, the digital edge of marketing, logistics and supply chain management, technology, operational and infrastructure management among others.

The summit is dedicated to help businesses think about how they can leverage partnerships and external expertise to enhance their own capabilities, improve profitability as well as products and services. As per Nasscom study, IT-BPM industry is set to aggregate $118 billion in the current financial year.

Speaking at the summit, Commissioner for Industrial Development & Director of Industries and Commerce, Government of Karnataka, M Maheshwar Rao, IAS said, the advantages in India for outsourcing can best be illustrated as four pillars like skill, efficiency, growing flexibility and service.

Rao said that in the near future the outsourcing trend will drift towards domestic companies looking inward and start outsourcing their high-end knowledge as well. “The future of outsourcing is not just restricted to IT and ITES.

It will include sectors like IPR, business research, analytics, legal research, clinical research, publishing, market research etc. Specialised outsourcing services will allow organisations to focus on their core businesses so that they can increase revenue and improve bottom line,” he said.

According to  Rao, the industry is slowly getting back to normalcy in Karnataka and the biggest gainers are textile industry and the food & beverages industry which registered growth (Index of Industrial Production, year-on year) of 4.65 per cent and 4.76 per cent respectively.

“The expected implementation of the State Industrial Policy (2014-19) and Infrastructure Policy will reflect positively on industrial development of the state and the state industry will see robust growth in the next 2 to 3 years,” he said.


Malaysia yet to fully tap outsourcing sector potentials

July 30th, 2014

Malaysia’s outsourcing industry achieved a higher overall revenue of RM1.59 billion last year as compared to RM1.25 billion in 2012 from overseas outsourcing opportunities and projects.

World Business Meeting with Growth Concept
This achievement is significant, said Outsourcing Malaysia (OM), an initiative of national ICT industry association PIKOM, as the outsourcing industry is one of the Entry Point Projects (EPP) under the Business Services NKEA of the Economic Transformation Programme (ETP) which focuses on areas of business such as business process outsourcing), IT process outsourcing and knowledge process outsourcing.
OM chairman David Wong said: “This 27% increase in just one year to RM1.59 billion in total revenue is pretty significant for Malaysia’s outsourcing industry, which is still relatively small compared to those of other regional countries.”

Wong attributes a driver to this positive earnings growth to the Malaysian government’s various initiatives via the ETP and industry-wide efforts.
However he noted: “There’s still a lot of room for improvement as out of this RM1.59 billion in overseas revenue, only 25% is generated by local outsourcing players while the rest is by their foreign shared services players based in Malaysia.”

Wong said there are still many local outsourcing players which only focus on business from the local market only, rather than their global counterparts (established and operating in Malaysia) who are more keen to attract and secure foreign outsourcing business.

“This is where OM is able to come in to assist small medium businesses (SME)-like local outsourcing companies in assisting them to move up the value chain to improve their global attractiveness and their overseas income from in-bound outsourcing projects.”

Among OM’s initatives are missions to help the SMEs connect with overseas firms looking to outsource their non-core business in fields such as analytics, healthcare and robotics.

In the AT Kearney’s 2011 Global Services Location Index, Malaysia was ranked third after India and China in terms of attractiveness for shared services and outsourcing; with Asian countries dominating the top 10 positions on the index.

“The domestic market in Malaysia is getting smaller by the day and unless we look outwards for business, the industry’s growth will remain stagnant or decrease as neighbouring countries have started picking up the pace,” said Wong.

He noted that the largest Malaysian outsourcing company employs only 5,000 staff at the most, as compared with some of the larger outsourcing companies in China and Indian that are made up of over 100,000 employees.

“Due to Malaysia’s population size, it is impossible for Malaysia to compete in terms of volume-driven type of outsourcing projects that naturally require very large scale call centre capacities.

“Malaysian players therefore need to start specialising their business service offerings and differentiate themselves from their Asian counterparts.

“They can look into sectors such as Islamic banking, healthcare, logistics, financial services where the world is constantly looking to outsource to players who can properly service these niche markets with higher sets of skills and expertise.”


How can managed IT services satisfy Web development needs?

July 29th, 2014

Both companies new to and familiar with the business arena recognize that having an updated website is imperative to acquiring market share.Outsourcing5

There are a number of Web developers out in the market, but what perspectives should a managed IT services company bring to the table? Programming skills are one thing, but a solid grasp of concept design and usability must be prevalent.

What to hire

Weighing the pros and cons of outsourcing to a Web designer itself isn’t too difficult. After all, there are few people within an enterprise who have the expertise necessary to make the project run smoothly, let alone know how to work with HTML or CSS. But what should enterprises be mindful of?

Forbes contributor David Teten recently spoke with Kyle Stalzer, president of development firm Tackk, who maintained that organizations should look for Web development professionals who understand that a creating a good-looking homepage isn’t the be-all and end-all. A quality webpage fabrication firm possesses:

A team of graphic and website designers that can correlate layout, text and navigation with colors, visuals and fonts
Marketing specialists who understand what aspects of a website influence conversion rates and bolster traffic
Coders who are aware of cybersecurity needs and can spot faults that are easy to overlook or difficult to identify

Creative Bloq contributor Kyle Fiedler maintained that one of the most important aspects of creating sound website designs is usability. If potential customers find it difficult to find specific information and need a service representative to answer their questions, then the layout needs to be reassessed.

How to hire

Vendor resource management providers often conduct thorough research on prospective designers before giving their clients the go-ahead to finalize a contract. There are a number of steps these professionals take to assess a Web developer’s capabilities and limitations:

Visit previously constructed websites to see how sophisticated and navigable the implementations are
Check for online search engine patterns to figure out how difficult or easy it is to find Web pages
Speak with previous clients to get a solid idea of past experiences, looking for inconsistencies in satisfaction
Discover how transparent developers are, favoring those that create an open line of communication and maintain constant connection with clients
Challenge prospects with questions pertaining to situations, deducing how well they’ll respond to major and minor disruptions

Above all, it’s imperative that enterprises contract a developer capable of conducting website maintenance over a long period of time. If a designer is willing to create a long-term relationship, it’s one that will be there when clients need it most.


Daimler Begins IT Transformation with Infosys

July 29th, 2014

Company have handed over European data centre keys to Bangalore-based Infosys.Outsourcing4

Daimler, the German automobile company that manufactures Mercendes Benz, is making moves towards the cloud after handing over management of its European data centres to Infosys.

Infosys will manage Daimler’s infrastrastructure, data centre, middleware and database operations from its Enterprise division in India’s technology hub, Bangalore.

Daimler previously used HP to support its key systems. Prior to that, Fujitsu Siemens managed its servers and databases from2008.

The contract is the first step Daimler is taking to transform its IT infrastructure. It reflects Bangalore’s growing influence in the European, and specifically German market.

Infosys reported a revenue and profit rise ahead of Vishal Sikka, former SAP technology chief’s takeover as CEO this week.

It is believed that Sikka’s Silicon Valley background and connections will accelerateInfosys’ growth strategy through acquisitions as well as shifting the focus to non-linear services and higher margin IP products.

The outsourcing deal coincides with Daimler’s launch of the world’s first autonomous truck this month, allowing speeds of up to 80 kilometres per hour.

In its financial results, Daimler said the “Truck 2025″ indicates the “long-distance trucks of tomorrow and future transport systems. This is based on the intelligent networking of all existing safety systems, supplemented by cameras, radar sensors and the possibility of communication between vehicles”.

The manufacturer said that the new truck could be available on the road within five years, “but due to the complex situation of heavy commercial vehicles, a timeframe of 10 years is realistic”, it said in its financial results on Thursday.

However, the automotive industry has a lot to learn about software patching throughout the supply chain before connected cars reach critical mass, security experts have warned.

Increasingly businesses are moving the management of their infrastructure off-premise so that IT can focus on product releases like the Truck 2025.

Ruchir Budhwar, Infosys vice president and head of automotive in Europe, said: “Radically changing markets and customer demands are making manufacturers relook at their technology backbones to seek solutions that enable rapid response at manageable costs and without disruption. Such solutions allow companies to react quickly, at low cost and without downtime. Infosys will manage the day-to-day data centre operations driven by a shared vision to innovate and transform these facilities.”

Daimler has kept tight-lipped over the deal, refusing to confirm contract details including cost and time-scale.

‘State of IT’ report shows companies more concerned with cloud than adding new staff

July 29th, 2014

2015 might not be a big hiring year for IT as more companies focus resources on the cloud. But there is also some good news, including the latest on IT spending, according to a new report.Outsourcing3

The IT industry is showing signs of stability according to The State of IT, an annual report from Spiceworks, covering tech adoption trends.

The results of the survey were compiled from the answers of 1,100 IT professionals, drawn from the professional networking site’s roughly 5 million users, according to Spiceworks’ content marketing manager, Peter Tsai.

About 60% of respondents in the US and abroad, reported that their companies do not plan to add additional IT staff within the year. Only 4% plan to reduce staff, meaning the majority of companies polled will either stay the same or add staff.

“We view this is a net positive thing,” Tsai said. He also explained that since many of the companies included skew on the smaller side, many of them do not have the budget to hire new employees.

Though these businesses aren’t necessarily bringing on new staff, they are reporting (42%) plans to increase IT budgets. Tsai said that the added budget, for many, will likely go toward the continuing adoption of cloud services.

“When you’re purchasing the use of a cloud service, you’re in effect, outsourcing some of the maintenance that an IT [professional] would do internally,” he said. For a smaller company that may be strapped for both cash and knowledge, cloud services allows them to grow their business without growing their head count.

Nigel Hickey, an infrastructure administrator at National Specialty Alloys, said his budget next year will in part go toward investing in cloud services and virtualization.

“We virtualize now, and I’m hoping to use virtualization as a stepping stone to disaster recovery at a second failover site that either I manage or a software as a service provider manages,” he said.

As far as staffing, he also said he’s like to add a desktop support person, but the job wouldn’t be full time.

“I need another set of hands to do helpdesk and desktop support so I can focus on my higher level projects. I don’t think I can ask management for another 40 hour a week person, but there’s days where I wish I had somebody so I could work on other things,” he said.

Looking broadly, Tsai said there does seem to be a sense of optimism in increase of IT budgets for 2015. He cited a few external sources – Gartner’s projection that worldwide IT spending would hit $3.8 trillion in 2014, up 3.1% from the year before, and data from the US Bureau of Labor Statistics forecasting growth in the industry through 2020.

Other trends Tsai marked as important included the inverse relationship between the size of a company and the cost of IT support per employee (see chart below), and the slightly higher IT budgets in North America versus Europe, the Middle East, and Africa, possibly due to tendencies toward early adoption and a less concerned attitude toward privacy.


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