Posts Tagged ‘IT’

Industrialisation boosts IT firms in Koramangala

September 22nd, 2014

Rapid industrialisation and partial privatisation of the telecommunication industry has fuelled fresh blood into the Koramangala-based IT companies. The industry insiders opined that the new developments have helped the industry to log at least 13-15 percent growth in second quarter of the current fiscal. Outsourcing11

T Umakanth Rao, director, Zarlina Systems Private Limited said, “In last two-three years, Koramangala has witnessed a rapid industrialisation along with partial privatisation in the telecom sector. IT being an integral part of these two major industries, has also witnessed a growth of around 13-15 percent in the second quarter of the current fiscal as a trickle-down effect.”


Rao went on to add that if the way the US and EU economy have shown the recovery, the growth rate in the IT industry may go beyond the 20 percent levels in the quarters to come in the current fiscal. He said that slowdown recovery among the EU nations and the US has helped industrialisation in the respective countries as well.

Such economic developments in first world nations help outsourcing business from these nations in Koramangala. Asked about the benefit of industrial growth in first world economies, and its benefit to the Koramangala-based BPO industry; T Umakanth Rao of Zarlina Systems Private Limited said, “In last three months, rate of IT outsourcing in Koramangala has gone up by around 8-10 percent.”


Naved Ahmed, director, MN Associates said, “Privatisation in the telecom sector is one of the major drivers in IT growth. Since, telecom sector requires lots of IT services like software programming, data processing, data storage solutions etc. Telecom sector has fuelled demand for the IT solutions in the locale and hence are cashing in on this opportunity.” On telecom privatisation helping the IT industry of Koramangala, he said that demand for IT solutions in the telecom sector has gone up by more than 30 percent in last six months.

Sushanth K Nair, proprietor, Innova Team Software, a Koramangala-based IT company which has base in New York as well said, “These days special economic zone (SEZ) has become a modern trend of executing organised business. Since, the SEZ helps IT companies to avail tax benefits; it is also a major reason for IT companies growing healthy these days.”


Nair further said that generally, IT companies run on low operation cost if compared to the industries fuelling its business these days. Hence, IT companies are growing faster in comparison to the industries which are outsourcing business to the Koramangala-based IT industry. He further added, “For rapid industrialisation, a manufacturer requires huge amount of money, however, for the IT companies need not to put much money to provide its services to the concerned company. They already have a resource readily available to aid such rapid industrialisation in the region.”

V Prasad, director, R&B Software Solutions, a Koramangala-based IT company said, “This growth in the Koramangala IT industry is expected to boost the IT exports also. He said that NASSCOM has predicted the Indian IT exports to be in the range of 15 percent. However, if we look at the Bangalore and Koramangala, the exports would be in the range of 20 percent as the area is considered IT hub in India.”


Commenting on IT growth translating into the job opportunities; Prasad said, “The IT and ITeS (information technology enabled services) sector has generated massive employment in the past and continues the trend of providing jobs. With online shopping, social media and cloud computing flourishing more than ever before in the locale, there is great demand for IT professionals in e-commerce and business to consumer firms, especially in Koramangala.” He said it fuelled IT hiring by around 5 percent in last quarter.


IT provider Pinnacle needs more time for turnaround

September 22nd, 2014

The chief executive of IT and telecoms provider Pinnacle Technology Group has warned his turnaround programme to return the AIM-listed business to profit will take time to bear fruit.Outsourcing13

Nicholas Scallan took charge in early March and believes the firm is now moving in the right direction.

Mr Scallan came into the role after Pinnacle founder Alan Bonner announced at the end of 2013 he wanted to step down.

The group’s half-year results to March 31 this year, which were published in June, showed a dip in revenue from £5.36 million to £4.29m with its loss before tax widening from £1.1m to £1.2m.

Mr Scallan, a former director of customer solutions at Virgin Media Business, was bound by stock market rules and was unable to talk about the specific financial projections at the company.

However even six months into the post he reiterated the turnaround process will not be a quick fix.

He said: “We have made progress with it and we are making some headway which is good.

“We are pointing in the right direction but it is going to take time.”

Mr Scallan’s plan involves narrowing the focus of the business to concentrate more closely on managed IT services and cyber security although it will still provide services such as broadband and telecoms.

There has already been a step-back from its one-off events business which saw Pinnacle provide telecoms and broadband infrastructure to major events ranging from the Alfred Dunhill Links golf championship and London Marathon to music festivals and the Queen’s Jubilee celebrations.

Alongside that Mr Scallan has continued to trim costs “where possible” while aiming for profitable revenue growth.

He said: “In terms of growing the business clearly we need to acquire new clients as well as maintain the ones we have got. We have got a good track record of recurring business, it is about 88 per cent of customers staying with us and we have started to try and grow again.”

Mr Scallan pointed out Aberlour Childcare Trust as a new client while also stating recent renewals included Glasgow Chamber of Commerce and United Utilities.

He was also keen to note that while Pinnacle is trying to keep a lid on costs it continues to invest, particularly in its Glasgow office.

He said: “We are continuing to take cost out where we think it is the right thing to do. That is balanced by selective investment.

“We put some investment in Glasgow and brought on some additional technicians and engineers.”

According to Mr Scallan headcount in Glasgow is now at 16 and he would be happy to add to that.

He said: “When I did my review of the business I saw that our Glasgow operation was one of the best bits of the company and has the capacity to grow.

“I thought we could make the customer experience in Glasgow better by adding some new tools.

“My view is that success breeds success. As we attract new clients then we will continue to grow the operation. It is a question of the team having the right tools to deliver customer service and having the right skills in the business.”

Mr Scallan, a chartered engineer who graduated from Strathclyde University, confirmed there were no plans for the company to invest in infrastructure such as data centres as he feels it is better served by outsourcing services of that type to specialists like Scolocate.

As well as that he indicated the public sector procurement process is becoming increasingly difficult for small and medium businesses to compete in.

He added: “This is increasingly challenging as the frameworks which public sector (contracts) are being procured under, while ostensibly inviting small and medium businesses to be part of it, actually have quite a high degree of overhead associated with them.

“So while we are continuing to explore (public sector)we are also exploring solutions where we are part of a consortium or solution.

“This collaboration approach is increasingly important as the public sector is obviously cost conscious but equally strict in terms of the procurement process. It can be quite challenging for a company like ours to produce something to the standard they would need on our own two feet.”


Insourcing of IT jobs gains popularity

September 22nd, 2014

In a major reversal of the outsourcing trend, enterprises across verticals have started to build and strengthen their internal IT teams. They don’t want to depend on outsourcing service providers any more to gain the ‘India advantage’ in terms of low cost and talent, say experts.Outsourcing12

Companies like General Motors, AstraZeneca and Dun & Bradstreet (D&B) have started to set up their own captive units or build on the existing ones to do IT work that was earlier outsourced to external vendors. The ‘in-sourcing’ trend has started and is here to stay, said David Smoley, chief information officer of AstraZeneca.

“It is a silent trend. Companies like General Motors are on it for the last three years. This is unlike the earlier outsourcing trend, which had people shouting from rooftops. So nobody is talking about ‘insourcing,’ at least not yet,” he added.

Global pharma major AstraZeneca inaugurated its offshore IT development centre at the Ramanujan IT City SEZ in Chennai last Tuesday. Starting with 60 people, the company plans to scale up to 300 by end of the first year. The overall strategy is to bring outsourced IT work back into the company’s fold to improve efficiency and time-to-market.

Eight global vendors including Cognizant, TCS, HCL and Wipro have been providing IT services to AstraZeneca.

The company’s aspiration is to cut down the amount of work outsourced to external vendors over the next 3-4 years, he added. For 2013, the pharma major spent about $1.3 billion on IT projects and services.

Large companies have started to recruit directly in India to build their captive units. They seem to have learnt from IT vendors how to go all-out to find the necessary talent.

“Our vendors focused on their profit margins and not ours. On an outsourced model, there are three or four arm links by way of vendors’ people working on projects, teams managing them and further teams from our side managing overall activity. By ‘insourcing’ work, we will have fewer handoffs and simpler controls,” Smoley said.

“We see a decisive trend in which large companies including the big four consultants have started to hire directly from colleges. They recruit students from across streams for their IT operations pretty much the way the IT vendors do it. They are trying to cut costs by hiring freshers directly from colleges to build their in-house IT teams,” said Sekar Viswanathan, vice president of VIT University.

Cost, though, is not the only reason for insourcing, said Vinod Baya, director- technology and innovation at PricewaterhouseCoopers (PwC). As more businesses go digital, IT products become intellectual property, which cannot be outsourced.

“What is true is that IT is increasingly becoming a source of competitive differentiation. As a company, you’d want to own it because your vendor won’t know your business enough. As a critical part of the digital enterprise, technology becomes your business and not your vendor’s,” he added.

Outsourcing started to gain steam when companies set out to find experts to do non-core work. However, for most B2C businesses that have gone digital, IT has become a part of their core activity. For example, a company like FedEx uses a lot of technology and its IT is its intellectual property and a market differentiator.

“Even non-digital native companies have become tech players and they sure want to own their future,” Baya reiterated.

However, insourcing may not be the death knell for the Indian IT industry. From being vendors, they can now become partners, said S Ganesh, chief executive officer of D&B Technologies and Data Services.

“It is a great opportunity for Indian IT players. More so for the mid-size IT companies, which can now reach out to large enterprises with flexible pricing policies. We ourselves are setting up a captive unit and are more comfortable with mid-size vendors.

“The vast pool of talent was, is and will continue to be India’s biggest advantage. It is so difficult to build even a 20-member IT team in Europe. Enterprises including Standard Chartered, Pfizer and Goldman Sachs have their captives in India and continue to strengthen them mainly for this reason,” he added.

Indian companies will have to change their pricing methods, account management and delivery models to deliver services within India. IT work will become more collaborative and in future, vendors may even go up to the level where they can jointly own intellectual property, Ganesh said.


IT Outsourcing Market Far From Stable

September 22nd, 2014

IT services deal activity was steady in the second quarter, but the IT and business process outsourcing industry is undergoing significant shifts as customers fire existing providers, ink shorter deals and embrace emerging technologies.Outsourcing9

The demand for global IT and business process services remained steady in the second quarter of 2014, according to a recently released report from outsourcing consultancy Everest Group. A total of 416 outsourcing deals were signed during the period, almost unchanged from the 415 signed in the first quarter of this year.

However, the IT and business process outsourcing market is far from stable, say the report’s authors.

Most notably, the report points out a continued and strong “anti-incumbency” sentiment among IT service buyers. During the first half of this year, companies terminated approximately 27 percent of their existing IT infrastructure deals, for example. And Salil Dani, practice director of the global sourcing group at Everest Group, expects that trend to continue throughout the year.

Factors Driving Provider Switching

Key factors driving the provider switching activity include disappointment with service delivery, the desire to unbundle IT services, and the anticipation of next generation technology needs that current outsourcers may not be able to provide, Dani says. In addition, providers eager to take over deals are making investments to reduce the cost traditionally associated with changing vendors, according to Dani.

Shorter and smaller contracts are also increasing, both on the infrastructure and application services sides. The share of IT deals with three- to five-year tenurres has steadily increased from 26 percent in 2010 to 31 percent in 2013, according to Everest Group. During the first half of this year, more than a third of new contracts (35 percent) were three to five years in length. And the percentage of very short-term contracts less than three years in duration increased from 10 percent in the first quarter of 2014 to 15 percent in the second quarter, according to the report. “This trend is one of the contributing factors towards anti-incumbency but is not the strongest driver,” Dani says.

Meanwhile, some customers may be showing old IT service providers the door as they Increase their adoption of technologies such as cloud, mobility, analytics, and robotic automation, according to the report. For example, the share of IT outsourcing deals with a cloud component nearly doubled from 5.8 percent in 2011 to 10.5 percent in 2013, according to Everest Group, and initial 2014 data indicates a continued increase in inclusion in outsourcing deals.

“There is increasing adoption of disruptive technologies in outsourcing contracts,” Dani says. “This adoption of disruptive technologies is leading to buyer organizations rationalizing the scope and scale of their outsourcing portfolio. They are also carefully evaluating service providers with distinct capabilities in disruptive technologies while making outsourcing decisions.”

IT service providers are increasing their capabilities and expertise in the areas of cloud, mobile, analytics, and robotic automation, but “there have been limited instances of service providers perfecting the art,” Dani says. Specialty providers have an opportunity to sweep in and take advantage of that fact.

“Disruptive technologies have the potential to fundamentally alter the traditional delivery constructs and provide opportunities to niche providers for more-than-normal growth and market share,” says Dani.

These combined trends are likely to intensify through the remainder of this year, according to Everest Group. To date, “any of these are limited to specific buyer geographies and type of providers,” Dani says. “Going forward, we see these impacting a broader and more expansive set of stakeholders than before.

How IT Outsourcing Customers Can Prepare

There are a number of steps outsourcing customers and providers can take to prepare for continued shifts in the IT outsourcing market.

Dani advises buyers to continuously evaluate outsourcing portfolios to identify opportunities based on provider capabilities and expertise, delivery rationalization, and newer technologies. And services providers must come to terms with an anti-incumbency bias that is likely to grow strong in coming months. Vendors must make greater investments in strategic relationships as they near the ends of their terms and further develop their cloud, mobile, analytics, and automation capabilities “given impact on non-linear growth,” Dani says.


Infosys partners with China’s Huawei for cloud-based services

September 19th, 2014

Infosys Ltd (INFY.NS), India’s second-biggest IT services provider, said it had signed a partnership agreement with Huawei Technologies Co Ltd [HWT.UL] to offer enterprise customers cloud computing services.Outsourcing11

Infosys also said it had expanded existing cloud computing partnerships with Microsoft Corp (MSFT.O) and a Hitachi Ltd (6501.T) unit.

Infosys, led by Chief Executive Vishal Sikka, has been planning to boost investment in cloud computing, smartphone apps and other new technologies to win more high-margin outsourcing contracts. These are expected to help Infosys back to the forefront of India’s $100 billion IT outsourcing industry.

Infosys and Huawei will jointly develop IT solutions that combine Huawei’s cloud infrastructure and Infosys’ service expertise, the companies said in a statement on Thursday.

Under an expanded partnership with Microsoft, Infosys will help companies use and migrate to Microsoft’s cloud platform in a more secure manner, Infosys said in a separate statement.

Under an expanded partnership with Hitachi Data Systems (HDS), Infosys and HDS will help clients transition their IT infrastructure to new cloud-based environments, the Indian IT firm also said.


Huawei enters IT services with telecom projects

September 19th, 2014

Telecom networking giant Huawei has entered IT services, a shift from its hardware-focussed strategy which will eat into the marketshare of Indian software exporters, especially in telecom-related projects.Outsourcing10

The world’s largest privately held technology company is using its India R&D centre to take up projects involving managing of telecom infrastructure and their networks, thereby treading on the bread-and-butter businesses of Indian IT exporters. When contacted, Wilson Wang confirmed the development and told BusinessLine that engineers from India have started doing projects onsite and offshore for its clients such as China Mobile, China Telecom and others.

“Our 2,700 Indian engineers are paving the way in services, working on areas such as Ring Back Tones, cloud computing and agile software development, which helps telcos to provide different solutions to their customers” he said.

Huawei started off making telecom equipments such as routers and switches for telecom operators globally and within a span of a decade, the company gained significant marketshare from competitors like Cisco and ZTE. This development also underscores the ambition of Huawei, as it branches out into services, especially with global client base, noted Sanchit Vir Gogia, Analyst at Greyhound research.

The company, which started off selling networking equipment to Chinese telcos, now counts Mobily, MegaFon, Etisalat as their customers. “We already have an existing installed base of products that telecom companies use and services is our next frontier,” explained Wang. Also, services an area where Chinese companies have been laggards when compared to their Indian counterparts who have exported $75 billion worth of software in the 2014 fiscal year.

For a decade-and-a-half, Indian IT exporters have been trying to make a mark in the Chinese market, with the likes of TCS, Infosys, Wipro and others have subsidiaries in cities like Shanghai and Shenzen. However, they have not been able to make much inroads and almost all of these companies contribute a fraction of its overall turnover, according to company data. In a bid to spruce up revenues from China, TCS last year, Tata Information Technology was merged into TCS China.

Accroding to analyst data, global telecom outsourcing market is estimated to hit $76 billion by 2016.


IGATE to focus on ITOPS to sustain its growth momentum

September 19th, 2014

Outsourcing solutions firm IGATE will focus on its integrated technology and operations (ITOPS) model, besides concentrating on automation and geographies like Europe to sustain its growth momentum.Outsourcing9

Ranked among the Fortune 100 fastest growing companies in the US this year, the US-based firm in the last one year has rejigged organisational structure to strengthen capabilities, increase focus on large deals and building a team of strong professionals through on-the-job training.

“The Fortune ranking is a revalidation of what we have done in the last one year. IGATE is the only IT services firm in the list and that makes it even more special,” IGATE President & CEO Ashok Vemuri told PTI.

Vemuri, who also completes a year at IGATE, added the firm’s focus on monetising and amplifying its strengths by adding new solutions and services and increased focus on large deals have helped it achieve the milestone.

“We are better than before with a clean balance sheet, reduced debt, strong organisation structure, right leadership and niche service offerings. This will further IGATE’s reputation as a complete solutions and software services provider,” the former Infosys Head of Americas said.

For the loan of $770 million (at an interest rate of 9%), IGATE was paying $23-25 million per quarter in interest costs. Now, the firm has refinanced it and taken a loan of $685 million at an interest of 4% and will be paying $7-8 million per quarter in interest costs, which will reduce over $50 million in interest costs annually.

Its net debt stood at $475 million at the end of the second quarter.

But the one-time charge of $51.8 million on debt settlement hit its net profit for the April-June quarter, which fell by 89.6% to $3.1 million. The company had posted a net profit of $30 million in the second quarter of 2013. It follows January-December as fiscal year.

When asked about plans of the company to maintain this growth momentum, Vemuri said the deal pipeline is good and the firm is focusing on building new technologies and train its manpower on those lines.

“We have great business opportunities developing, which can be seen with our expansion plans for our delivery centres across the US, Canada, Europe and India. Besides, we have been building on new technologies and investing on training our employees so that we go ahead prepared,” he added.


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