Posts Tagged ‘offshore’

Infy betters TCS, Wipro in revenue per employee

August 14th, 2014

IT services firm Infosys has been consistently improving its revenue per employee in the last few quarters. Its numbers are better than those of its top two Indian competitors, Tata Consultancy Services and Wipro, due to higher returns from consulting and systems integration (C&SI), says a company official.

Revenue per employee is a function of various things, including price points, portfolio of services, onsite-offshore mix, utilisation and client mix. However, “our proportion of revenues from C&SI is higher than leading offshore peers,” said a company spokesperson.

Reduced hiring

Reduced hiring by Infosys in comparison with TCS, especially during the last two financial years, has helped the Bangalore-headquartered firm boost its revenue per employee metric. However, attrition remains a challenge.

The recent improvement in utilisation for Infosys was mainly due to an increase in attrition, which forced other employees to bear the increasing workload, said Bozhidar Hristov, Analyst, Professional Services Practice, Technology Business Research, US.

If Infosys wants to maintain healthy (above its peers) revenue per employee and utilisation, it will need to pick up hiring of both freshers to support large-outsourcing deals and laterals to add value to C&SI opportunities. It should also invest in automation tools and IP-backed assets to sustain non-linear growth.

Infosys is leveraging its expanded foothold in Europe following the acquisition of Lodestone to boost brand awareness and drive high-value C&SI sales. In comparison, while TCS’ ability to provide operations execution remains its key lever, consulting on operations hinders its ability to expand high-value C&SI sales, said Hristov.

Automation helps

According to Moorthy K Uppaluri, CEO, Randstad India, in the IT sector, revenue per employee indicates the overall growth of the company, employee productivity and the non-linearity of the business model. Most IT majors have been winning large, multi-year project-based engagements, and they have built efficiency through automation to execute these projects. This has had a positive impact on the revenue per employee equation.

Companies are investing in development of products in core banking, IT infrastructure management and IT accelerators for emerging technologies to improve non-linear revenue. Such measures have helped improve the revenue per employee consistently, by around 15-20 per cent over the last five years.

A higher onsite ratio of employees also impacts this metric as for the same number of people, the billing is much higher, he said.

Rituparna Chakraborty, Senior VP & Co- Founder, TeamLease Services, said the top IT companies have vastly improved productivity.

Wipro this year had a flat headcount for revenue that last year would have required it to hire 10,000 people.

The role of HR for most IT companies is shifting from selecting to upskilling.


Why and when should your startup outsource offshore? 3 successful MENA entrepreneurs weigh in.

June 18th, 2014

Despite the controversy, offshore outsourcing is attracting more attention than ever from companies worldwide looking to streamline. It offers all the advantages of both outsourcing (time and energy saving, optimization of human resources and access to rare profiles) and offshore (reduced costs and local know-how).Outsoucing Strategy

Entrepreneurs in the Arab world are part of the global trend. We spoke to three of these who are using a foreign workforce, in Eastern Europe and India, to address challenges associated with the shortage of skilled developers workers in the region so as to remain as flexible and efficient as possible during a site’s crucial beta period.

Hervé Cuviliez, co-founder of the Lebanese online media startup Diwanee, Talal Jabari from the Palestinian startup Fariqak, an Arabic fantasy football platform, and Kamal Bouskri from MyVLE, a new offering from Morocco in the ed-tech sector, give us the pros and cons of offshore outsourcing based on their own experiences, in this, the first of a two-part series.

Finding qualified developers

Shortly after its founding, Diwanee was working with Lebanese developers. But its leaders soon realized that “in Lebanon, it’s easy to find four or five good ones,” explained Cuviliez, but finding “a big number of good, experienced developers” is pretty much an impossible mission. As the company grew, its team realized it would need to look offshore to fulfill its increasing coding requirements.

By chance, a Diwanee co-founder of Serbian origin, while on vacation in Belgrade, met a person working for a tech offshoring company who offered to help for a few hours a week. After he did a great job, the Diwanee team hired a few employees from this company full-time. Four months later, all 30 employees of the Serbian company were working for Diwanee.

Fariqak has also resorted to offshore outsourcing due to the lack of a deep pool of qualified workers, as well as the fact that developers in other parts of the world are cheaper than those in Palestine. When he didn’t find qualified candidates in Palestine, the startup decided to outsource to India.


According to Kamal Bouskri, co-founder of MyVLE, resorting to freelance offshore developers was a matter of flexibility, in terms of time and money. He explained: “for us, the logic was simple. We have a concept that requires development while spending as little as possible. We wanted to have minimal losses in case the project didn’t meet market needs and couldn’t be modified.” This meant no hiring of employees or managing a team, renting offices, investing in furniture or IT hardware.

Flexibility is also the center of Diwanee’s strategy. The startup continues to use freelancers for some aspects that are very technical or require specialties not needed by the company full-time. The company, specialized in creating online media, also uses freelancers to create content, especially during busy periods such as Ramadan or to develop content tailored to a specific geography.

When to develop internally?

If your product is very technical or critical to your product or service, it is better to develop internally, according to the three entrepreneurs. Even though the Diwanee and MyVLE teams are aware that they wouldn’t have made it without outsourcing, they are convinced that some things shouldn’t be developed externally. Hence, after an initial period, they quickly sought to take control again of certain aspects of technical development.

“It’s too risky,” argued Kamal Bouskri, to continue outsourcing after an initial period. According to him, once an entrepreneur has proven to be on the right track, i.e. once the MVP (minimal viable product) stage is done, “they must ensure they have total control over the product and do not depend on uncontrollable external factors.”

The company now has a local team in Morocco and only occasionally resorts to using freelancers.

Diwanee’s approach is similar: once the thirty employees of the Serbian outsourcing company were all working for Diwanee, the Lebanese startup bought the agency and made the CEO a shareholder in Diwanee. Cuviliez explained, “it is a very strategic part that we cannot afford not to control.”

For those who cannot afford to buy outright an outsourcing company, Kamal Bouskri suggests a gradual approach: start for example by hiring a CTO who can divide the code between freelancers, supervise the work, and if necessary redistribute the work internally.

Check back in the coming days for more information on how to go about scouting for and hiring an offshore outsourcing firm, and what to do when things go terribly wrong.


Captive Offshore Centers Remain Cost Competitive With Outsourcing

June 9th, 2014

Despite speculation that the cost competitiveness of captive offshore centers may be fading, most global in-house centers still save companies money over keeping the work local, according to recent research by outsourcing consultancy Everest Group.Outsourcing22

Many delivery locations have seen significant shifts in currency valuations and inflation leading to the perception that operating a company-owned IT or business process center offshore is less financially beneficial in the past, says Salil Dani, practice director in Everest Group’s global sourcing team. Wage inflation in India of as much as 20 percent for certain roles and functions, for example, has created questions around the sustainability of the cost arbitrage associated with a captive center.

in-house offshore centers, outsourcing, cost savings
However, Everest Group found that global in-house centers today deliver 30 to 70 percent savings when taking into account total cost of ownership including salaries, real estate, technology and telecom expenses as well as amortized costs associated with the setup, transition, and ongoing governance of the center.
Factors that Affect Total Cost of Savings From In-House Offshore Centers

Total cost of savings for captive centers vary by location and function. Typical captive center cost savings are 65 to 80 percent in India, 60 to 70 percent in the Philippines, 45 to 55 percent in China, and 35 to 45 percent in Poland, according to the research conducted in conjunction with India’s IT service trade group NASSCOM. In addition, more transactional roles like application maintenance deliver greater cost savings in-house than more complex functions like analytics, according to the study.

New setups of global in-house offshore centers were down slightly in the first quarter of 2014, but the first quarter of the year typically sees lower demand for global services in general, says Dani. This quarter, new captive center activity is steady, and, long-term captive center creation will far exceed divestitures, says Dani. In the last year, companies have opened 70 new in-house centers and divested just two due to company-specific issues, according to Everest Group.
In addition, the appetite for captive centers in locations outside of India is increasing. Companies are setting up shop in Latin America for bilingual English and Spanish support and Central and Eastern Europe to service nearby European operations, for example. And some are expanding beyond India for increased diversification and risk management, adds Dani.

In-house centers should remain cost competitive for as many as 8 to 16 years for most geographies and functions, according to Everest Group. But exceptions will exist. For example, captive centers in Brazil and those for high-end analytics services may be more difficult to justify financially.
In the meantime, companies are taking steps to further improve the cost competitiveness of their internal offshore operations. Those include reducing general and administrative expenses, increasing capacity utilization, adopting robust talent management practices to reduce attrition, and leveraging tier two locations, says Dani.


India, China still the top out sourcing destinations

March 31st, 2014

India is the clear global leader by revenue, while China is the most serious challenger by scale, according to a study of nine Asia-Pacific (APAC) countries as potential offshore service locations.Outsourcing30

Bangladesh, Indonesia and Vietnam are continuing to gain regional traction for offshore service delivery, while more mature countries, such as Malaysia and the Philippines, are refocusing on their core capabilities. The capabilities are higher-end IT infrastructure, help desk, application and business process services, the study by Gartner said.

Historically, cost attractiveness, quality of service and scalability were key drivers for using Asia as an offshore outsourcing destination. However, in the last few years, growing concern about high inflation, attrition and quality lapses in offshore and nearshore locations have been driving chief information officers to consider alternatives such as low-cost onshore sourcing and sometimes crowd-sourcing.

Despite these trends, India and China are still among the most popular destinations for offshore services. Over 48 per cent and 45 per cent of clients surveyed in 2012 were using these countries for nearshore or offshore outsourcing respectively.

Countries in APAC offer cost-competitive, typically stable and scalable locations for offshore IT and business process services, but Latin American and Eastern European countries now compete more aggressively for offshore deals, it said.

The currency fluctuations and rising delivery costs are also an issue for Asia, it added.


Business Process Management to touch USD 50 billion in next six years

February 10th, 2014

The BPM industry has indeed transitioned from the delivery of simple, repeatable processes of non-core functions at offshore locations as BPO to driving business outcome of clients’ complex, industry-focused processes from global locations.outsourcing56

“The industry that has demonstrated resilience in the face of economic uncertainty by constantly re-inventing itself to meet market needs, is forecast to touch USD 50 billion by 2020 from the present USD 21 billion,” Nasscom BPM Council Chairman and WNS Group CEO Keshav R Murugesh told.

An integral enabler for growth in these times has been the industry’s smart use of technology to create innovative solutions, Murugesh said.

The world of BPO or business process outsourcing as it was known, has evolved into a brand new identity – Business Process Management (BPM), Murugesh said.

“While BPM 1.0 in the late nineties was centered on cost efficiencies and productivity, BPM 3.0 in late 2000 focused on specialisation, process re-engineering, technology-enabled platforms and taking BPM to the rural areas. I believe that the era ahead is that of clients and
providers working together even more closely on disruptive innovations,” he added.

Commenting on the focus of the Nasscom BPM Council, Murugesh said, “We have a rather audacious goal ahead of us as a Council. We are looking to rebrand the image of the industry from BPO to BPM to signify the evolution and the value that it creates for client companies globally.”


China Specifies VAT Exemption for Offshore Outsourcing Services

December 26th, 2013

In the recent “Notice Regarding the Inclusion of Railway Transportation and Postal Service Industries under ‘Value-Added Tax (VAT) in lieu of Business Tax’ Pilot Reform (Caishui [2013] No. 106, hereinafter referred to as ‘Circular 106′)” jointly released by the Ministry of Finance (MoF) and the State Administration of Taxation (SAT), it specified that offshore outsourcing services in China will be VAT exempted from January 1, 2014, to December 31, 2018, as a pilot transitional policy during ongoing VAT reform.Outsourcing23

Under Circular 106 offshore outsourcing services refer to ITO (Information Technology Outsourcing), BPO (Business Process Outsourcing) and KPO (Knowledge Process Outsourcing) services provided by a pilot taxpayer of the VAT reform to a foreign company under an entrustment contract.

The “Circular on the Tax Collection Policies for the Nationwide Adoption of the Business Tax to Value-Added Tax Pilot Conversion in the Transportation Industry and Certain Modern Service Industries (caishui [2013] No. 37, hereinafter referred to as ‘Circular 37′)” came into effective on August 1 this year and is the current major guideline for enforcing the VAT reform. Circular 37 allowed VAT exemption for offshore outsourcing services provided by companies located in certain cities of China and is scheduled to expire at the end of this year. Circular 106 expands this exemption to all pilot taxpayers and provides the detailed scope of eligible services. It will be effective starting next year and will abolish the provisions of Circular 37.

Greater detail of the eligible services for VAT exemption can be found below:


1) Software research, development and outsourcing:

a) Software research and development services

  • The development of customized software, embedded software, packaged software, system software, and software testing services provided to departments and enterprises of/in finance, government, education, manufacturing, retail, services, energy, logistics, transport, media, telecommunication, public utilities and medical and public health for the operation, production, supply chain management, customer relationship management, human resource and financial management, auxiliary design in computers, engineering, and other activities of clients.

b) Technical software services

  • Technical services such as software consulting, maintenance, training and testing.

2) Outsourcing of research and development services in information technology:

a) Design of integrated circuits and electronic circuits

  • The design and provision of relevant technical support services for integrated circuit and electronic circuit products.

b) Platform testing

  • Platform testing for the development and application of software, integrated circuits and electronic circuits.

3) Outsourcing of the operation and maintenance of information systems:

a) Operation and maintenance services of information systems

  • Internal information system integration, network management, desktop management and maintenance services for clients.
  • Information system application services such as information engineering, geographic information system and remote maintenance.

b) Fundamental information technology services

  • Fundamental information technology services such as integration of management platforms for fundamental information technology, IT infrastructure management, data centers, hosting centers, security services and communication services.


1) Process-design services for enterprises:

  • Process design for enterprises in internal management and business operation.

2) Internal management services for enterprises:

  • Services in backstage management, human resource management, financial, audit and tax management, financial payment, data analysis of medical and other internal management operation, data mining, data management, data usage, and special data processing, analysis and integration.

3) Enterprise operation services:

  • Services in technology research and development, and client analysis and database management for enterprise operations, sales, after-sale service of products, mainly including financial operations, government affairs and educational operations, manufacturing operations, life sciences, retail and wholesale, and transportation operations, public health operations, communication and public utilities operations, call center operations and E-commerce platforms.

4) Enterprise supply chain management services:

  • Overall solution design and database services for client’s procurement and logistics needs.


  • Research services on intellectual property rights, the research, development, and testing of pharmaceutical and biological technology, the research and development of product technology, industrial design, analytics and data mining, design and development of animation and online games, the research and development of educational courseware, and engineering design.


Cloud is vital for offshore providers ‘long term future’

July 30th, 2013

Offshore providers require a cloud strategy to ensure their long-term future is kept safe, Gartner has suggested.

The organisation believes that an increasing use of industrialised services will reduce the volume of traditional and customised services, leading to the impact on offshore providers to be counterbalanced by new revenue from cloud investment.Outsourcing9

Ian Marriott, research vice president at Gartner, estimates growth in public cloud services, with end-user spending on the technology expected to grow by 18 per cent in 2013 to $131 billion (£85 billion).

Despite rising investments in cloud-based services differentiating the leading providers from labour-intensive “pure-play” providers, a balanced portfolio of managed services and other conventional delivery approaches will be required.

Such a tactic will allow them to compete with leading multinational providers, as they will meet the evolving needs of buyers, leading to increases in revenue growth and profitability.

“There will always be a need for “pure-play” providers that operate a labour-intensive delivery approach. But, for broad-based offshore providers that operate in multiple geographies, industries and service lines, and who seek to compete for significant ‘wallet share’ in major accounts, strategic investments in cloud-based services are mandatory,” Mr Marriott concluded.

Gartner emphasised the importance of refreshing outsourcing strategies at least once a year in order to ensure optimal responsiveness to changing market opportunities and business demands.

Furthermore, the experts must perform a critical assessment of any investments made by their offshore providers in cloud-based services.

“The consequence to offshore providers of not responding to such significant market changes will be the deterioration of market share, acquisition by another provider, or its disappearance from the offshore services landscape,” Mr Marriott concluded.

The security of the cloud is another vital consideration for businesses, as the technology is often vulnerable to a host of online threats.

In order to protect against this, file recovery technology should be introduced, offering companies peace of mind when it comes to their data.

As the trend to embrace the cloud continues, organisations need to provide their employees with clarity on how to safeguard the organisation’s operating environment and critical data.


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