Posts Tagged ‘Outsourcing’

Koramangala IT Cos bet on price tweak tactics

January 27th, 2015

In a bid to compete against global IT majors like IBM and Accenture, Koramangala-based IT majors are playing the price card on delayed risk on fees pattern.Outsourcing58

Industry experts say that milestone-related payments have become a norm in the IT industry, while, bank guarantees that the vendors need to provide upon winning projects, have increased to as much as 20 percent of the deal value from the earlier 5 percent. Their strategies include coughing up money upfront to sweeten the deal and win large contracts.

T Umakanth Rao, director, Zarlina Systems, said, “India’s top IT outsourcers, including the traditionally conservative Infosys and Wipro, are becoming increasingly risk-taking as they chase commoditised contracts. While cut-throat competition is giving more bang for the buck for customers, technology vendors are risking future cash flow and locking up resources.”

Commenting upon the risk on fees or milestone related payments, Rao said, “While bank guarantees have increased to as much as a fifth of the deal value, the aggressive pricing strategies being adopted by the IT companies in the locale and their promise of value-added offerings to win contracts have made customers cautious and they want to see results before paying up.”

“In the last year and half, we have seen customers holding back the risk-on-fees which we normally get upon completion of certain milestones,” said a bid manager working with a large IT company based out of Bengaluru. The bid manager went on to add, “Across industries, we have seen customers holding back this money which they normally give more in a staggered manner than at the time when payments are due.”

Naved Ahmed, director, MN Associates said, “Indian firms play the pricing card often these days as they battle with global majors like IBM and Accenture to win bread-and-butter outsourcing deals.” He said that in earlier years, the top Indian IT services firms in Koramangala generally avoided heated price competition with their professional brethrens both in domestic market and in global merchandise. “However, the IT services industry has definitely become more competitive, and today, we as an industry observer, see certain IT firms actively pursuing price-to-win strategies,” said Ahmed.

Giving credit to the sizeable improvement in the operating margins of the local IT outsourcing companies Sushanth K Nair, proprietor, Innova Team Software, a Koramangala-based IT company which has base in New York as well said, “Operating margins of the home grown IT outsourcers have significantly improved over the past two years. One of the biggest cost components for IT companies, is manpower, and technologies like artificial intelligence and automation for completing repetitive low-end work have helped them cut down on this cost.”

Giving caution upon the upfront payment for wining a big ticket contract, Nair said, “Delayed payment by customers and upfront spending could prove to be an issue in the event of turbulence in the markets these companies operate in, or if the customers face financial troubles. Promising tough-to-achieve milestones is another problem that could affect expected cash flow.”

“A pricing trend I’ve seen is Indian firms taking on more risk by tying more fees to contractual milestones – milestones that in a number of cases are tough to predict and achieve, especially as work assignments get more complex,” he added and continued, “This trend tends to occur on deals in which the client is large and experienced with outsourcing contracts and on deals in which an outsourcing adviser is helping the client with vendor selection and pricing.”

However, a large number of IT professionals in the locale who avoided being named confirmed the trend and said that it was more a function of maturity of the deal and depends on how effectively a customer was able to negotiate with an IT vendor. “Agreed! More customers nowadays are holding back fees in some industries but then this is more a function of what kind of contract it is. As more customers mature in their use of outsourcing and are able to manage their IT vendors, they will explore different models,” the professionals said.


IT Outsourcing Company in Dubai Announced Promotional Rates

January 26th, 2015

IT-Serve, a Dubai based leading managed IT services and support provider in the United Arab Emirates (UAE) offer a range of managed IT services including Annual IT Support Contacts and IT Outsourcing Services. The services are already some of the most competitively priced in the market, but now enjoy a 50% discount until the end of March 2015.Outsourcing55

Ali Liaquat, Marketing Manager, said, “We are seeing a shift in the market away from the traditional in-house IT support model to IT outsourcing model. Businesses realize that the mantra of zero downtime is only possible with enterprise class IT services including quality hardware support and technical management. IT-Serve’s IT outsourcing services are designed from the ground up for SMEs and Enterprises, and therefore have significant advantages over other One-size-fits-all IT outsourcing services.”

“If you don’t have a dedicated IT person, IT outsourcing service is the perfect substitute. Rather than paying the salary and benefits for another employee, you could pay a reduced amount for IT outsourcing services. A technology professional with five years of experience may be worth AED 80,000+ a year. That AED 80,000 salary only gets you one person, not a team of professionals with expertise and knowledge. When you hire your own IT staff, there are also challenges scheduling around vacation, training, and illness. Using IT outsourcing services provides full time IT coverage and vacations, illness, and other absences don’t affect your support,” said, Nikhar Juneja, Head of SME Engineering.


Wage settlement for private outsourcing firm employees

January 23rd, 2015

Labour department officials held talks with the employees of C Cubed Solutions, a company that provides call centre, BPO, healthcare billing and IT outsourcing services, and the management representatives here on Thursday and arrived at an agreement on payment to the employees as the company was stopping operations here.Outsourcing53

An employee who did not want to be identified said that C Cubed was present in India for the last 15 years and started Coimbatore operations four years ago. It employed 283 people and most of them were engineers. On January 19, employees who reported to work at 6 p.m. were told that the Coimbatore operations were being stopped, the employee claimed.

On Tuesday, a couple of representatives of the company told the employees that the pending salary payment would be made in two terms. The employees met the District Revenue Officer on Wednesday and labour department officials on Thursday here.

According to Joint Labour Commissioner P. Marimuthu the employees would get 25 per cent of the pending salary on Thursday and a post dated cheque for the remaining on January 27. The company would also give experience certificates to the employees.

At another IT firm located at Singanallur here, there were reports that the company was downsizing the employee strength. However, an official of the company said that it was “downsizing to a minimal level”. The total strength of about 350 plus will come down by hardly ten per cent and “We have followed the due process of retrenchment.” The company started operations here seven years ago.

An industry source told The Hindu that with technology development, the dynamics were changing for service companies. The companies here should be able to live up to the expectations of customers. If some of the overseas customers shut shop, companies here would bring down the employee strength. Downsizing is neither a trend nor a problem in the industry. About 7,000 new jobs would be created by the IT and IT Enabled Services sector here in the next one year. “We are on the growth path.”

Mr. Marimuthu said such instances are a new dimension of industrial disputes here. These are new to Coimbatore as the management teams of these firms are not headquartered here.


IT outsourcing: When it’s necessary and when it’s not

January 23rd, 2015

With Britain still managing a weaker economy than its traditionally used to outsourcing has become a necessity to keep businesses afloat and to stay competitive. Often outsourcing teams or projects proves to be an effective method to get high-quality work done without the need to go through the hassle of finding permanent staff, but is outsourcing always effective? I spoke to Rick Simmonds, managing partner of Aecus, all about outsourcing; when you should and when you shouldn’t, questions to ask ensure your business is right for outsourcing, and why outsourcing has become a trend in IT.Outsourcing52

Why do you think the IT sector in particular was seen an increase in outsourcing? What is the reason for the trend, would you say it’s due to new technologies, a change in working philosophy or a combination of both?

There are a number of reasons why ITO (IT outsourcing) continues to grow, some to do with the market and some to do with technology.

The first is the market. ITO is now a mature field, with many second and third generation deals and a wide range of large, sophisticated suppliers keen to grow their businesses. This means that there is something of a ratchet effect – relatively few deals are terminated and brought back in-house, most are renewed with the incumbent or re-let to another supplier.

Although deal scopes flex, with some functions moving in or out, on the whole this means that there is a solid platform of existing deals, with new first generation deals and expanded scope on existing deals providing constant growth. The rate of renewals also indicates that most clients are at least reasonably satisfied with outsourcing as a delivery model – although some might argue that deals are renewed because clients no longer have the skills and experience internally to take work back in-house.

The second is access to skills. For example, most ITO deals have a substantial offshore component. It is hard for most client organisations to compete with specialist outsourcers in building sustainable, scaleable, high-quality offshore operations. Only the very largest organisations are likely to be able to invest enough and have the scale to offer attractive careers to IT professionals, compared to the major outsourcers. So as the amount of work delivered from offshore increases, so does outsourcing.

The third and final reason is technology and access to skills – the rate of technology change continues to increase. It is arguably easier to access new technologies like digitalisation and robotics through leveraging the investment of outsourcers. And, of course, the cloud and the trend to “as a Service” is a big driver of using outsourced resources which are delivered in a cost-effective way not available in-house.

In terms of “working philosophy”, the big change over the last 10 years is that outsourcing has become an accepted norm. It used to be a more controversial and esoteric business model, whereas now it is firmly mainstream and part of the popular lexicon.

Obviously you have a great belief in outsourcing, could you run us through some of the “sticking points” or aversions businesses have toward outsourcing and explain why businesses tend to have said “sticking points”?

Actually at Aecus we’re absolutely agnostic about outsourcing! It is a commercial model for delivering results, and in some circumstances it is the right model, in some circumstances it isn’t. But to answer the question, these are some of the key concerns that businesses have.

An important consideration is the loss of control of the service. Businesses fear that if employees no longer deliver the service, they won’t be able to get what they want, when they want it. In other cases, businesses fear that the decision will be irreversible, that they will no longer have the skills or capability to take back the service at the end of the contract.

Cost is also an issue. Many businesses worry that once they are in a commercial relationship with a sophisticated outsourcer they will be “out-gunned” and end up over-paying.

Some businesses are concerned about being disloyal and unfair to their staff and want to protect them and their jobs. Similarly, a key sticking point can be the fear of bad publicity. This is typically linked to job losses or moving work offshore as a result of outsourcing.

The first three concerns (loss of control, fear that it’s irreversible and cost) can typically be addressed by contracting in the right way. Regarding the people and PR issues, these can be managed in various ways – many deals include staff transfers or re-training provisions.

On that same tack: Is an outsourced IT department a good option for any business? For example businesses that already have highly skilled staff, or that have a strong company culture that may be affected by part of the team being outsourced?

The question of whether to outsource is always very particular to the specific business and circumstances. The question to answer is ‘what is the business case?’ (in a broad sense, including capability, sustainability, risk and financials) for outsourcing versus retaining an in-house option. Outsourcers have no “secret sauce” – it is generally at least theoretically possible for an in-house function to deliver anything that an outsourcer can. The question is always “will they deliver in practice and which option is more likely to succeed?”

Highly skilled staff and a strong company culture may well be reasons why it would be hard to make a business case in favour of outsourcing. Each case should be assessed on its merits.

A study from Leiberman found that in 62 per cent of cases outsourcing cost more than originally planned, what are three strategies that businesses can implement to avoid this? And for what reasons does this happen?

Cost overruns will happen for a number of common reasons. For example, poor initial planning and analysis often means that initial costs were underestimated and drivers of future costs insufficiently understood. Similarly, poor or (often) over-complex charging mechanisms in the contract can mean it is difficult for a client to understand and control charges. Another factor can be a lack of active client management of the arrangement, which leads to loss of control.

The strategies to avoid this include spending sufficient time upfront producing a detailed cost model of current and future services, and modelling in-house and outsourced scenarios. This will help businesses know how they will compare in different circumstances.

Businesses should also negotiate a clear, robust contract with strong change control and clear charging mechanisms, and model scenarios so that they know how charges will change in different circumstances.

It also helps to assign a dedicated contract manager or management team, with the skills, experience and remit to manage the supplier. If businesses leave this all to the supplier, they are asking for trouble!

Lastly, what are there any situations when businesses should definitely outsource a team?

There are NO examples where you should definitely outsource a team! However, examples where businesses should seriously consider whether outsourcing might be the best option for them would include where in-house teams have continuously failed to deliver what the business expects, and remediation efforts have failed.

Outsourcing might also be used in functions where businesses are struggling to attract and retain and motivate high quality staff, for example, the maintenance of old technologies. It is also appropriate when the outsourcing market has specific, leverage-able assets or capabilities which provide cost or efficiency advantages which the business cannot replicate in-house, such as cloud-based services or offshore resources.

Equally, outsourcing can be beneficial when a major investment is needed in order to make a change. That investment can be funded by the outsourcer and/or shared with other clients. Finally, in some organisations, there is simply a philosophy to focus only on their core functions and to outsource everything else.


Indian Public Cloud Services Market To Be $838 Mn In 2015: Gartner

January 21st, 2015

Public cloud services revenue in India will reach $838 million by the end of 2015, an increase of almost 33 percent over 2014, information technology research and advisory firm Gartner said here Monday.Outsourcing50

“Public cloud services revenue in India will reach $838 million by the end of 2015, an increase of almost 33 percent, or $206 million over 2014 revenue of $632 million,” the statement said.

In 2015, public cloud services revenue is driven by high rates of growth in key market segments, cloud infrastructure as a service (IaaS), cloud management and security services and cloud application infrastructure platform as a service (PaaS), it added.

Spending on IaaS will total $104.8 million in 2015, an increase of 38 percent over last year. Spending on cloud management/security and PaaS will both grow 35.4 percent to $56.7 and $84.6 million respectively during the same period.

Gartner predicts high rates of spending on cloud services in India to continue through 2018 when the market is expected to reach $1.9 billion.

“Organizations in India seeking IT outsourcing services are increasingly turning to public cloud services as an alternative to traditional ITO offerings,” said Ed Anderson, research vice president at Gartner.

According to Gartner’s latest cloud adoption survey, 53 percent of organizations in India indicate they are using cloud services now, with another 43 percent indicating plans to begin using cloud services in the next 12 months.


TCS profits rise on US, European demand

January 16th, 2015

India’s biggest outsourcing firm Tata Consultancy Services has reported a 5.1 per cent rise in quarterly net profits, driven by demand in its key markets of the United States and Europe.???????????????????????????????

The firm, commonly known as TCS, inked seven major agreements in the final quarter of 2014 and has ‘a strong pipeline of deals,’ said chief executive N Chandrasekaran.

Net profit for the three months to December 31 rose to 54.44 billion rupees ($A1.07 billion), from 51.80 billion rupees a year earlier, the firm said.

That missed the 54.8 billion-rupee median forecast from 37 analysts surveyed by Bloomberg.

The IT giant’s revenues also rose to 245.01 billion rupees in the October-December quarter, against 212.94 billion rupees a year ago.

Revenues were hit by ‘sharp cross-currency movements,’ according to chief financial officer Rajesh Gopinathan, who added that margins were maintained through ‘discipline and rigour’.

India has become a back office to the world as companies have sought to cut costs by outsourcing some functions to its industrious, English-speaking population.

But the sector has been hit by hard times as some US and Britain-based clients were reluctant to fix new budgets for IT-related services in the face of weaker growth.

That trend now seems to be reversing, with TCS’s main rival Infosys last week reporting a better-than-expected 13 per cent jump in third-quarter net profit.

TCS’s Chandrasekaran on Thursday also dismissed speculation the company is planning large-scale layoffs.

‘TCS is in high growth mode and there is no truth in the rumours of layoffs,’ he said.

In fact, the company ‘was likely to hire more’ than the 55,000 people it had announced earlier, he added.

In the just-ended quarter, the IT giant added 16,561 people to its workforce, taking its employee base to 318,625.


HIT Outsourcing To Explode In 2015

January 15th, 2015

The trend of outsourcing health IT is expected to grow through this year and beyond into 2019.Outsourcing46

Health IT Outcomes reported last month one particular type of health IT – revenue cycle management (RCM) – was being outsourced as a way for providers to relieve pressure on their staff. Experts estimated the market for RCM outsourcing could reach $10 billion by 2016.

Now, a second report affirms the earlier one, noting RCM outsourcing about to become a booming business. Researchers from Reportstack say cost effectiveness is the number one motivator for providers to turn to outsourcing.

“Healthcare providers have begun subscribing to IT outsourcing services to deliver improved patient care services and to maximize staff efficiency,” says the market brief. “IT outsourcing also reduces operational and maintenance costs and enables healthcare providers to focus on core business areas and deal with the complexities of patient care more efficiently. They usually outsource applications such as operational services, financial services, database management services, and infrastructure-related services.”

According to Health IT Analytics, outsourcing of health IT is expected to grow at a compound annual growth rate (CAGR) of 8.60 percent between 2014 and 2019. Outsourcing is expected to increase as third party vendors (for example Dell, Hewlett-Packard, Accenture, and IBM) take interest in this trend.

Fierce Health IT points out this follows the prediction that by 2020, 80 percent of data will pass through the cloud. The adoption of cloud-based services is one of the report’s top predictions for trends in the coming years.


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