Posts Tagged ‘TCS’

Indo-US trade wars Part 1: The great outsourcing debate

November 14th, 2014

No issue has the ability to spark an online conflagration as much as a debate on outsourcing. So you can well imagine how much of a role it could actually play in either strengthening or destabilising US-India relations. After all, all of India’s tech biggies, from Infosys to Wipro, to TCS, to Cognizant, and many of its smaller players (Mindshare, Happiest Minds, Tech Mahindra) have their futures firmly in Uncle Sam’s backyard. Any attempt to jeopardise that trough of revenue is likely to cause shrill alarm, while the continued trend of using low-cost tech labour — specifically H-1B workers — by shipping them over to the US to work at clients’ sites will continue to get the American techie worked up.Outsourcing33

It is a greatly divisive issue that could have major spill-over effects, with disastrous tit-for-tat outcomes — but Narendra Modi and Barack Obama would fervently hope that it doesn’t come to that, since the business stakes are high for both countries.

It doesn’t help that the recent Immigration Reform Bill (S744), passed last year in the Senate by a comfortable 68 to 32 margin, has simply poured jet fuel over this issue. However, the temperature is going to really shoot up into the stratosphere if the House of Representatives decides in the coming months to go ahead and pass what is essentially a very similar-looking Bill.

Meanwhile, the Indian software industry is on tenterhooks. The Indian American Advisory Council (IAAC) which advises US House of Representatives on India-related issues, estimates that the Indian economy could take a $30 billion hit if the Bill goes through.

On the other side of the debate, US observers say the Bill could be disastrous for US tech workers, who in effect are being let down by American companies as well as their governments. Who to believe depends on what kind of math you end up doing. (Ironically, it’s probably the first time in recent history that both parties in a rancorous debate on protectionism are in agreement.)

Broadly speaking, the proposed Immigration Bill actually boosts the number of H-1Bs from the current 85,000 to 195,000, but that’s just candy coating that hides the bitter medicine underneath, say pro-outsourcing critics of the Bill. This cohort is horrified by the clause that states that a company with more than 15 percent of its workforce on H-1Bs will be barred from placing H-1B workers at client sites. Companies using L-1s (another short-term visa similar to the H-1B) would have to prove that it didn’t replace any American workers in the same field 90 days before or after the L-1 filing. Lastly, no company can use L-1s or H-1Bs to make up more than 50 percent of its workforce after October 2016.

If this weren’t bad enough, say pro-H-1B critics of the Bill, the killer blow is in the fees that would be levied on companies currently exceeding the future caps: $2,250 for L-1 petitions and $2,000 for H-1B petitions for companies that have more than 50 percent of their workforce on these visas. That fee would rise to $5,000 per visa in fiscal 2015 for companies with 30 to 50 percent of employees on these visas, and a whopping $10,000 per employee for a company that has 50 to 75 percent on them. To add to all of this, there is a requirement that employers pay H-1B workers no less than the mean wage for the occupation that could boost a $60,000 per year entry-level job to $92,000.

No Indian company thought that when Barack Obama used the tagline “Say no to Bangalore and yes to Buffalo” in 2009, in an effort to revive the post-meltdown American economy, it would come to this.

“The Senate Bill unfairly targets American companies trying to remain globally competitive by reducing their ability to contract with global IT service providers and restricting their access to the international expertise they need,” said Ron Somers, former president of the US-India Business Council, a year ago. He also cautioned that it could strangulate innovation and job creation, and compel businesses to move jobs outside the country.

Not true, say anti-outsourcing critics of the Bill, who think that in reality, this is just one more nail in the coffin of the American tech worker who has a long history of being replaced by low-cost H-1B workers. That is apparently because of what has been widely dubbed as the Facebook Loophole — a clause in the Bill stating that if companies help their H-1Bs and L-1 workers to apply for Greencards (which can take a few years to materialise), they can reclassify them as “immigrants in waiting”, and duck the new requirements altogether.

“I think it’s a pretty large loophole, and it defeats the purpose of trying to get these firms that are heavily dependent on H-1B visas to hire American workers. Now, they have an additional way to avoid hiring American,” said Ron Hira a year ago, a policy guru who researches outsourcing at the Rochester Institute of Technology. “Really, the tech industry wrote it.”

Even if this loophole wasn’t exercised, whatever these companies fork out in additional fees is a trifle compared to how much they would save because of the cheaper labour that they utilise, say pro-labour critics like Neeraj Gupta, CEO of the IT services company Systems in Motion.

Who to believe? That’s a tough call. The widespread stereotype on the American side of the fence is of Indian engineers of poor calibre replacing boatloads of talented American techies who are denied what is rightfully their jobs. These workers also bring wages down, it is believed, and since they are willing to work for peanuts, they help foster unfair work practices.

For instance, a Zogby International poll conducted many years ago discovered that 71 percent of Americans felt that outsourcing jobs overseas negatively impacted the US economy, while 62 percent said that the US government should tax or legislate to try to stem the tide.

Conversely, the pro-outsourcing side of the fence says that the myth of low-quality Indian engineers is way overblown (“look at all the people who work in Silicon Valley — they come from the same stock”, they say). Many Americans are simply not qualified for these jobs, whose technical requirements change rapidly, and that many Americans are simply not interested in these entry-level, grunt positions that are not capable of paying back debilitating student loans that Americans are often saddled with. Indeed, many American employers complain that retaining an American, who often take flight to jobs that pay a few dollars more, is a monumental pain and an expensive proposition.

So, where does the truth lie? For a real measure of the economic impact of H-1B workers on the American jobs, it is probably only logical to analyse the job market and wage growth for this sector. It turns out that Ian Hathaway, research director at Engine, an American economic research outfit, has conducted an analysis that shows the job market in science, technology, engineering, and mathematics fields (STEM), as well as computer and math sciences (CMS), is actually a whole lot tighter — which means a lot more jobs available per unemployed worker where employers must compete to get employees — than for other fields. Apparently, At the end of 2012, there were 2.4 CMS job openings for each unemployed CMS worker, and 1.4 STEM openings for each unemployed STEM worker versus four unemployed workers in non-STEM and CMS fields per job opening.

What’s more, Hathaway shows that wage growth for STEM and CMS workers with at least a bachelor’s degree was far more “robust” in the last 12 years compared to other fields. “Not only did wages grow at the median for these fields while wages in all other professions fell substantially; that growth also reached workers with a broader set of income levels,” pointed out Hathway. In fact, it is “irresponsible for researchers to claim there is an oversupply of STEM workers,” he added.

Hathaway also pointed to another study, conducted by William R Kerr, a Harvard business professor, who examined 300 American companies and found little empirical evidence that pointed to American engineers being displaced by foreign ones. In fact, Kerr’s study suggested quite the contrary, where the growth of immigrant workers apparently “helps younger American technical workers — more of them are hired and at higher-paying jobs — but has no noticeable consequences, good or bad, on older workers”. Kerr also said that “In the short run, we don’t find really any adverse or super-positive effect on the employment of Americans,” adding that “People take an extremely one-sided view of this stuff and dismiss any evidence to the contrary.”

This is more or less borne out by another study done by academics at the University of California at Berkeley, which says that foreign-born STEM workers increase employment and wage opportunities for high-skilled native-born American workers (STEM and non-STEM).

The study found that over the span of a decade in an urban area, a 1 percentage (of total employment) increase in foreign STEM workers during a decade actually increased the wages of native-born American college graduates by 4 to 6 percent, with small effect on their employment. Moreover, “the technologies introduced in the period 1990-2010 by STEM workers likely increased total production, and even more strongly the productivity of college-educated. We also found that college-educated natives moved in response to foreign STEM workers to more human capital-intensive sectors of the city economy, they increased the ‘creative’ skills used in production, and their house rent increased, eroding part of their wage gain.”

This is all startling stuff and an overwhelming refutation of the widespread scaremongering regarding outsourcing and H-1Bs. The inevitable conclusion, then, is that the American tech worker has no reason to fear H-1Bs, regardless of what they hear through the grapevine or their own occasional bitter experiences. What these studies overwhelmingly point to is that paradoxically, H-1Bs actually help them.

There are other reasons for outsourcing opponents to perhaps revisit their positions. Today, as this New Republic piece points out, many large global American firms in fields from finance to healthcare have gargantuan back-end systems that require careful tending to, something that the lower-end H-1B worker is perfectly suited for, allowing American tech workers to focus on climbing the employment value chain. Not doing so could stymie growth prospects for these companies, thereby making it even harder for American workers to find the kinds of jobs they want.

Several hundred years ago, economist David Ricardo postulated his theory of comparative advantage by saying that the essence of a sound, free-trade system is that which allows countries to focus on their core skills, thereby producing something that they are the most efficient at, instead of a product that someone else is better at churning out. Here, outsourcing is simply a service instead of a good, and by protecting low-end service jobs instead of trying to create higher-end ones, the US is simply being more inefficient.

And while the new areas of tech employment, rife with self-driving cars, bots, and other forms of artificial intelligence may be disruptive and appear to be “anti-people”, they actually require a whole new wave of techies to code, build, and manage them. This is the emerging, new world of employment, along with analytics and big data, that Americans should be focused on conquering, instead of fretting over the inconsequential lower-end ones.

As David Clark, a senior research scientist at MIT’s Computer Science and Artificial Intelligence Laboratory, has observed, “the larger trend to consider is the penetration of automation into service jobs. This trend will require new skills for the service industry, which may challenge some of the lower-tier workers, but in 12 years, I do not think autonomous devices will be truly autonomous. I think they will allow us to deliver a higher level of service with the same level of human involvement.”

Getting replaced by someone else at work is a humiliating experience. If it happened to me, I would probably be angry, bitter, and vengeful. And I would, if I were American, not be able to appreciate the thick irony that the biggest proselytiser and enforcer of opening up markets, especially in developing countries, has been the US.

However, considering all of the evidence that points to outsourcing and H-1Bs having a negligible — indeed, a positive — impact on the US worker, never mind the US economy, maybe it’s time for the American tech worker to deep-six his or her understandable animosities toward H-1Bs and the likes, and focus on ruling the emerging technology landscape, just as their predecessors have been doing for decades.

Which means that any debate on the Immigration Bill going ahead should take this into account, lest a flawed conception of what H-1Bs do to the American economy result in torpedoing what could be a fertile era for Indo-US trade and cooperation.

Source:http://www.zdnet.com/indo-us-trade-wars-part-1-the-great-outsourcing-debate-7000035650/

New IT Jobs Set to Fall by 50% in Four Years: Crisil

November 10th, 2014

New hirings in the IT sector are likely to drop by 50 per cent over the next four years, according to a report by Crisil. The prediction is extremely negative for lakhs of engineering students across the country as the IT sector has traditionally been the biggest employer in the private sector.Outsourcing24

More than 7 lakh engineering students graduate every year. In fiscal 2013-14, Crisil estimates IT hiring at 1.05 lakh and says the number could come down to a mere 55,000 by 2017-18. The IT sector currently employs 31 lakh people or 24 per cent of total private sector jobs in the organised sector. The sharp slowdown will therefore impact the overall hiring sentiment in the economy.

IT jobs growth is slowing down because margins in the $118 billion outsourcing industry are under pressure. Frontline IT companies such as TCS, Infosys and Wipro earn nearly three fourth revenues from North America and Europe, where growth is still anemic. As a result, clients are asking companies to cut costs.

Since employee salaries account for the biggest cost component for IT companies, domestic outsourcers are reducing bench strength, improving employee utilisation rates and reducing other operational costs, Crisil says. In 2013-14, employee cost accounted for over 60 per cent of total cost of IT companies.

“Companies will run very tight ships because of which incremental employment will be curbed,” Crisil says.

The report says Indian companies are increasingly looking to maintain a leaner bench by adopting just-in-time hiring to improve utilisation rates. The current utilisation (or productivity) rate stands at 80 per cent and Crisil expects it to go up by 500 basis points in the medium term. A 100-basis-point improvement in utilisation impacts the employee growth by 105 basis points, the report says.

Companies are gradually migrating towards fixed price contracts, which eliminate the need for maintaining a large workforce for billing purposes. Such contracts weigh on hiring as revenue per employee goes up, Crisil notes.

Finally, Indian companies are planning strategies to move further up the value chain towards services such as consulting and software products, Crisil says. These services are currently dominated by global majors (such as Accenture, IBM), who have higher revenue per employee despite comparable employee bases.

Source:http://profit.ndtv.com/news/industries/article-new-it-jobs-set-to-fall-by-50-in-four-years-crisil-691206

Cognizant raises full-year revenue guidance

November 6th, 2014

Cognizant Technology Solutions Corp. raised its full-year revenue forecast after it reported an 11.9% increase in sales for the September quarter, boosted by higher demand for its healthcare and financial services. Outsourcing19

The Nasdaq-listed company said on Wednesday it now expects full-year revenue to range between $10.13 billion and $10.16 billion, compared with its earlier forecast of around $10.1 billion.

Revenue rose to $2.58 billion in the three months ended 30 September from $2.31 billion a year ago. It rose 2.5% from the preceding June quarter. Net income rose 11.3% to $355.6 million from $319.6 million a year earlier.

The increase in the revenue forecast comes three months after Cognizant disappointed investors by cutting its full-year revenue growth prediction citing client-specific challenges.

Analysts at Baird Equity Research said they were “encouraged” by the increase in guidance by Cognizant. “We think that the stock is a good value, given its discount to Infosys (despite faster revenue growth) and potential for upside to consensus 2015 estimates from the TriZetto acquisition,” the analysts wrote in a note on Wednesday.

Cognizant’s slowing healthcare business, which represented about 25.4% of its total revenue, has been a problem for the company over the past few quarters. To boost its healthcare business, Cognizant struck a deal to buy TriZetto Corp. for $2.7 billion in September.

In the latest quarter, healthcare sales rose by about 9% from a year ago, slower than its previous quarters, and 1.5% sequentially.

TriZetto’s services reach 245,000 healthcare providers, representing more than half of the insured population in the US, which is a lucrative market for IT service providers.

A January report by researcher Gartner Inc. said information technology services spending by global healthcare providers will grow by 4.33% to $31.96 billion in 2014.

The “overall demand environment remains strong”, Cognizant president Gordon Coburn said in a statement on Wednesday.

According to Francisco D’Souza, chief executive officer of Cognizant, “there is a tremendous opportunity in the marketplace as the advent of new digital technologies, global economic pressures, and an evolving regulatory environment force businesses across all industries to change and adapt faster than ever before”.

According to Gartner analyst Ian Marriott, Cognizant’s performance in the September quarter could be attributed to it performing well across all geographies. He added that discretionary spending is picking up in Cognizant’s major buying markets, which are North America and Western Europe.

Last month, India’s second largest software services exporter Infosys Ltd reported a higher-than-expected increase in its second-quarter profit as it added almost 50 new clients and benefited from favourable foreign exchange fluctuations.

However, India’s largest software provider Tata Consultancy Services Ltd posted quarterly revenue that fell short of analysts’ estimates as demand for outsourcing in Latin America was weak.

In the September quarter, consulting and technology services (formerly known as application development) and outsourcing services (formerly called application management) represented 53.5% and 46.5% of revenue, respectively. Consulting and technology services increased 5.1% sequentially and 18% from a year ago.

Outsourcing services were flat sequentially and grew 5.7% from a year ago.

The management said pricing was stable during the September quarter.

During the quarter, Cognizant added about 12,300 people and ended the quarter with nearly 200,000 employees globally.

Around 43% of gross additions for the September quarter were directly from colleges, while 57% comprised experienced professionals.

Source:http://www.livemint.com/Companies/vKS6e11hJWK1vKtZfscLPM/Cognizant-Q3-profit-up-113-raises-fullyear-guidance.html

CIOs have erratic IT services pricing on their side

November 6th, 2014

The IT services sector is experiencing erratic pricing as western suppliers attempt to retain their corporate customers amid huge competitive pressure from offshore suppliers.Outsourcing17

Large corporates, once cautious about working with offshore players, today recognise operating model advantages over western players and no longer show trepidation because they have worked with offshore players for years now.

But things are changing, with companies such as Tata Consultancy Services (TCS) fighting for deals with established western firms as equals rather than upstarts. This is resulting in incumbent suppliers being forced to cut prices to retain large clients.

Losing major accounts is bad news for large western suppliers listed on the stockmarket because they need to retain revenue growth.

Peter Schumacher, CEO at management consultancy Value Leadership Group, which has spoken to hundreds of large European businesses about their IT outsourcing plans, said while there is still a lack of understanding about just how big some of the Indian suppliers are, it is beginning to sink in.

“In Europe, customers recognise that offshore firms offer significant operating model advantages over western IT services companies, which are seen as still struggling to adapt their largely conventional and fragmented country-focused model to the new competitive realities,” he added.

“Meanwhile, the offshore firms have established very strong positions in key sectors, where the biggest customers see them as being on par with companies like IBM,” said Schumacher.

He said this is giving CIOs a bargaining tool when contracts are up for renewal with the large western service providers, which is causing erratic pricing.

“The stronger presence of the offshore firms has given clients enormous bargaining power, which they are using to extract pricing concessions and renegotiate contracts,” Schumacher added.

Outsourcing is not all about price
Recent research by the National Outsourcing Association (NOA) revealed that 54% of outsourcing buyers gave cost reduction as the main reason for doing so, while 36% said improved services were the main driver. The remaining 10% cited access to other value-add services as the top reason.

According to the survey of NOA members, suppliers are promising cost savings, with 60% offering savings of between 11% and 30%, but 57% of executives buying the services expect savings of between 21% and 40%.

But it is no longer just about price – although still the main factor, it is diminishing in importance. Offshore suppliers that have not readied themselves for changing buying habits will struggle.

While TCS is gaining huge ground on western companies, and was even described by one commentator as IBM Global Services’ biggest competitor, this is not the case for all offshore suppliers.

A lack of service innovation will hold many offshore suppliers back, according to Ilan Oshri, a professor at Loughborough School of Business.

He said the Indian suppliers have their own challenges in reducing their reliance on models that are based on the provision of low-cost skills: “From discussions we have had, it seems some of the Indian firms are under pressure because they are not pursuing strategies outside offshore models.

“Companies such as IBM have developed hybrid models that combine offshore delivery with innovation. IBM has been doing this for five or six years, but many Indian firms have not focused on that.”

Source:http://www.computerweekly.com/news/2240234125/CIOs-have-erratic-IT-services-pricing-on-their-side

Are Indian suppliers IBM Global Services’ biggest threat?

November 4th, 2014

India’s IT services industry has grown fast, but who would have thought that TCS is now IBM Global Services’ biggest threat.Outsourcing6

That’s what one management consultant told me last week. I was writing an article about talk of IBM reducing its workforce in India. IBM is one of the biggest IT services firms in India in terms of workforce and even if it is true that it will cut about 50,000 staff there, it will still be very big with about 100,000 people.

Read my article here. I have has quite a few emails from readers about this.

But the industry is changing and the provision of low cost full time equivalents is no longer the way to grow and profit for IT services firms. They want non-linear business models and they are doing this with less labour intensive services that harness cloud and automation technologies for example. At the same time customers want services using the latest technologies.

For example Scandinavian IT services firm Cygate has expanded its business without needing to recruit more staff by using automation software from IPSoft. In 2010, the company, which serves more than 1,000 customers including some of the biggest corporates in the Nordic region, was experiencing 20% growth in sales. This meant the company needed to add resources or risk service levels deteriorating. But just adding manpower would have reduced its margins.

So you would think the Indian suppliers who grew their businesses through offering highly skilled IT workers at a lower cost to Western corporates, would struggle the most. But it seems this is not the case. In fact it could be another phase of growth for these firms.

Mark Lewis, outsourcing lawyer at Berwin Leighton Paisner, says, “TCS, India’s biggest IT services supplier,  is achieving both linear and non-linear growth. It is still recruiting heavily in India and is building its global workforce at the same time,” said Lewis.

While IBM Global Services is always a default consideration businesses outsource IT it is not winning as many deals as it used to. Peter Schumacher, Value Leadership Group, said conversations with large corporates in Europe reveal that Indian suppliers are now  now IBM Global Services’s biggest competitor, and TCS is the biggest of these.

The Indian advantage of lower cost skills may have diminished overtime because western IT services firms have built huge offshore workforces of their own. At the same time wages in India have increased. But during the hay day of low cost IT services companies like TCS, Infosys, Wipro and HCL have build strong businesses and developed domain expertise, by moving beyond pure IT services to business services using IT.

The other interesting point is that western IT services forms have shot them in the
Have the western IT services firms let the foot by reducing the fear associated with offshoring. There was a time that offshoring IT was a brave and perhaps a risky strategy for a big business. But companies like IBM have used offshore staff and as a result made it the norm for outsourced service delivery.

Today service levels from offshore and western suppliers are little different and CIOs will make decisions based on the pure business value, rather than perceived risks.

“In Europe, TCS will add almost $1bn in new business in 2014, which underlines the enormous market momentum and customer confidence they now enjoy,” says Schumacher.

Source:http://www.computerweekly.com/blogs/outsourcing/2014/11/are-indian-suppliers-ibm-gloabl-services-biggest-threat.html

IBM India staff reductions are sign of shift in outsourcing sector

November 3rd, 2014

Talk of IBM reducing its India-based workforce by 50,000 over the past three years, with more to come, is a reflection of the diminishing importance of low-cost operatives.IBM, cloudcomputing

The reported reduction in staff in India, although unconfirmed, is in line with changing IT-outsourcing demand and delivery models. One source claimed India’s Tata Consultancy Services (TCS) is now IBM Global Service’s biggest competition.

According to a report from India, the IT giant has reduced its India-based workforce from about 165,000 in 2011 to 113,000 in 2014. The report quoted sources close to IBM’s plans who said this number will be down to 100,000 in 2015. The firm’s global workforce is made up of 431,212 employees.

In IBM Global Services, the company boasts the world’s biggest IT services firm. It is often referred to as an IT bellwether and its every move is scrutinised by IT executives at enterprise users and at its competitors. When the offshore-IT services delivery model was at its peak, the firm was the biggest IT employer in India.

But new technologies, such as automation software – including IBM’s very own Watson – and cloud computing, are reducing the need for high numbers of offshore staff to carry out business processes and software development.

Telecommunications firm O2, for example, uses automation software from Blue Prism to cut its reliance on offshore recruitment to cope with spikes in workload.

IT services firms traditionally grew in a linear way – typically, they win more business, then add more staff to support it. In many cases this has involved building large offshore workforces. But service providers are now trying to reach the holy grail of non-linear growth. This means adding business without needing to add to the workforce to support it – reducing the proportional increase in the cost of providing an additional service.

At the same time, increased use of cloud-based IT is forcing IT services firms to add more higher-level support services, while the move to platform-based services in the cloud means there is less need for businesses to develop their own software.

IBM not moving away from offshore delivery

In a recent presentation to equity analysts IBM said it is not moving away from offshore delivery and, in fact, will be harnessing global delivery centres to make it more competitive.

“In parts of our portfolio that aren’t as well differentiated, we’re continuing to see price and profit pressure,” said an IBM statement. “These are the areas where we’ll be more aggressive on the use of global delivery centres and applying intellectual property for faster time to value for our clients and improved business results for us.”

In its recent results for the third quarter of 2014, IBM said Global Services sales decreased by 3% to $13.7bn, compared with the same period of 2013. Pre-tax profit from Global Technology Services reduced by 11%.

IBM CEO Ginni Rometty said in areas of focus – which did not include IT services – the company did well.

“While we did not produce the results we expected to achieve, we again performed well in our strategic growth areas – including cloud, data and analytics, security, social and mobile – where we continue to shift our business. We will accelerate this transformation,” she said.

“We are executing on a clear strategy that is moving IBM to higher value, and we’ve taken significant actions to exit non-strategic elements of the business,” she added.

Reflecting its shift in focus, IBM has reportedly reached an agreement with Globalfoundries to take over its semiconductor operations. IBM will pay the manufacturer $1.5bn to take the chip operations off its hands.

Competition from Tata Consultancy Services
Berwin Leighton Paisner outsourcing lawyer Mark Lewis said it is not yet clear what IBM’s strategy is, and compared the company with India’s biggest IT services firm Tata Consultancy Services (TCS).

TCS has 276,195 global staff, with 92.3% being Indian. Just over 21,000 of the company’s staff are not Indian, while it has an increasing UK workforce, with more than 10,000 UK-based staff.

“TCS is achieving both linear and non-linear growth. It is still recruiting heavily in India and is building its global workforce at the same time,” said Lewis.

While IBM is the biggest IT company in the world, Lewis said he is unsure if it is leading the way in terms of strategy in IT services.

“Until its strategy is clearer, it is difficult to say what it is a bellwether for,” he said.

According to CEO at management consultancy Value Leadership Group Peter Schumacher, based on meetings with about 200 outsourcing customers around the world, IBM is losing ground to offshore-based firms.

“Pricing is one reason but, perhaps more importantly, top customers also cite IBM’s arrogance and weaker partnership capabilities as key reasons. In other words, IBM is seen as lacking price competitiveness, operating flexibility and customer intimacy. These are a complex mix of interrelated challenges and overcoming these can take years to resolve,” he said.

The stronger presence of the offshore-based firms has given clients enormous bargaining power over IBM, added Schumacher, and they are using this to extract pricing concessions and renegotiate contracts. He said TCS is the main challenger to IBM Global Services.

“In Europe, TCS will add almost $1bn in new business in 2014, which underlines the enormous market momentum and customer confidence they now enjoy,” he said.

IBM still an IT services bellwether
IBM is always in the mix when it comes to global outsourcing deals, according to KPMG management consulting partner Lee Ayling. “I don’t think IBM has taken its eye off the ball in services – it quietly gets on with its work,” he said.

IBM could still be considered a bellwether for global IT services, Ayling added. In four recent large global IT-outsourcing deals he has been involved in, the firm has been in the running. “IBM is more often than not in the bidding for large global enterprise deals,” he said.

He suggested the reduction of staff at IBM in India could be linked to the companies scaling back on business process outsourcing (BPO) services, with more focus on IT services.

One former senior IBM executive says IBM was focused on growth markets, which could mean building staff numbers in countries like China and those in South America.

Source:http://www.computerweekly.com/feature/IBM-India-staff-reductions-are-sign-of-shift-in-outsourcing-sector

Councillor defends Enmax outsourcing

October 30th, 2014

City-owned utility Enmax needs to be able to compete on the same playing field as other corporations, even if that means outsourcing dozens of local jobs, said a city councillor Wednesday.Outsourcing51

Coun. Peter Demong — one of two councillors who sits on Enmax’s board of directors — told the Herald he understands why some Calgarians would be opposed to the idea of a taxpayer-owned company sending local jobs overseas. Enmax informed its employees last Friday that it will be outsourcing 38 back-end technology support jobs to Tata Consultancy Services (TCS), a massive multinational company headquartered in Mumbai, India.

But Demong said that as a wholly-owned subsidiary of the City of the Calgary, Enmax needs to have the ability to operate in the free market and generate profits.

“We can’t hamstring them by saying ‘You have to do this, you have to do that,’ ” Demong said. “We have to allow them the same freedom and ability to compete as any other competitor in that industry.”

TCS, with annual revenues of $13.4 billion and over 300,000 IT consultants working in 46 countries, is one of the world’s largest IT outsourcing firms. Enmax has said it is making the switch to improve efficiency and also to provide better data security for its customer service and billing operations.

Demong added TCS has much-needed expertise as Enmax looks to improve its technology applications.

“It’s very difficult to find that expertise in Canada or even North America,” he said. “There are very few corporations or companies that specialize in this kind of thing.”

The news of the outsourcing was met with dismay by some Enmax employees as well as the union that represents 17 of the affected workers.

“Good work gets you what? Your job sent offshore? There’s not a lot of loyalty there,” said CUPE Local 38 president Peter Marsden on Tuesday.

But an Enmax spokesperson said the majority of affected employees are being redeployed to other positions within the company, though a handful have chosen to take severance or retirement options. Enmax also emphasized that while the outsourced work will be done by TCS workers in both Canada and India, no “front-facing” positions are involved in the move. Customers who contact Enmax will still speak to a local customer service representative based in Calgary.

Coun. Brian Pincott, the second city councillor with a seat at Enmax’s board, said he was unaware of the outsourcing until contacted by the Herald this week. He said he doesn’t have a position yet, but will “undoubtedly” be seeking more information about the decision.

The outsourcing is expected to be complete by the end of November.

Source:http://www.calgaryherald.com/business/Councillor+defends+Enmax+outsourcing/10336033/story.html

Protected by تهنئة
Get Adobe Flash player