Bangalore Thrives, Chokes on Outsourcing
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BANGALORE, India  - When narrow colonial-era  streets get jammed with evening traffic in India's technology  capital, the radio disc jockey turns agony aunt.
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The city of Hyderabad in the southern Indian state of Andhra Pradesh has attracted a number of large multinational companies to set up software, services, and product development operations. The city, which has the headquarters of Indiaâs fourth largest outsourcer, Satyam Computer Services, also has facilities of other Indian outsourcers, and multinational technology companies like Microsoft and Oracle.
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India's Kerala state to build a technology-friendly city for global investors.  Also: Intel continues its expansion in the Indian city Bangalore & hellip;. Sirius Satellite scores a hard-charging CEO & hellip;. and more.
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(InfoWorld) - Indian outsourcer Infosys TechnologiesÂ is expanding its facility in Brno in the Czech Republic, to boost its ability to deliver services to its European customers. The expanded facility will have a capacity of 350 seats by January, Infosys of Bangalore said on Wednesday. Infosys has about 130 staff in Brno, who deliver business process outsourcing (BPO) services such as sales order management, finance and accounts, market research and underwriting for clients in 16 European countries. Over 80 percent of the staff at Brno are hired locally, and operations are run in 13 different languages including German, French, and Spanish, Infosys said. The company is planning to also deliver IT services such as infrastructure management and package implementations such as enterprise resource planning (ERP) and customer relationship management (CRM) from Brno once the expanded facility is in operation. A number of Indian outsourcing companies including Wipro and HCL Technologies have set up operations in Europe or acquired companies there with an eye to the European market. Currently, the U.S. and U.K. account for most of the revenue of Indian outsourcing companies. Although companies in the U.K. outsource software development and business processes to India, the rest of Europe has been comparatively slower in outsourcing to India. Continental Europe accounts for only about 12 to 13 percent of India's outsourcing revenues, according to India's National Association of Software and Service Companies (Nasscom). Infosys' revenue from Europe has grown by 60 percent year-on-year for the last three years. Europe accounted for about 25 percent of the revenue of Infosys in the last quarter, but most of that came from the U.K., according to a spokeswoman for Infosys. Besides expanding in Brno, Infosys is also setting up a development facility in Swindon in the U.K. The company also has a development center in Germany, and a center in Mauritius that is designed to address European customers because the population in Mauritius is multilingual, the spokeswoman said. Having centers in Europe helps Infosys build up capabilities in the specific European languages required by customers, and also comply with European Union regulations on data protection and privacy, which require that certain types of data should not be sent for processing outside the E.U., the spokeswoman added.ADVERTISEMENTMAKE SOA REAL WITH IBM WEBSPHERE PODCASTStreamline processes and maximize efficiency within a proven service oriented architecture. Take back control of your business processes with IBM WebSphere.
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Working Western contracts in India isn't enough. Now they're outsourcing too.
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High stress and low status have soured many grads on the telephone work. Now India, the outsourcing capital, finds itself having to outsource
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India's IT services market is growing rapidly as outsourcing emerges as local companies outsource more business functions.
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India's out-sourcing capital Bangalore is to get an $87m (Â£48m) new toll motorway in a fresh bid to tackle congestion.
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(InfoWorld) - To cut costs in its growing business, the IT services subsidiary of Swedish transport equipment company AB Volvo moved some work offshore in 2002 to MindTree Consulting, a software services company in Bangalore, India. The subsidiary, Volvo Information Technology AB (Volvo IT), has an operation in Poland that is doing application maintenance, but it wasn't easy to increase the number of staff in that country quickly, said PÃ¤r Forsberg, Volvo IT's competitive sourcing manager. Working with an outsourcer gave Volvo IT flexibility in staffing. "We needed to be able to ramp up and down quickly depending on demand from clients and MindTree was able to meet that requirement," Forsberg said. MindTree also offered skills in the broad spectrum of technology areas that Volvo IT was working on, including Java, .Net, and technologies from SAP AG, he added. MindTree now has about 300 staff doing work for Volvo IT, mainly in applications development, up from less than 20 four years ago. Volvo is one of a large number of multinationals in the U.S., Europe, and Japan that have been flocking to India to outsource software development work, or to set up their own development operations in the country. Many of the U.S. and European companies are also moving call centers and back-office processing work to India. The influx has been a boon to India's economy. Its revenue from software exports and IT services grew by about 33 percent in the year to March 31, to US$23.6 billion, according to Kiran Karnik, president of the National Association of Software and Service Companies (NASSCOM). The numbers include the revenue from both Indian outsourcing companies and the Indian software and services subsidiaries of multinationals. India offers these companies a vast pool of talent at lower cost than they can find in the U.S. and Western Europe. "We've started to see the cost benefits of migrating roles from the U.K. to India, and we are now also seeing a lot of innovation around our IT and business processes coming from the Indian operation," said Meena Ganesh, chief executive officer (CEO) of Tesco's Hindustan Service Center, a subsidiary of U.K. retailer Tesco PLC. Tesco has 1,600 staff in Bangalore. About half develop software, and the rest run back-office processes such as internal support, payroll and accounts payable. Savings have been in the range of 30 to 40 percent, in line with the average for India, Ganesh said. Multinationals like Tesco are also looking beyond low-cost coding work to tap the ability of their Indian staff to innovate. Yahoo India Research and Development, in Bangalore, does product development in the areas of multimedia search and user behavior analysis, said Venkat Panchapakesan, CEO of Yahoo Inc.'s Indian subsidiary. With over 750 staff, the R&D operation is Yahoo's largest outside the U.S. India's key strength is that about 2.5 million students graduate every year. Education is still in English, a legacy of nearly two centuries of British colonial rule. English has also served as a link between India's numerous cultural and linguistic groups. To take advantage of the low-cost labor, companies are expanding their operations at a fast pace. Dell Inc. has said it will double its staff in India to about 20,000 in the next three years. It already runs call centers and does software development in the country. It also said recently it would design servers and storage gear in Bangalore and build a PC manufacturing plant in Chennai. Services companies are also moving in. LogicaCMG PLC of London has 2,300 staff at its offshore operation in Bangalore, and will expand its facility by November to accommodate up to 4,000, said Rahul Patwardhan, CEO of LogicaCMG's global delivery center. Capgemini SA plans to increase its staff in the country from 5,600 today to 10,000 by the end of next year. Customers of these firms want them to have an offshore component in order to benefit from the cost savings, said Siddharth Pai, a partner at sourcing consultancy firm Technology Partners International Inc., in Houston, Texas. Taking advantage of the low costs in India, some services companies are now bidding for contracts at prices even lower than those of Indian outsourcing companies, he said. To achieve a target of $60 billion in outsourcing exports by 2010, the country will have to overcome several issues, however, including a potential shortage of manpower. The industry will need 2.3 million IT, call center and back-office processing staff by 2010, and there's likely to be a shortfall of about 500,000, according to a December report from NASSCOM and the management consulting firm McKinsey & Co. Attracting and retaining staff has already become difficult. Tesco and IBM Corp. have started advertising on billboards to lure staff, promising the chance to work on leading-edge technologies. Some companies advertise jobs on buses used to transport staff to work. Google Inc. and Microsoft Corp. are hosting programming contests to help identify talented people. Most companies offer cash incentives to staff who refer potential employees. Meanwhile, salaries are going up on account of the competition for staff. "Talent is available, but it is becoming a little more difficult to find and get on board the people with the right skills, particularly in IT," Ganesh said. Companies are hiring from outside cities, but finding good English skills there is a problem. LogicaCMG rejects more than half of the applicants for IT jobs not on technical grounds, but because of inadequate English, Patwardhan said. As the back-office processing and call center business expands, less people with good English skills are likely to go in for higher technical education, which in the future could create a shortage of technical staff who speak good English, he said. The problem is that, although India's universities produce graduates, only a small proportion have the skills required -- a quarter of them in the case of engineering graduates, according to Karnik. Only 10 to 15 percent of the general graduates can be employed by the business process outsourcing industry, he said. Karnik suggests sending engineering graduates to a "finishing school" for a few months to hone their skills. Staff for call center and back-office operations could be trained in parallel with their university education. To contain costs and curb attrition, companies are hiring a mix of new graduates -- or "freshers" -- and experienced staff. Between 10 and 15 percent of Tesco's IT staff in India are freshers, a figure the company plans to double during this year. "Once you have a strong middle layer of staff, you can add more freshers without sacrificing quality," Ganesh said. Some companies are also moving to smaller towns, where competition is less. Dell has set up a call center in Mohali, in northern India, while Opera Software ASA has a development center in Chandigarh, also in northern India. As India's IT hubs, particularly Bangalore, expand at a fast pace, real estate and general living costs become expensive, even as the infrastructure, including roads and power supply, deteriorates. Other countries may emerge as greater threats to India, such as China and countries in Latin America and Eastern Europe. LogicaCMG is expanding in Brazil, Morocco, and Europe, to spread its risks and to address some of its non-English speaking customers. Staff costs outside of the Euro zone, in countries like Romania, Ukraine and Russia, are comparable to those in India, Patwardhan said. Outsourcing has also come under attack because of the threat of lost jobs at home. "Protectionism in the U.S. is very related to the employment situation in the country," NASSCOM's Karnik said, adding that it has receded in the past 18 months as employment there has picked up. Other obstacles could also hinder business. Concerns about data privacy could grow as more call center and back-office jobs move overseas. After a case in which Indian staff were alleged to have sold some customer data, NASSCOM initiated measures to strengthen data protection at Indian service companies. A National Skills Registry allows employers in India to check employee backgrounds, and a new watchdog organization later this year will monitor data protection standards. The Indian government is also amending its Information Technology Act of 2000 to give it more teeth in data protection and privacy. Outsourcing companies have also implemented processes such as the BS7799 standard for information security management of the London-based British Standards Institution. "We want to change the rules of outsourcing to India," said Sunil Mehta, vice president of NASSCOM, in a recent interview. "Customers should be interested in outsourcing to India not for lower cost alone, but because of the superior data protection and privacy we offer." Despite the problems, many companies plan to keep India as their main hub for offshore work, and the growth shows no signs of sputtering. Tesco's strategy is entirely based around India, Ganesh said. It has software and back-office operations in Eastern Europe and elsewhere, but these are primarily to service local needs. LogicaCMG also plans to continue expanding in India, and its importance will remain high even as the company expands in other locations, Patwardhan said. Meanwhile new opportunities are emerging, such as non-IT design and engineering services. India's second largest outsourcer, Infosys Technologies Ltd., set up an R&D center in Bangalore last year for French engineering company Alstom SA, to focus on high-end services such as product development, engineering simulation and product life cycle management. The big Indian outsourcing companies, Infosys, Wipro Ltd., and Tata Consultancy Services Ltd. (TCS), are also offering more value-add services such as IT consulting. The country's domestic IT and business process outsourcing market is also growing. Revenue from the domestic market was US$6 billion in the year to March 31, up 24 percent from a year ago, according to NASSCOM. India's software and services revenue will grow by as much as 30 percent next year, to between $29 billion and $31 billion, NASSCOM said. And India's revenue from exports of software development, call centers and back-office processing will grow by 25 percent a year to US$60 billion by 2010, according to the joint report from NASSCOM and McKinsey. "We are well on target," NASSCOM's Karnik said.
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Indiaâs outsourcing industry continues to do well despite theÂ appreciation of the Indian rupeeÂ against the U.S. dollar and higher staff costs.
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(InfoWorld) - Operations of IT services companies in Bangalore face potential disruptions as the city protests a tribunal decision on the sharing of river waters between two states. The order covers Karnataka, of which Bangalore is the capital, and the neighboring Tamil Nadu state. Besides Indian outsourcers like Infosys and Wipro, a number of multinational companies, including Dell, IBM, and Accenture have global services operations in Bangalore. The tribunal, set up to arbitrate the dispute, delivered a verdict on Monday that has angered the people of Karnataka, who want a larger share of the waters of the Cauvery river. Disputes over sharing the waters of the Cauvery have in the past led to violence in Karnataka. A verdict over sharing of Cauvery water by another panel, in 1991, sparked off anti-Tamil violence in Karnataka, which left about 18 people dead. Karnataka has a significant number of settlers from Tamil Nadu. A few Bangalore IT companies closed operations early on Monday and asked their staff to work from home as they were worried that news of the order would trigger off violence in the city. Most others however ran their operations normally. "It is business as usual as extra police have been deployed, and everything seems under control," said a spokeswoman for Infosys of Bangalore. Infosys, which is Indiaâs second largest outsourcer, is in touch with the government and is evaluating the situation round-the-clock, she added. Accenture, which also has a large operation in Bangalore, is working normally, said a spokesman for the company. The company has staff working on both day and night shifts. So far, there have been reports of only sporadic protests in Bangalore and surrounding districts. The government of Karnataka deployed about 18,000 police in the city ahead of the tribunal's verdict. If violence erupts or if there are calls for strikes, IT companies may have to temporarily scale down their Bangalore operations as it will become difficult for staff to get to work. Most IT companies like Infosys and Wipro have business continuity plans in place to move work to their facilities in other locations in India.
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(InfoWorld) - Chinese cities are expected to unseat Bangalore, Mumbai, and Delhi in India, and Manila of the Philippines, as favored offshore delivery centers by 2011, according to IDC. The market researcher has introduced a new Global Delivery Index (GDI), which compares 35 cities in the Asia-Pacific as potential offshore delivery centers, based on criteria such as cost of labor, cost of rent, language skills, government policies, infrastructure, and staff turnover rates. Bangalore currently tops the list, followed by Manila, Delhi, and Mumbai. The Chinese cities that figure in the 2007 list include Dalian, Shanghai, and Beijing, at numbers five, six, and seven. Indian cities have inherent challenges such asÂ cost of staff and pressure on infrastructure, said Conrad Chang, a research manager at IDCâs Asia Pacific operations, in a telephone interview on Thursday. While India has focused on the U.S. and European markets, China has large opportunities in the Japanese and Korean markets, Chang added. Chinese cities will overtake Indian cities by 2011 because of massive investments made in infrastructure, English language, Internet connections, and technical skills, which are favorable towards offshoring, IDC said Tuesday. Forrester Research,Â however, takes a less optimistic view about China as an offshore destination. Nearly two years ago, the country was widely viewed as a key challenger to India as an offshore services delivery location, however Forresterâs research shows that the market has not taken off as expected, the research firm said in a recent report. China primarily attracts business from Korean and Japanese companies, but most of them have preferred to set up their own operations in China rather than outsource, because there are not many large service providers in China, said Siddharth Pai, a partner at outsourcing consultancy firm Technology Partners InternationalÂ (TPI) in Houston, on Thursday. Many U.S. and European companies, that set up offshore services operations in India, may also have an operation in China, Pai said. â But the Indian operation will typically be the larger,â he added. China has still not overcome customersâ concerns about English language skills, intellectual property (IP) protection, and attrition in the country, Forrester said. In contrast, India has a sophisticated and time-tested legal environment built around Western common law, Pai said. Even if China invests heavily in education, the population cannot get in four to five years as fluent in English as Indians, he said. â Indians have been speaking English for over a hundred years,â he added. Indiaâs demographics also favor its continuation as a key offshore services location. On account of Chinaâs one-child-per-family policy, the countryâs population is aging. The country has about half as many people under 30 than India, Pai said. The IT industry primarily employs younger staff, he added. The IDC GDI rates the potential of cities as offshore destinations, said Chang. The actual business decision by companies to offshore to these cities will depend on a host of other factors, he added. The GDI is a moving index, reviewed every six months. âThis is not about India versus China,â Chang said. IDC expects both countriesâ offshore business to grow, he added.
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How does offshore outsourcing's reigning champion, India, compare against China on software quality, staff costs, and more?
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Close on the heels of the&#160;appreciation of the Indian rupee against the dollar, Indian outsourcing companies are grappling with a new problem -- uncertainty among U.S. companies about a recession has made these companies delay finalizing their IT budgets.
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Indian professionals, venture capitalists (VCs), and entrepreneurs of Indian origin helped promote India as an outsourcing destination, according to a study conducted for the World Bank Institute in Washington, D.C., by Evalueserve Inc., a business intelligence and research firm.
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Offshore outsourcing&#39;s reigning champion, India, squares off against its upstart rival, China, on software quality, staff costs, advanced business skills and more. We also figure in a few top of mind questions for the IT manager who&#39;ll be traveling to his company&#39;s offshore provider once a quarter: Can I get a decent cup of coffee, and how long will I actually be on the plane?
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Bombay to Mumbai is familiar enough, but Bangalore to Bangaluru? A trend gains speed.