Indian minister says IT outsourcing raked in $12.5 billion
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Indian officials today disclosed details on revenues from IT outsourcing for the last year.
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Indian firms are increasing their IT budgets an average of 13 percent this year, far more than the global average of 3.3 percent, research company Gartner said Wednesday.
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(InfoWorld) - Up against competition for markets and for hiring staff, Indian software outsourcers are focusing on building reusable software that automates specific business processes. These software components can in turn be used across a number of clients, saving costs, and time. Top Indian outsourcers such as Infosys Technologies Ltd. and HCL Technologies Ltd. for example, have developed a variety of components including an RFID (radio frequency ID) component for supply chain applications, according to Forrester Research Inc. senior analyst Sudin Apte. Currently, outsourcers' business models are largely based on a cost-plus model where they add more staff to a project to get more revenue. "They are trying to break out of this linearity and dependence on low-cost staff alone," Apte said. Midsize outsourcers are also investing in creating reusable components, consisting of business applications or middleware. "If you look at the applications we develop, about 30 to 35 percent are common across various applications, so there is an opportunity to make them reusable," said Bala Variyam, vice president for IT delivery at iGate Global Solutions Ltd., an outsourcing company in Bangalore. The company develops prebuilt components that can be used across a variety of industries, as well as business components for banking and financial services that are quickly configured and deployed for customers, Variyam said. Besides developing components in-house, iGate is also looking at open-source components. "We are looking, for example, at an open-source trading platform that can be used for capital markets and investment banking applications," Variyam said. Among multinational services companies, IBM Corp., for example, set up last year in India a Global Business Solutions Center as the company's global hub for the management and creation of reusable software components. IBM also set up last year development centers in Beijing, China, and Pune, India, that focus on developing industry-specific SOA (service-oriented architecture) services that are reusable across various customers. In the short term, this strategy will require Indian companies to invest in top quality staff to understand the business problem and the technology and develop the software. Most Indian companies like Infosys and HCL that are developing reusable components have large teams that are not immediately billable, so they don't earn direct revenue for their companies, Apte said. In the long term, though, these companies could probably have less demand for new staff as they reuse software across a large number of customers, according to Apte. IGate is already seeing dramatic time savings of up to 30 percent on applications development, though time taken on the design and testing phases does not change, Variyam said. Customers are also demanding components that have already been proven across other deployments, Variyam added.
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The Nielsen Company, a provider of consumer and media information services, is outsourcing a portion of its IT and business processes to Tata Consultancy Services&#160;(TCS), an Indian outsourcer based in Mumbai.Under a 10-year agreement valued at $1.2 billion, TCS will take responsibility for some of Nielsen&#8217;s IT and operational processes and help the customer integrate and centralize multiple systems, technologies, and processes on a global scale. TCS will also deliver certain finance and human resource business processes, the company said Thursday.On Monday, TCS reported growth of 45 percent in revenue and profit for the quarter ended Sept. 30, despite fears that the weakening dollar would erode margins for Indian outsourcers.
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(InfoWorld) - Indiaâs largest outsourcer Tata Consultancy ServicesÂ (TCS) has set up a global delivery center in Guadalajara, Mexico, with plans to hire up to 5,000 staff there over the next five years. Having a center in Mexico helps TCS, of Mumbai, as it will be closer to U.S. customers and on a similar time zone, said Pradipta Bagchi, a spokesman for TCS said on Thursday. The South American market also provides a significant opportunity for TCS because of a large number of regional companies investing in information technology and related services, Bagchi said. TCS currently has about 5,000 employees in South America, which service over 150 clients there. It operates global delivery centers in Brazil, Mexico, and Uruguay, besides a business process outsourcing (BPO) services center in Chile. Indian outsourcing companies are grappling with the appreciation of the Indian rupee against the U.S. dollar, andÂ rising labor costs. Indiaâs National Association of Software and Service Companies (NASSCOM) has said that the 8 to 9 percent appreciation of the rupee over the last three months is worrisome. The U.S. is the largest market for Indian outsourcers. TCSâ expansion in Mexico led to speculation that the company may be looking for alternative locations to India. Staff in India is still cheaper than in Mexico, and the company has no plans to scale down its operations in India, Bagchi said. A number of Indian companies have set up operations in South America and Eastern Europe to offer a near-shore option to their customers in the U.S. and Europe. Indian companies are also expanding in other countries to look for new talent pools, as it gets tougher to hire staff in large numbers in India. Satyam Computer Services, an outsourcer in Hyderabad, said last year it wasÂ expanding in China, Malaysia, and other locations to tap regional markets and supplement its Indian operations. TCS and Indiaâs second largest outsourcer, Infosys Technologies, have alsoÂ set up operations in China. China has, however, fallen short of expectations as an offshore location, according to Forrester Research. Two years ago, China was viewed as a key challenger to India because of its large number of engineering graduates and the support of the Chinese government to establish it as a key offshore location, Forrester said. But after an initial burst of momentum, there has been relatively little evidence of the countryâs success, the research firm added. TCSâs new center at Mexico will primarily offer software development, Bagchi said. The center will serve clients in Mexico and in the U.S., he added.
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Like the auto industry, the computer programming field and the customer-service business, the state of Indiana is outsourcing.
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Hewlett-Packard Co. said on Wednesday it had signed a five-year technology outsourcing agreement with Nokia worth $100 million per year, finalizing a deal first flagged in February.
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(InfoWorld) - India's third largest outsourcer, Wipro, Thursday reported growth in revenue and profit, although like other Indian outsourcers, it too was affected by theÂ appreciation of the Indian rupeeÂ against the U.S. dollar. The company posted total revenue of Indian rupees 41.83 billion ($1.03 billion) in the quarter ended June 30, up 34 percent over revenue in the same period last year. Net revenue was rupees 7.1 billion, up by 16 percent for the same period a year ago. Wipro, of Bangalore, has both a domestic and export business. Its export-oriented outsourcing business, called Global IT Services and Products, posted revenue of rupees 29.4 billion, up by 20 percent over the same period last year. The company's operating margin for this business was however down from the same quarter last year because of the strong rupee. The results are based on U.S. generally accepted accounting principles (GAAP), the company said. The company's export business had 72,137 employees as of June 30, which included 53,073 employees in its IT services and products business, and 19,064 employees in the BPO (business process outsourcing) services business. The company added 4,319 staff during the quarter of which 2,719 employees were added in its IT services and products business and 1,600 employees in its BPO business. During the quarter, some of the company's services lines like technology infrastructure services and software package implementation grew by over 50 percent year-on-year, while its BPO and testing services grew by over 40 percent year-on-year. The company's export business accounted for 70 percent of total revenue and 91 percent of operating income for the quarter. Wipro does not report profits separately for this business, which added 39 new outsourcing clients in the quarter.
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Indian outsourcing companies must move beyond low-cost services on an hourly-rate basis, to offering complete services, according to an outsourcing consultancy.
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India&#39;s third largest outsourcer Wipro reported a 32 percent increase in revenue in the quarter ending December 31, but profits grew by only 11 percent over the same quarter last year, reflecting&#160;higher salaries in India, and reduced margins as a result of its&#160;acquisition last year of U.S. IT services provider Infocrossing.Infocrossing&#39;s margins were lower than that of Wipro even before the acquisition, although the company said last year that it hoped to increase utilization at its datacenters by offering the option of hosting in the U.S. to some of its outsourcing clients.Wipro&#39;s revenue for the quarter was 52.36 billion rupees ($1.33 billion) at the exchange rate on the closing date of the quarter, while its profits were 8.26 billion rupees. Wipro&#39;s revenue from its export business, Global IT Services and Products, was 36.14 billion rupees, up by 26 percent over the same period last year.The U.S. economy, which is the largest market for Indian outsourcers, is facing challenges, but there has not been any impact yet on Wipro, Azim Premji, chairman of the company told analysts.Indian largest outsourcer, Tata Consultancy Services, and second largest outsourcer, Infosys Technologies, both reported strong revenue growth for the quarter, despite concerns that the Indian outsourcing industry was likely to be hit by the&#160;weakening of the U.S. dollar. The U.S. is the largest market for Indian outsourcers, accounting for about 66 percent of export revenue, and the rupee has appreciated by about 12 percent against the dollar from the beginning of this year.The appreciation of the rupee against the U.S. dollar pushes down rupee realizations for revenue earned in the U.S. by Indian companies, even as staff costs in India are going up.Wipro got better prices for its services during the quarter, and added 39 new clients, which helped push up its top line. Improved price realizations and productivity also helped counter the impact of the weakening dollar, said Suresh Senapaty, Wipro&#39;s chief financial officer. &quot;We have a healthy pipeline of large deals going forward,&quot; Premji said.The company had 79,832 employees as of December 31, which included 59,925 employees in its IT Services and products business and 19,907 employees in its BPO (business process outsourcing) services business.
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Wages in India have risen to the point that offshoring development operations no longer makes sense for one high-tech company.
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US Undersecretary of Commerce Kenneth Juster, right, winks as he speaks to Indian Minister for Science and Technology Kapil Sibal at the India US Information Security Summit in New Delhi, India, Tuesday, Oct. 12, 2004.
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Software exports from India's technology hub of Bangalore shot up 34 percent in the first five months of the current fiscal year compared to the same period the previous year, an official said.
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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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India's premier software body has said outsourcing of engineering services by global firms presented the country with a 40-billion-dollar opportunity.
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Indian outsourcers are planning to double the revenue from remote infrastructure management services by 2013.