Outsourcing to India shows no signs of letting up
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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.
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India&#39;s largest outsourcer, Tata Consultancy Services, Wednesday reported strong growth in revenue and profit, despite earlier concerns that the&#160;Indian outsourcing industry would be badly hit by a weak dollar, and a crisis in the U.S. subprime mortgage market.The company&#39;s revenue for the quarter, ended Dec. 31, was 59 billion rupees ($1.5 billion at the exchange rate on the closing day of the quarter), up by 22 percent from the same quarter in the previous year. Profit increased by 20.5 percent to 13.3 billion rupees.The company said it had improved its operating margin despite a 2.3 percent appreciation of the rupee against the dollar during the quarter, by cost-cutting and improving productivity. The rupee has gained about 12 percent over the dollar in the last year.Infosys Technologies, India&#39;s second largest outsourcer, said last week that its revenue for the quarter ended Dec. 31 increased by 32 percent, to $1.1 billion, from the same quarter in the previous year. Profit for the quarter rose by 42.2 percent to $310 million.Revenue growth rates are, however, not likely to be as high going forward, mainly because the companies already have large revenue bases, according to analysts.In the application development and maintenance market, where Indian companies are dominant players with about 36 percent market share, the opportunity to increase revenue isn&#39;t very large, said Siddharth Pai, a partner at Technology Partners International. The company is a sourcing consultancy firm in Houston.Indian companies are looking at new services lines, but it will take some time for these businesses to be key revenue earners, Pai said.Indian outsourcers also compete for staff with the Indian operations of multinational services companies like Accenture and IBM. Quality staff is increasingly harder to hire, and&#160;salaries are on the upswing.Infosys, for example, added 8,100 employees in the last quarter, taking its staff to 88,601 at the end of December. Tata added 4,037 in the quarter, giving it a headcount of staff to 108,229. The company&#39;s attrition rate at 12.2 percent was, however, higher than in the previous quarter.
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While media and political attention is on the threat of outsourcing, the reality is that outsourcing is a sideshow in a much larger event.
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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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(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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India's software exports are on track to grow by 30 percent in the year to March 2005, despite attempts in the key U.S. market to discourage outsourcing and protect jobs, the industry's head said on Monday.
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Many large companies have reaped the economic benefits of outsourcing in recent years. Karim Morsli is trying to make money bringing those same advantages to small and medium-sized businesses -- while also spurring economic growth in Africa.
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Indiaâs business providing software and services to companies outside its borders will grow a healthy 26 to 29 percent this year, the country's main trade association for that sector said Monday.
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It may now be the turn of Indian companies to offshore outside India their IT services requirements.
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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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(InfoWorld) - It may now be the turn of Indian companies to offshore outside India their IT services requirements. Indian CIOs will have to consider outsourcing offshore, because of the shortage of IT skills in the country, and inadequate services standards of local service providers, according to research firm Gartner Inc. Indian companies have been looking at India alone for outsourcing, said a spokesman for Gartner India on Tuesday, who asked not to be named. They will now have to look at other locations like Singapore, Hong Kong, and even the U.S., he added. The services offshore will come at a premium to Indian prices, but will at least ensure that Indian CIOs get quality services, the spokesman said. Demand for skilled IT personnel as a result of initiatives like the Indian government's recent national e-governance program (NEGP), and resource-hungry Indian offshore service providers, are outstripping local supply, according to Gartner. Rapid economic growth in India is exacerbating the problem, and local chief information officers areÂ finding it difficult to manage the shortage of skilled local IT resources as internal business units become even more demanding in the area of IT requirements and schedules, the research firm added. Indiaâs gross domestic product (GDP) grew 9.2 percent in the countryâs fiscal year to March. A recent Gartner survey conducted among more than 1,400 CIOs worldwide showed that IT budgets in India had the highest growth of 16.19 percent, compared with an average of 3.16 percent in the rest of the world. Gartner warned in February thatÂ the problem for user organizations in India may only get worse as outsourcing companies start hiring business line managers from user organizations to build their vertical industry expertise. As large Indian outsourcers grow in revenue by 30 to 40 percent each year, they will hire business managers from the banking, manufacturing, and retail industries, that bring the business knowledge that can be integrated into their services offerings, it added. The focus of Indian outsourcers is primarily on markets in the U.S. and Europe where margins are far higher than in India, according to Gartner. Multinational services companies have targeted outsourcing deals by large Indian companies but the focus so far has been on very large deals, Gartner said in February. If Indian CIOs outsource work offshore, that may get Indian companies to try and reverse the trend, the Gartner spokesman said. An alternative to offshore outsourcing is for Indian CIOs to work with second and third-tier providers in India who are interested in local business, said the Gartner spokesman. The right provider may be able to provide domestic resources and perhaps a higher level of attention to issues and demands, he added. Â
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As the 2008 presidential campaign picks up speed, Indian outsourcing companies have returned to Washington as veritable insiders, slicker and better connected than ever.
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The rise of the Indian rupee against the U.S. dollar is affecting Indian outsourcers.
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India has reaped the benefits of foreign companies switching jobs and resources to the country over the last five years.
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A heart-drug trial that was &quot;outsourced&quot; to India and China -- an approach many industries are taking to save money -- demonstrates the
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The Indian consulting firm continues to battle wage pressures and a higher currency.
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London, Feb 10 As Indian investors stalk British companies with takeover offers, the economic logic of outsourcing operations to India continues to direct the growth plans of major companies, despite protests ...Comment