UK outsourcing to India continues despite protests
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Karachi News.Net Saturday 10th February, 2007 As Indian investors stalk British companies with takeover offers, the economic logic of outsourcing operations to India continues to direct the growth plans of ...Comment
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The pound has continued to rise against the dollar following a better-than-expected UK manufacturing survey.
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BANGALORE, INDIA - India's software services and business process outsourcing (BPO) industries could face a shortage of skilled workers in the coming years, according to the National Association of Software and Service Companies (NASSCOM) in Delhi.
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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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India&#39;s IT services market is forecast to grow to $10.73 billion by 2011, at a five-year compound annual growth rate of 23.2 percent, as outsourcing emerges as a more favored option for companies in India, according to research firm Gartner.As companies are finding it more difficult to hire and retain staff in their IT departments, they are looking at external service providers as an option, hoping to also cut down costs, and better manage growth in the process, Gartner said Tuesday.Indian user companies compete for staff with Indian outsourcing companies and Indian operations of multinational companies, which hire new staff by the thousands each quarter.Staff attrition is however not the key reason why companies are outsourcing, said Arun Gupta, chief technology officer, at Shopper&#39;s Stop, a top Indian retail chain. Driving outsourcing in India is a growing demand for new technologies and applications. Shopper&#39;s Stop has six IT projects in progress with another 12 projects planned for the next six to 12 months.Rather than creating and managing a large IT organization in house, the company is working with service partners to support its 45 IT staff, Gupta said. Some of the functions it outsources are network maintenance, desktop and server maintenance, monitoring enterprise resource planning (ERP) applications, and software development, he added.A number of large banks and telecommunications service providers are already outsourcing key IT operations, though the key winners so far have been multinational services companies. Many Indian outsourcing companies had neglected the Indian market in favor of exports, according to a survey last year by Gartner. But that may be changing as the&#160;weakening dollar puts pressure on rupee&#160;realization from exports.IBM,&#160;Tata Consultancy Services (TCS), and Wipro together accounted for 26.1 per cent of IT services vendor market share in India last year, according to Gartner. IBM was the top vendor, with 11.2 per cent market share. TCS and Wipro occupy the second and third positions with 10.9 and 4.1 percent market shares, respectively.However, the Indian IT services market is still fragmented, with the majority of the market being serviced by smaller local players that account for close to 40 per cent of the IT services market, according to Gartner.&quot;We have looked at smaller players for very small and specific jobs, but for larger jobs, running into a number of years, and which require a variety of skills, we look at large Indian companies or multinational services companies,&quot; Gupta said.The key segments of the Indian IT services market are hardware maintenance and support, software support, consulting, development and integration, IT management, and process management, Gartner said.
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(InfoWorld) - Indian outsourcing companies have to move beyond low-cost services on an hourly-rate basis to offering complete services, according to an outsourcing consultancy. A model that is based primarily on the low cost of Indian staff will not be sustainable by Indian providers in the long term, as the cost advantage is eroding, said Dennis McGuire, chairman of outsourcing consultancy firm, Technology Partners InternationalÂ (TPI) in Houston, Texas. Large competitors like IBM and Accenture are also expanding operations in India to take advantage of low-cost staff, he said. âWhen I go to a restaurant, I want a chicken dish and not a rate-card telling me how much the chefâs time will cost me,â McGuire told reporters Wednesday. There isnât much risk, nor promise of great reward, in the current labor-cost arbitrage model adopted by Indian providers, he said. Indian service providers must make more investments in senior staff, and industry specific applications and tools if they want to win big contracts, said Peter Allan, a partner at TPI. They will have to develop industry-specific applications, such as a billing system for telecommunications companies, around which they can offer services to customers, said Siddharth Pai, another partner at TPI. Indian providers have been reluctant to trade current margins for long-term revenue opportunities because investors expect far higher margins from Indian service companies than from their multinational competitors, TPI said. Only recently have these outsourcers indicated that they are willing to accept total outsourcing deals that involve transferring customer staff and assets, Pai said. The reluctance of Indian outsourcers to address the lower-revenue domestic outsourcing business will also hurt them as the market shifts from plain coding and testing to higher-end transformation services, research firm Gartner said this week. Working on projects in India in these new areas would give Indian outsourcing companies the opportunity to prove their capabilities to customers abroad, said Partha Iyengar, research vice president at Gartner. Indian outsourcing companies such as Infosys Technologies and Tata Consultancy Services are attempting to go up the value chain into IT consulting and services delivered around their products. â They still donât offer the full array of services, and in applications they only have products in the core banking area,â Pai said. However,Â business is still strong for Indian outsourcers, according to data released by TPI. Of the number of contracts greater than $50 million awarded last year, the share of Indian service providers went up to 11 percent from 8 percent a year earlier, according to the consultancy. Their share of the total value of these contracts went up to 7 percent from 4 percent a year earlier, it said.
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Despite concerns over procurement process Southampton has outsourced its IT services to Capita, despite criticism of the procurement process and concerns about local jobs.â¦
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India's largest outsourcer, Tata Consultancy Services (TCS), reported Monday strong growth in revenue and profit, despite theÂ appreciation of the Indian rupeeÂ against the U.S. dollar and higher staff costs in India.
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Some still question the vehicle's chances of success, despite a boost from India.
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London, Aug. 19: Yet another fault has been found by British unions with the quality of outsourcing to India but this time perhaps with some justification.
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Working Western contracts in India isn't enough. Now they're outsourcing too.
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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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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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New venture in India raises questions about the evolution of offshore outsourcing.
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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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Although India still gets the bulk of U.S. offshoring dollars, the number of countries companies are eyeing is expanding as they seek specific IT skills and follow-the-sun delivery.
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International Business Machines Corp. said Wednesday it signed a pair of outsourcing contracts worth more than &#36;1 billion with two Danish companies, continuing the computer giant's push into northern Europe.