Industry news

Genpact Limited, a global leader in business process and technology management, celebrated the 10th anniversary of its entry into the Chinese market in Dalian today. Genpact’s global President and CEO Pramod Bhasin and newly-appointed CEO of Genpact Asia Charles Hunting met with the company’s employees to look back on Genpact’s achievements over the past decade and outline Genpact’s vision for the future, including the implementation of the company’s China strategy.

Pramod Bhasin, President and CEO of Genpact, said of Genpact’s accomplishments thus far, “China is a strategically important market for Genpact. It is a fact recognized around the world that if you want to succeed, you have to be in China. China’s service outsourcing industry has grown rapidly over the last ten years, as has the nation’s abundance of capable talent. This makes me even more confident of the future as Genpact continues to invest in the Chinese market and strengthen our China strategy and operations here.”

A pioneer of the outsourcing industry in China, Genpact introduced the new business model of outsourcing to China by opening the country’s first business process outsourcing (BPO) center in Dalian in June 2000. Since then, Genpact has proven its willingness to invest in its China operations and its commitment to the Chinese market by growing its business in China to include five operations centers in Dalian, Changchun, Shanghai, and Beijing, with more than 3,000 employees.

Source:http://www.marketwatch.com/story/genpact-celebrates-ten-years-in-china-2010-09-10?reflink=MW_news_stmp

CIOs are cutting operating budgets in order to increase capital expenditure.

Commercial and public sector CIOs plan to increase capital expenditure by 3% this year, funded in part by a 1.3% cut in operating budgets, according to research from Gartner.

Mark McDonald, group vice-president at Gartner, said economic conditions are changing CIOs' spending priorities. "CIOs felt they could no longer delay infrastructure upgrades and other capital investments, funding them at the expense of operating budgets," he said.

Overall IT spending remained flat, with budget growth projections just 1.1% this year, found the research.

However, smaller organisations are reporting stronger IT spending than their larger counterparts, said McDonald. "The larger the organisation, the tighter it is managing its IT budget, and IT operating expense in particular. This continues a trend we have observed since 2008," he added.

Industries such as utilities and healthcare are most likely to increase expenditure as they are undergoing deep structural change, while government and education industry CIOs report budget declines in the face of tight economic conditions, said the report.

Of the 500 CIOs surveyed, more than 40% said they were positive about the condition of the economy.

Source: ComputerWeekly.com

Bangalore: The US President Barack Obama on Thursday issued a veiled threat on offshoring saying that he would end tax breaks that encourage companies to create jobs and profits outside the US—a threat that analysts said would impact multinational firms more than any Indian IT services firms.

The president was speaking in Cleveland, Ohio. The state has proposed to ban offshoring of all government IT projects. Ohio’s unemployment rate is higher than the national average of 9.5%.

“For years, our tax code has given billions of dollars in tax breaks, encouraging firms to create jobs in other nations. I want to change that,” the President said. Instead of tax loopholes that incentivise investments in overseas jobs, he will propose a “generous, permanent extension of tax credit that goes to firms for research and innovation done in the US”.

This is not the first time that the President has spoken about loopholes in the US tax code. In May last year, Obama had proposed to close loopholes in a tax code that says “you should pay lower taxes if you create a job in Bangalore, than one in Buffalo, New York.”

Source: http://www.financialexpress.com/news/Obama-threatens-to-end-tax-bre...

The summer of 2010 is almost behind us and with it the third anniversary of the global financial meltdown that began with the US sub-prime crisis in August 2007, followed by the collapse of Lehman 12 months later.

Where some were initially optimistic about the duration of the downturn, others were able to discern the start of what would be a protracted recovery; 2009 was a particularly tough year and for many an annus horribilis.

In outsourcing, financial services is, perhaps understandably, where the impact has been felt the most. Certainly, outsourcing may not have witnessed such a drastic halt such as the one witnessed in the public listings and other financial sectors, but a slowdown was most definitely felt by most industry players as the effects trickled down.

“The financial services sector, seen by many as the most traditional user of outsourcing services was very quiet last year. It had little money to invest in new ITO projects and spent most of its time renegotiating contracts. Meanwhile, BPO was almost dead – no one really had the capital for the investment required,” said Alistair Maughan partner at international law firm Morrison Foerster.

However there are clear indications that this trend may be slowly reversing. Indeed, figures released in the latest Market Vista report, indicated that the banking, financial services and insurance (BFSI) sectors in particular have seen a 41% increase in transactions, with most contracts signed in the banking sub-sector; volume recorded was double over the Q1 this year.

The increase in transactions in the BSFI sector is indicative of a larger trend, which we are likely to see evolving: the increased attention to Cloud computing and XasS (anything as a service).

As the private and public sectors move to increase efficiencies and cut spending, Cloud computing presents a way to increase capacity or add capabilities on the fly without investing in new infrastructure, training new personnel, or licensing new software. It encompasses any subscription-based or pay-per-use service that, in real time over the Internet, extends IT's existing capabilities.

ITO suppliers are constrained to respond to client’s business demands through building capabilities to solve technical problems, expand services, and build consultative front ends and customised solutions for client’s differentiation.

Market experts suggest that this could see ITO suppliers in Central and Eastern Europe step up to respond to transformations caused by SaaS and Cloud Computing, adjust costs, upgrade delivery models among others issues.

In the UK there has been much talk about the G-Cloud. A strategy that would support everything from pooled government data centres to a communal email solution, collaboration tools and staff-editable wikis. It could allegedly save government £3.2bn of its annual £16bn IT budget – perfectly meeting the chancellor's 20% savings target. [The current ad hoc network of department- hosted systems is composed of a dozen dedicated government secure data centres, costing close to £250m each.]

“We don’t see an increase in Government IT happening over the next 12 months based on current deal flow as well as on the procurement cycle – it takes a good 12 months to get through a procurement process. This means such projects would not be implemented before autumn 2011,”commented Maughan.

Another trend that has been slowly building up is a move away from megadeals and into multi-sourcing type deals.

Indeed, for some in the outsourcing industry, these mega deals have become a thing of the past. The breaking down of larger contracts into smaller deals could open up the possibility of using smaller suppliers and manageable projects with appropriate governance and flexibility as required by volatile business environments, and altering systems when business change demands it.

“Under present circumstances, the projects will be axed (e.g Building Schools for the Future) or re-shaped. Reducing down the size of projects and capping them at £100m is also likely to be part of the landscape of the coming months,” notes Maughan.

“Anything above a £1m will have to go to ministers with projects over £100m going all the way to the top for authorisation,” continues Maughan “Reducing down the scope of projects is also likely to make them more manageable.”

The blending of the services provisions market is also a trend that has been evolving in the last three years. The distinction between Tier-1 providers (Accenture, IBM, EDS, CSC); mid tier/niche (Capita, Capgemini, Unysis), and the traditional (offshore) vendors (TCS, Wipro, WNS) was more of less clear.

However, things may not be as clearly delineated anymore. Tier-1 players are trying to develop their offshore capabilities while traditional providers are establishing onshore presence; mid Tier vendors are perhaps feeling a squeeze as they find it more difficult to compete with the larger players.

This market consolidation is also illustrated by acquisitions like that of EDS by Hewlett Packard, Perot Systems by Dell, ACS by Xerox or TCS’ purchase of UK-based Diligenta.

Whether reactionary, proactive or a bit of both; the trends evolving in the outsourcing market have been a few years in the making. Nevertheless, it would be unwise to bet on these trends evolving in a particular direction.

And while recent Gartner reports suggest the UK’s Government IT spending will be higher than financial and manufacturing sector. It also assumes that Chancellor George Osborne, in his aim to bring public sector to 1997 levels, will be successful in transforming people-driven processes into IT-driven processes – according to industry experts, that’s 450,000 jobs we are talking about cutting.

It would seem that before anything can happen the government is going to have to bite the bullet and make up its mind: efficiencies and virtualisation vs. unemployment. It’s going to be a tough one.

The practice of outsourcing recruitment processes is now well accepted in Europe and the US and, increasingly, on the Pacific Rim. But should organisations be going one step further and partnering with outsourcers to support the vital work that goes into retaining staff as well?

I would argue that giving responsibility to an external organisation which already looks after hiring processes would help companies avoid an all too common trap - trying to address retention when it reaches its crisis point and an employee has already expressed a wish to leave. Which is, of course when it is far too late to do anything productive. Once someone has decided to go then what I‘d call the psychological contract has been broken. And when that happens, no matter how much time, effort and money is thrown at the problem, that individual will almost certainly move on – perhaps not immediately, but within a relatively short period of time during which they will become less and less effective.

To be really effective, organisations need to be thinking about retention issues from the very first point when they engage with a potential employee. Of course this means ensuring that front line recruiters are treating the individuals they deal with in a consistently professional fashion - and not just those that are right for the role or the organisation but those who do not match the spec as well. Blogs, twitter and social networking sites have made it all too easy for a disgruntled applicant to do serious damage to an employer brand.

Its also very important for recruiters to be communicating the right messages about the organisation to potential hires. Over-selling a job or a working environment is a recipe for disaster. The more an individual understands about the job and the culture in which it sits then the less likelihood that expectations will not be met and the employee will vote with their feet. It’s all about joining up the talent management process to make it work in the most effective way rather than looking at each part of it in isolation.

We all recognise that the idea of the job for life has gone the way of the dinosaur so 100% retention is completely unrealistic. However retention initiatives are absolutely vital to business success because they can help an organisation analyse exactly what elements of its workforce it really needs to hang on to and how to marshal its resources to do this. Equally as important is the management of attrition. Once a company accepts that people will leave it can target its efforts at ensuring that they leave with the most positive view of their time there. By doing this it will be sending out ambassadors for the business who will help generate new customers, new recruits, new partners. And the flip side of this is just too unpleasant to contemplate.

Paul Daley is a director at recruitment outsourcing and talent management specialist, Ochre House – www.ochrehouse.com

by Mike Henley, outsourcing expert at PA Consulting Group.

In the first of a two part series, Mike Henley, outsourcing expert at PA Consulting Group with 20 years experience in the legal sector, discusses how, in the light of fundamental and permanent changes in the legal market, the greatest issue is whether legal firms and their people can accept and deliver revolutionary change.

The last 18 months to two years have been difficult for most law firms. A minority of firms have managed to do well in terms of maintaining revenues and profits, but most have seen revenues and profits drop in the recent past, in some cases quite alarmingly.

Many firms have been reducing staff numbers and trainee intake and most are trying to reduce cost and control expenditure much more tightly. Some are being looked at very carefully by their bankers, who no longer regard law firms as being immune to catastrophic failure. It has not been a pleasant time for many partners, some of whom have been managed out altogether, whilst others have been demoted from equity status. For those remaining in the equity, many are being asked to take on greater personal risk with the prospect, at least in the short to medium term, of less reward. They are being required to contribute more capital at a time when their drawings and profits are reduced.

What makes this a period of fundamental significance for law firms is the fact that the economic turmoil of the last two years is only one of a number of dynamics which together will reshape the legal marketplace. What are those dynamics?

• Substantial reductions in revenues and profits, caused by lower volumes, particularly in corporate finance and real estate sectors,, have weakened firms. The position is made worse by the fact that many current and prospective clients have been experiencing serious financial troubles, and in reviewing their spending categories are looking to pay their lawyers less.

• Clients are asking, where is the value for money? It is becoming increasingly difficult for law firms to justify their fees when balanced against the tangible value they add to a client’s business. Law firms are being asked whether their activities are making a difference, whether the fees are proportionate to the difference made or how easily an alternative comparable service could have been procured for similar or lower fees?

• Competition is increasing, most notably in the form of increasingly powerful in-house teams and ambitious new entrants to the market in the form of providers of legal process outsourcing (“LPO”).

• Liberalisation of the legal market will drive commoditisation. Non lawyers are entering the market place and are bringing proven business tools, technology and techniques to deliver consistency and reduced cost.

• There are too many law firms. Competitive dynamics, fee pressure, the current trend for clients to rationalise and manage their relationships with firms more actively and the contraction of the economy all point to significant overcapacity in the market.

In the second of this two part series, Mike Henley will demonstrate how law firms must react to these changing dynamics to secure their future success.

Public sector organisations are leading the way in outsourcing software applications and IT infrastructure to third-party providers, but cost savings are not always the biggest draw.

The Nursing and Midwifery Council (NMC) announced last week that it will outsource its core applications and IT infrastructure to Business Systems Group (BSG) in a deal worth £5.2m over five years.

Elsewhere, Bridgend County Borough Council has renegotiated a deal to host its COA Solutions e5 financial accounting system with hosting company 2e2, saving an estimated £488,000 over the course of the five-year agreement. But this was compared with the cost of the previous outsourcing contract, rather than in-house provision.

The NMC had a large outsourcing contract with EDS, which ended in 2002, but has kept applications and services in-house since then. It will move 50 servers from one of its own datacentres into a BSG facility also in London, as well as the storage area network and all the applications those servers host. The NMC will keep a separate datacentre operational for disaster recovery purposes.

Jolyon Ingham, interim head of ICT for NMC, said actual cost savings compared with in-house provision were negligible – it was the attraction of moving responsibility for IT provision and disaster recovery to a third party, leaving the NMC to focus on providing core services, that won the argument.

“Cost savings are pretty cost neutral. We had a small team of four guys that has been transferred to BSG. But we also used consultants and contractors and it had become very expensive to continue to manage the infrastructure ourselves,” he said.

“When we come to refresh the hardware in two to three years’ time, we will look to buy services rather than make a capital [infrastructure] investment. Infrastructure is more of a commodity these days, and we recognise this.”

All NMC’s software apps will be hosted by BSG, including its OpenAccounts fin ancial management system. The deal also covers systems monitoring and technical design services provided by BSG, as well as support for the NMC’s Exchange email system, its Cisco CallManager IP telephony system and, later, Citrix desktops after a scheduled move to thin client PCs as part of the agreement.

“Being a public body, we are subject to the Data Protection Act (DPA) and so data confidentiality forms a large part of the BSG contract,” he added.

Bridgend County Borough Council is also required to store its data in the UK to comply with DPA and privacy regulations, although it is not subject to Financial Services Authority rules. All its accounting and general purchase ledger information will reside on 2e2 servers going forward.

Although it has had a similar outsourcing agreement with 2e2 going back to 2002, it has recently switched platforms.

“We have been using COA Solutions e5 financial accounting system for a long time now, but this is a move to a completely new delivery platform from the old Unix-based one,” said Steve Durbin, Bridgend council’s group manager for applications delivery.

The e5 software is delivered to up to 300 users who regularly log in and download changes to the Java-based application, which is cached on local PCs. Legacy users of other systems will be brought on board over the next 12 months, as well as users of the council’s purchasing system.

While cost savings played their part in the decision to retain 2e2 during the tender process, Durbin revealed it would still have been cheaper to opt for in-house software provision. Rather, it is the flexibility, reduced management overhead and ease of future scalability that swung the argument, with 2e2 going the extra distance to retain the business.

“They [2e2] would have cost a little more than an in-sourcing solution, [but] it saves us all the hard work and means the accounting department is given a fixed cost for IT,” he said.

Research company Gartner has estimated that the value of enterprise software delivered globally via the software-as-a-service model will exceed $8.5bn (£5.5bn) in 2010, a 14.1 per cent increase over 2009, as a broader range of applications and Web 2.0 integration prove more tempting.

Bridgend is currently considering switching other in-house applications and services to a hosted model, most notably security and threat management.

Source: http://www.computing.co.uk/computing/analysis/2269289/why-outsourcing-worth-cost#ixzz0z1G23inx

The Indian IT sector on Wednesday termed the Ohio state’s bill to ban outsourcing of its IT projects discriminative and counter-productive to the US government thrust on reducing public deficit.

“Ohio’s ban on outsourcing can only be viewed as counter-productive to the US government thrust on reducing public deficit and possibly lead to an increased tax burden on its citizens,” the industry’s representative body Nasscom said in a statement.

Noting that the move came at a time when the November elections to the US Congress and Ohio governorship were drawing closer, Nasscom president Som Mittal said that more such electoral rhetoric could be expected in the next few months.

“We are taking up the issue with the US officials concerned later this month. We will also seek the support of the union minister for Industry and Commerce Anand Sharma, who will be in the US at the same time,” Mittal said.

Endorsing Nasscom’s stand against the controversial move, Indian IT bellwether Infosys Technologies expressed concern at the banning of offshoring of IT services by the Ohio government.

“We are concerned with the news from the US over banning offshore outsourcing by the Ohio government departments,” Infosys chief executive Kris Gopalakrishnan said in a statement here.

The company, however, hoped that its initiative in the public services sector would not be affected as it is focused on creating a domestic delivery centre in the US.

“Though the public sector in the US represents a small fraction in the overall demand for off-shored services, it is focus areas in the future for the Indian IT industry, as governments world over are seeing the benefits of employing IT in public services,” Mittal asserted.

Nasscom is also studying the legality of such a bill being passed by the Ohio state government though international trade is a federal subject.

“It is imperative that the focus on free trade remains strong, but instances like Republican senator Schumer’s Borders Security Bill and the Ohio state ban on outsourcing only reinforce our stand on discrimination,” Mittal pointed out.

Since India was opening up not only in IT, but also in other areas for global firms, Nasscom has decided to work with key stakeholders to minimise the impact of such discrimination by highlighting the benefits of IT with international governments.

Source:http://smetimes.tradeindia.com/smetimes/news/industry/2010/Sep/09/it-sector-terms-ohio-s-outsourcing-ban-discriminative61987.html

BPO services provider Firstsource Solutions Ltd said it signed a five-year outsourcing agreement with Axis Bank Ltd.

Firstsource, as a part of the agreement, will offer customer contact services (voice, email & web chat) to retail customers of Axis Bank.

Services to Axis Bank retail customers will be across the fixed, savings and current account category while credit card services will be to its platinum, corporate, regular and travel card customers.

Firstsource will provide these services from its centres in Mumbai and Chennai in 11 Indian languages. Firstsource currently derives 24% of its revenues from the banking, financial services and insurance (BFSI) vertical, said the company in a statement.

On Tuesday, Firstsource shares declined 0.9% to Rs26, while Axis Bank shares rose 0.2% to Rs1,398 on the Bombay Stock Exchange. The benchmark Sensex gained 0.5% to 18,645 points.

Source:-http://www.moneylife.in/article/8/8926.html

Mahindra Satyam has launched a single-window ‘Art-to-Part’ engagement model for partners in Aerospace and Defence. This 3600 partnership model covers both design and manufacturing areas to provide a seamless engagement experience for partners, covering the complete product development lifecycle including after-market services.

The new proposition leverages synergies within the Mahindra Group, drawing on the skill sets and experience from Mahindra Aerospace and Mahindra Defence, which specialise in aerospace manufacturing and defence systems. Mahindra Satyam, which works with 5 of the top 8 global Aerospace and defense organisations, provides end-to-end product engineering capability, covering aero-structures, avionics, wiring design, systems design, manufacturing engineering and consortium-led manufacturing projects, for both civil and military sectors.

Mahindra Satyam’s single ‘interface’ model provides a continuity of service to minimise recurring costs, improve time to market, and maintain research and development at reduced costs and reduced risk. The business model is built around creating significant value for partners by taking end-to-end responsibility of mission critical systems and sub-systems. This not only provides cost and time-based arbitrage but also means that Mahindra Satyam will share the ‘risk’ with its partners.

Gaurav Gupta, Associate Vice President Strategic Partnerships, Aerospace and Defence said: “Clients in this market sector increasingly require partners which can deliver an entire solution as opposed to a particular, discrete service. Mahindra Satyam can draw upon a wealth of expertise from within the Mahindra Group in this sector to offer a complete 3600 relationship. We are creating various Centres of Excellence, not just in Aerospace, but also in Defence including Land and Air. This market looks set to boom in the next two to five years with India predicted to spend Billions both on ‘Buy’ and ‘Make’ programmes. We also created the ‘Technology Advisory Council’ for Aerospace and Defence, A&D, constituted by key recognised leaders from the A&D industry, Academia and Mahindra Satyam, which is a unique step towards creating technology-based innovation, developing new engineering and design talent, and building a blueprint for tomorrow.”

He continues: “As a large scale integrator we will support our global partners in developing their commercial interests in India, as a home market. Our ability to impact costs for both recurring and non-recurring parts of a programme enables our partners to fulfil their offset obligations more effectively. Our aim over the next 12 months is to build on our existing relationships, and create new partnership opportunities through our ecosystem for design and consortium based manufacturing. Of course, risk arbitration will drive innovative commercial modelling in this sector and is the key to building large, strategic partnerships.”