Industry news

With a record low in property sales last month, the British Chambers of Commerce (BCC) have added to the UK's woes by reporting the worst economic survey results on record and a “frightening deterioration” in the UK's performance.

Covering the last quarter of 2008, the BCC said the survey results contained “no positive features... Domestic demand is plunging, exports are falling, and confidence is plummeting”.

The BCC has carried out its quarterly survey of more than 6,000 firms for more than twenty years.

While retail and manufacturing performance have been in the public spotlight, the bad news also concerns the services sector, said the BCC, in which home sales and orders were “particularly disturbing”. Manufacturing and services together showed negative results across enterprises of all sizes in every UK region.

”Interest rates will have to be reduced to almost zero early in 2009,” said the BCC's chief economist. Others predict that the base rate may hit half of one percent by Christmas 2009.

However, interest rate cuts are no longer adequate on their own, warned the BCC. “New and more far-reaching measures like a further fiscal stimulus and quantitative monetary easing should be introduced,” said the report.
 Quantitative easing is the modern equivalent of printing money, which some political commentators view as the last option facing a bankrupt nation.

Some of those same commentators believe the UK may have to turn to the International Monetary Fund for aid. If that happens, then Brown's days must surely be numbered.

“If the risk of deflation worsens, businesses will face new threats, and the authorities must be ready to introduce emergency policies," continued the report. Deflation might seem attractive to counterbalance last year's hike in food and energy prices, but as we've seen from the property market it can undermine consumer demand as people wait for prices to fall.

”The smooth flow of finance to businesses must be sustained at all costs, and business taxes will have to be cut,” concluded the report.

The British Retail Consortium also reported the worst high street performance since it began its own regular survey fourteen years ago.

With the government debating a loan guarantee scheme and offering golden hellos to companies taking on the long-term unemployed, it's clear that 2009 may prove to be a dark year indeed for business.

This is no ordinary recession like the one we experienced in the 1990s: the credit crunch means that even long-established, generation-spanning businesses are unable to secure lines of finance to ride out the downturn.

So let's get some feedback from sourcingfocus.com's readers and NOA members: what has your experience been, and what lessons must we learn? Sourcingfocus.com is your forum. Let's make it a thinktank for innovative ideas.

George W. Bush has used his last press conference as president today to air his views on the economy.

The outgoing 43rd president, who leaves office next Tuesday when Barack Obama is sworn in, said a protectionist stance on trade would be a huge mistake for America and the world, and that global trade was the way to end countries' isolation.

Asked what mistakes he made in office, he said he regrets working people's money finding its way into Wall Street bankers' pockets in the wake of the multibillion dollar economic cash injection last year.

In a long press conference, during which the President seemed relaxed and jovial, he took the time to poke fun at himself, repeating the 'misunderestimated' gaffe that, for many, characterised his time at the White House.

On a more serious note, he said that he inherited a recession and was leaving office in a recession – which he said he had been warned could be as serious as the Great Depression that followed the Wall Street Crash in 1929. Thanks for that note of optimism, George.

Next Wednesday he is getting off the stage and out of the spotlight, he said, and said he wished President Elect Obama “the best of luck”.

CSC has received four task orders to support the Department of Defense’s (DoD) ‘High Performance Computing Modernization Program’, providing technical operations as well as user support and outreach services at two DoD sites. The combined value of the task orders is more than US $82 million if all options are exercised over six years. The task orders were awarded by the General Services Administration under the Federal Technology Service’s Millennia contract.

CSC’s High Performance Computing (HPC) Center of Excellence, which has supported the DoD sites since 1996, will perform the work under two task orders at each site: the U.S. Army Corps of Engineers’ Engineers Research and Development Center in Vicksburg, Miss., and the U.S. Air Force Aeronautical Systems Center in Dayton, Ohio. CSC will support the centers’ high-performance capabilities with services ranging from site preparation, system administration, and equipment installation and integration to providing help desks, managing user information and providing scientific visualization support.

“Few companies can provide the scope of services that CSC can in such a technically demanding and leading-edge environment,” said Bob Scudamore, vice president of CSC’s HPC Center of Excellence. “We look forward to continuing our support of these sites.”

India’s Ministry of Corporate Affairs has announced the appointment of a new board at troubled Satyam, including the ex NASSCOM president, Kiran Karnik. The company said in a statement that it hopes to: “ensure the company's continued operations, maintain customer confidence, and restore investor trust.”

The new members are:

Deepak S. Parekh, Chairman of HDFC Bank

Kiran Karnik, former President of NASSCOM

C. Achuthan, Director at the National Stock Exchange, former Member

SEBI, and former Chairman of Securities Appellate Tribunal.

Commenting on the appointment the company said, "The new members are eminent and accomplished leaders, recognized in India and around the world for their expertise in finance, law, administration and the IT services industry. Satyam's leadership team has complete confidence in them, and pledges to work closely and in full cooperation with the new board.”

The board is expected to meet within the next 24 hours.

"This is a vital stabilizing development for Satyam, and it marks the beginning of a new chapter in the company's history. It is the best news we've received in the past four weeks," a company spokesperson added.

It's not often that I'm disappointed to be proved right. No sooner had I invoked the spectre of Enron in my earlier blog this week – about Satyam, corporate governance and the risks to the reputation of India's outsourcing industry – than Satyam's chairman had resigned in the wake of a billion-pound scandal.

B Ramalinga Raju, Satyam's founder, has quit after it emerged that he and his brother had fraudulently added some 70 billion rupees' worth of business (£1 billion) to the company's books, overestimating the company's worth for several years.

India's "Enron moment" was reportedly hidden by Raju from Satyam's board and auditors; nevertheless, the board is now no more, while the auditors are being investigated. Satyam shares plunged 40 percent today and it is not certain that the company has enough money to pay its 50,000 staff.

Needless to say, the timing could not be worse for Indian outsourcing, and for the Indian and global economies.

India has been a beacon of economic growth and, on the surface at least, outsourcing professionalism in BPO services. That one of its largest and most prestigious companies has engaged in fraudulent practice on such a massive scale will inevitably damage confidence in Indian corporate governance (not to mention Indian outsourcing).

Bear in mind also Satyam's run-in with the World Bank and whispers about a number of business deals: this appears to be no isolated incident at the company.

The sad truth is that, however honest and transparent other Indian outsourcers may be, mud sticks and clients of every size may feel nervous about large-scale exposure to the sector at a time of economic fragility back home.

Sector confidence is easily damaged when any player is found to have behaved unethically. Let us hope that such wholesale dishonesty is limited to a few individuals within this once-proud company, and not indicative of a widespread malaise across a sector that has witnessed explosive growth and cut-throat competition.

So what next for Satyam? It is now an obvious takeover target, whatever its directors may do to steady the ship. However, the repercussions of any swift, economy-steadying buy for long-term competition within Indian outsourcing would make for an anxious 2009 for clients in the West. Would customers want a small number of major players to hold the balance of power in outsourced expertise and business services?

Capita Life & Pensions has announced a five year partnership with Steria, which will see it provide offshore IT application development and support services for Capita’s life and pensions clients.

John Torrie, Steria UK CEO, commented, “This is an important partnership for Steria and strengthens our position within the IT outsourcing market.”

Craig Rodgerson, Capita Life & Pensions IT director, said, “Our overall objective was to manage our IT expenditure, so that we could offer our clients the most cost effective service possible.”

No financial details were released

Unisys Corporation, a worldwide IT services company, has received a one-year outsourcing contract from Dr Pepper Snapple Group, one of the largest beverage companies in the Americas.

Unisys will provide managed services for 5,000 Dr Pepper Snapple Group IT users in the Americas.

Virginia Guthrie, CIO of Dr Pepper Snapple Group, commented, “Partnering with Unisys for outsourcing services helps Dr Pepper Snapple Group keep IT costs in line and streamline operations.”

No financial details were released.

TCS has launched a development centre TCS Kalinga Park in Bhubaneswar, Orissa.

TCS Kalinga Park, which is being developed over 45 acres of land, is the latest addition to the company’s global delivery repertoire. The first unit of the facility with a capacity of 1,000 seats has been made operational in the first phase. Upon completion, the facility will have a total capacity of 7,000 seats.

Mr. S. Ramadorai, TCS CEO & Managing Director, commented: “With a strong education eco-system and plentiful talent, Orissa has emerged as a key resource base for TCS in the region. The new center will also increase our access to skilled professionals and students from in and around Bhubaneswar.”

The head of India's Satyam Computer Services resigned on Wednesday after saying that the outsourcer’s profits had been inflated, sending the stock down more than 80 percent and roiling investor confidence, according to a report by Reuters.

Ramalinga Raju, founder and chairman of Satyam, said in a statement the company's profits had been inflated over recent years but no other board member had been aware of the financial irregularities.

"The gap in the balance sheet has arisen purely on account of inflated profits over a period of the last several years," Raju said.

The Economic Times has reported that Tech Mahindra, has approached Satyam Computer Services, India’s fourth-largest IT services company, for a cashless merger, according to a person close to the development. If the merger goes through then the resulting organisation would be the third largest IT services company in the world.

The full article can be found here