Industry news

According to technology research and advisory firm Gartner, Inc. the market for Business Intelligence (BI) platform software in Australia is forecast to reach a$174.8 million (US$152 million) in 2009, up 16.8 percent from A$149.6 million (US$130.1 million) in 2008.

Speaking ahead of the Gartner Business Intelligence and Information Management Summit in Sydney next week, Gartner analysts said BI platform purchases should be more resilient to a recession compared with some other software areas, but a tougher economic environment, together with stronger pricing pressures, would still hamper growth during the next five years.

Additionally, many organisations are still trying to get value from their BI investments, according to Gartner. Further investments by these organisations will be constrained until they determine how to get value from the investments they have already made.

For the fourth year in a row, BI applications have been ranked the top technology priority in the 2009 Gartner Executive Programs survey of more than 1,500 chief information officers (CIOs) around the world.

Ian Bertram, Gartner managing vice president and chair of the 2009 Gartner BI Summit, said that because BI has the highest priority for CIOs, it will fare better than many other technologies and management practices in the economic downturn.

“Businesses in this region will continue to prioritise BI because it's transformational,” said Mr. Bertram. “BI is even more important when times are tough. It can help find bottlenecks and inefficiencies or to expose areas that are profitable. We continue to see traction for solutions such as spend analytics, risk and fraud.

“The rapid growth in information generated from enterprise applications, the popularity of metrics-driven business initiatives and the growing need for regulatory compliance will also continue to drive growth in BI,” he said.

While market demand for BI platforms will be favorable, heavy discounting can be expected, according to Gartner. The effect of the market consolidation by SAP, Oracle and IBM is to reduce overall revenue because BI is often sold as an add-on or part of a larger solution bundle. This will keep overall revenue growth lower. BI investments are also likely to be subjected to increased scrutiny from finance, with CFOs doing final negotiations on pricing and maintenance.

Mr. Bertram said skills shortages continue to hamper BI projects in Asia Pacific.

“Mature markets such as Australia and Singapore continue to make investments but struggle with a gap in implementation skills. Limited BI skills in Asia Pacific will inhibit growth in license revenue, but it also represents an opportunity for service providers. Software vendors should work on improving usability, design appropriate learning programs, propose alternative delivery models and form strategic partnerships with local service providers,” he said.

The overall Asia Pacific BI platform software market will continue to grow at a respectable compound annual growth rate (CAGR) of 15.3 percent through 2012, reaching more than US$510 million by 2012, according to Gartner.

Australia will remain the biggest BI platforms software market in Asia Pacific through 2012, reaching A$243.8 (US$212 million) in revenue, followed by China. The local BI market will be sustained through maintenance revenue, which will become more pronounced in the slowing economic environment.

Kale Consultants announced that it has entered into a multi-year outsourcing contract with Wataniya Airways. As part of the deal, Kale will deliver complete outsourced revenue accounting and passenger audit services from its delivery centre. Kale will provide services to the airline from its Managed Processing Services centres in India.

George Cooper, CEO of Wataniya, commented, “Outsourcing our accounting and audit services to a specialist like Kale has been a key strategic step in our preparations to commence operations in January 2009. This will help us to keep our costs in line and build efficiencies to focus on devising competitive strategies in our core area of business”.

The Economic Times has reported that Merrill Lynch will move many of its IT contracts away from Satyam to Tata Consultancy Services. The contracts are reported to be worth up to US$40 million.

The Indian newspaper also commented that in early February Merrill Lynch sent a team to assess the situation at Satyam’s headquarters.

The bulk of the contracts will move to TCS. However, Satyam will continue to service parts of the contract for the foreseeable future.

The full story can be read on the Economic Times’ website

India's Tata Communications plans to invest $430 million in the Asia-Pacific region.

The investments will include developing an internet data centre and the completion of the main segment of its TGN-Intra Asia Cable System. The development forms part of the company’s commitment to enhance its global infrastructure as part of an ongoing US $2 billion expansion plan over the next three years, the company said in a statement.

The Tata Communications Exchange and the TGN-Intra Asia Cable System are integral parts of the Tata Global Network (TGN) that includes one of the most advanced and largest submarine cable networks, a tier-1 IP platform and more than 1 million square feet of data centre and co-location facilities worldwide.

The new infrastructure investment comes due to increasing outsourcing demands from global multinational corporations into emerging markets. Tata Communications itself is expanding its capacity with the construction of a flagship data centre, the Tata Communications Exchange in Singapore. It will be ready for operation in early 2010. The new data centre will provide increased capacity for both domestic and international companies

“The Asian market continues to be promising, even in the current economic environment. Businesses need to capitalise on the opportunities this region provides, and investments in Asia are critical for the growth of global business,” said Vinod Kumar, president and chief operating officer for Tata Communications. “Our large-scale investment in the Tata Communications Exchange, coupled with our submarine cable build-out, ensures scalability and global reach while delivering our commitment to meet customer requirements. We will continue to be an active leader in offering superior services into emerging regions where we see high growth potential and opportunities for customers.”

The credit crisis seems set to prompt a new rush for outsourcing services across the I.T. sector, with a number of new locations worldwide emerging as viable Business Process Outsourcing (BPO) hubs, according to KPMG's Advisory practice.

Launching their Exploring Global Frontiers report at last week’s NASSCOM outsourcing event in India, KPMG claims to have identified 31 cities which are rapidly emerging as leading pretenders to the BPO crown held by the traditional powerhouses such as Bangalore, Chennai or Shanghai.

As those locations rapidly approach saturation point, there is a sizable opportunity for these new and emerging locations to swallow up a large proportion of the new outsourcing work which the credit crisis is apparently creating.

The 31 locations are an eclectic mix, ranging from well-known cities in developed countries to lesser-known places in the emerging markets, well off the tourist track. Winnipeg, Belfast and Brisbane all feature for example, alongside Queretaro, Davao City and Cluj-Napoca.

On the KPMG list, Buenos Aires, with its population of nearly 13 million, thus features alongside tiny Port Louis (population 130,000) in Mauritius. Despite the difference in size, both are emerging as important future outsourcing centers, with the latter rapidly developing an international reputation as a disaster recovery center.

Speaking at the report’s launch, Edge Zarrella, Global Head of IT Advisory at KPMG and a partner in the Hong Kong firm, said: “Traditional sourcing locations, which have been at the forefront of the outsourcing boom, were always going to reach saturation point. Corporates now need to know which locations to consider next for their outsourcing activities. There are many locations around the world which are able to supply a credible outsourcing capability. However, there are subtle nuances in terms of labor skills, niche specialisms and government incentives which have led us to highlight these 31 locations as stars of the future.”

“The need to develop new, cost effective, viable outsourcing locations has been highlighted by the economic events of the past few months. Companies are focused on reducing their cost base, both for short-term and long-term gain. As a result, more organizations are considering savings obtained through outsourcing parts of their operations. Most importantly, they should be convinced that by doing so, they are not sacrificing performance for the sake of cutting costs. Our location study aims to highlight the benefits brought by the different city choices available to them.”

The full list of highlighted destinations includes 10 locations in the Americas (Buenos Aires, Campinas, Curitiba, Calgary, Winnipeg, Santiago, Guadalajara, Queretaro, Boise, Indianapolis); 10 in Asia-Pacific (Brisbane, Changsha, Hangzhou, Ahmedabad, Jaipur, Nagpur, Penang, Davao City, Iloilo City, Ho Chi Minh City); and 11 in Europe, the Middle East and Africa (Sofia, Zagreb, Cairo, Port Louis, Belfast, Gdansk, Cluj-Napoca, Rostov-on-Don, Belgrade, Tunis and Lviv).

The reasons for these locations making it on to the final KPMG list are varied but cities in the Americas should typically benefit from large labor pools, scalability, a more mature service offering, proximity to the major client base and multiple language skills. AsPac benefits from lower costs, younger populations, plenty of government incentives and the lessons learned from the numerous outsourcing centers which already dot the region. The Europe, Middle East and Africa region offers great diversity, excellent infrastructure and numerous niche specialisms.

Zarrella concluded: “These are fascinating times to be choosing a new outsourcing provider or location as there is simply so much choice. New cities are emerging as outsourcing contenders all the time, each boasting a different set of characteristics. Just within our 31 for example, there are specific specialisms on offer — such as accounting, R&D or even animation — driven by an apparent skills bias within the pool of locally available graduates. As a word of warning though, these locations are still ‘emerging’ and, as such, can still carry a degree of risk; an element of venturing into the unknown. This is why all outsourcing location decisions should be carefully thought through on a case-by-case basis; there is no ‘one size fits all’ approach to outsourcing.”

Related publication:

• Exploring global frontiers

Some good news has come out of Nasscom in recent weeks. The organisation has announced the formation of a corporate governance and ethics committee to prevent a recurrence of Satyam-style corporate fraud and books-cooking. Satyam recently admitted that a figure of $1 billion on its books was fiction.

The new permanent committee linking business people with academics will be chaired by N R Narayana Murthy, chairman of Infosys, whose executives have been outspokenly critical of the damage done to India's reputation by the scandals.

Certainly, both India and Infosys stand to gain by association with the stand against corporate scandal. Infosys, along with other leading outsourcing giants, has done much to increase India's global reputation for service and price competitiveness.

That said, some US commentators have scented blood in the aftermath of Satyam's fall from grace, suggesting that poor financial reporting is rife throughout Indian business and that relations between some Indian companies and local government are a grey area.

Few, however, have put their name to the criticisms, while some of the sentiments smack of triumphalism.

An exception has been UK investment bank Noble, which published recent research claiming that 20% of India's top 500 companies indulge in accounting malpractice, including fictitious sales and revenue overstatement.

There may be a certain irony in today's banking sector taking pot-shots at an expanding market in the downturn, but the message is clear: Indian business needs to be seen to clean up its act to restore international confidence, even if the Satyam scandal does prove to be a one-off aberration.

• Reports from Reuters suggest Satyam may have up to a fifth fewer staff than it reported. The original report, exposed in India’s Economic Times, suggested that Satyam’s headcount could have been inflated by 15-20 percent.

According to the newspaper the Serious Frauds Investigation Office believes Satyam’s headcount could have been inflated to siphon off money as salary payments for non-existent employees.

See News for more.

Micro Focus, a provider of enterprise application management services has signed a deal with Capita Life & Pensions Services to undertake a number of strategic modernisation projects. The partnership is designed to provide cost savings and increased efficiency to the UK life and pensions industry.

The agreement with Capita Life & Pensions Services is an initial three-year framework with a view to a wider ongoing commercial relationship. Micro Focus products will be used in strategic modernisation projects supporting the realisation of significant cost benefits by migrating some core administration systems off the mainframe to more contemporary Windows environments.

David Stephenson, UK Country General Manager for Micro Focus, commented, “In a time of economic uncertainty, our products and expertise will enable Capita to drive greater efficiencies by maximising the value of their existing IT.”

Amid talk of an acquisition for embattled outsourcer, Satyam Computer Services, reports from Reuters suggest the company may have up to a fifth fewer staff than it reported. The original report, exposed in India’s popular daily the Economic Times, suggested that Satyam’s headcount could have been inflated by 15-20 percent, citing unnamed sources.

According to the newspaper the Serious Frauds Investigation Office believes Satyam's headcount could have been inflated to siphon off money as salary payments for non-existent employees.

"Since a major chunk of the costs were actually salaries, a minor distortion in the number of employees could change the personnel expenses significantly," the paper quoted the source as saying.

The speculation comes at a difficult time for the company prior to a possible acquisition deal by Larsen & Toubro (L&T), India’s largest engineering and construction conglomerate. The company has appointed Japan's Nomura to advise on a possible deal after expanding its holding in the company to 12%. After spending US $140 L&T reportedly plans to merge its ITO business L&T Infotech with Satyam.

It is currently uncertain as to whether the staff speculation will affect L&T’s plans.

The Department of Health has signed a two year contract extension with Atos Healthcare, a business division of Atos Origin, to continue managing the electronic booking system, Choose and Book.

Atos Healthcare together with its long-standing partner, Cerner Corporation, a supplier of healthcare information technology, designed, developed and now manages the Choose and Book service to provide patients with increased choice and improved access to NHS services.

Don Trigg, Managing Director for Cerner Limited, said, “We are pleased to continue our support and commitment of the national Choose and Book system through our partnership with Atos Healthcare.”

Indian industry trade body Nasscom is on day two of its three-day annual conference, where the message has been “prepare for the worst, hope for the best”. It seems to have opted for the latter, despite attendance and sponsorships being 20% down on last year.

Last week, the organisation released figures for the Indian IT software and services market, which show that aggregate revenues for the sector are expected to reach $60 billion by the end of fiscal 2009. Export revenues are predicted to show healthy growth of 16-17% – reduced from earlier predictions of 20%.

Forrester and Gartner analysts are less upbeat about India's domestic prospects, suggesting that overseas firms are moving much faster to exploit the local market as a source of future growth.

India will account for just $34 billion of the $1.66 trillion global IT services market this year, according to Forrester, while the global market for goods and services will fall three percent this year.

The local Indian market is, despite the boom in outsourcing and services to the west, almost a green-field site, with just two percent of the local population owning a PC.

Such statistics are manna from heaven for at least one American company. Speaking at the event, Cisco's chairman and CEO John Chambers delivered his customary evangelical sermon about the strength and innovation of the networking behemoth.

I have witnessed similar Chambers speeches at other events: he walks among the crowd and bestows his beneficence upon the implicitly humble, meek and lowly. It can be truly unnerving.

Some of the audience were less than impressed, with Nasscom's own blogger describing Chambers as a “robot” struggling to access a hidden message in his head.

Others complained that he didn't talk about India's potential at all – the supposed subject of the speech – but simply came down from the Mount with his ancient stone tablets, presumably with smoke and electrical sparks issuing from his ears.

But the real message was clear, as it always is: “we are here to sell to you”. Cisco has expanded aggressively into India, investing more than $1.2 billion in the past four years. The company aims to make Bangalore its global HQ outside the United States.

One local official understood the message for local Indian suppliers. "The IT industry has looked outwards. Now it is time to look inwards," Commerce Minister Kamal Nath told delegates.