Outsourcing newsletter - march 2008 by offshoreindianews

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									                                                                                                  Offshoring & outsourcing newsletter- mid march, 2008

             Offshoring and Outsourcing market intelligence newsletter
                                                      (March 16th, 2008)
Recent news, upcoming events, competitor news, analysis, facts and trivia about offshoring and outsourcing


(click on the link to go the article)
                                                                           Upcoming outsourcing and offshoring
                                                                           events for March
1    Copal Partners eyes LPO buyouts
2    Evalueserve launches NOIDA center                                                th
                                                                           March 16 – 19 - $$$

3    „CSO Forum‟ set up to tackle cyber crimes in India
                                                                           Duke University – Successful outsourcing and offshoring
4    Survey Shows OPI “Has the Happiest Customers” in Finance
     & Accounting Outsourcing                                              strategy, Durham,NC
                                                                                      th     th
5    Cognizant signs up AstraZeneca for $95 million KPO deal               March 18 - 19 – $$$$
6    Australian organization cautious about BPO risk                       Financial Times Global outsourcing conference, New York
7    Gurgaon – the price of growth                                         March 25
                                                                                           - Webinar
8    Businesses negotiate outsourcing price cuts amid recession
                                                                           Onshore vs Offshore support: Why onshore is winning
9    Clients force IT companies to cut onsite teams
                                                                           March 30 – April 3rd – $$$$

10   Teradata Opens Global Consulting Centre in Pune, India                IQPC shared services week, Orlando,FL

11   3i a Private equity firm opens resource center in Bangalore
                                                                           Market trends
12   Evalueserve appoints Nand Gangwani, IPO expert as new
     CFO                                                                           Indian IT/BPO firms continue to expand operational
                                                                                    footprint outside of India to enable delivery centers
13   Is it too late to set up a captive software center in India ?                  closer to customers and to mitigate the risk of
14   IT firms face retention clause                                                 currency exchange rates

15   Training for commitment: new approach to curbing churn
                                                                                   Mid size and specialist vendors continue to face a
     rate                                                                           rough market with slowing customer demand,
16   TCS feels US pinch                                                             reduced pricing structures and slowing IPO/M&A
17   TCS in Cincinnati
18   Nokia Siemens, TCS sign outsourcing deal                                      Business in driving seat for offshore contract re-
19   Cognizant open new delivery center in Argentina                                negotiations, vendor selection and pricing for services

                                                                                   Mixed market messages on how US slowdown is
                                                                                    affecting offshoring – overall a reduction in IT budget
                                                                                    for firms has resulted in some firms accelerating
                                                                                    outsourcing and others pulling in the reigns.

                                                                                     Offshoring & outsourcing newsletter- mid march, 2008

Competitor news
No update for this newsletter
                                                                   Interesting Links:
Fact Box on India                                                        Indian apex body on IT/ITES offshoring:
Software Industry
*The software sector saw a 33 percent rise in exports to $31.4
billion for the year to March 2007, according to the National            Phillipines apex body on BPO outsourcing:
Association of Software and Service Companies (Nasscom). It
is expected to rise 24-27 percent to $49-$50 billion in the year          http://www.bpap.org
to March 2008.
                                                                         Brazil outsourcing apex body:
* Software and back office companies employ around 1.6                    http://www.braziloutsourcing.com.br/
million, up from 1.3 million last year. Indirect employment is
estimated at an additional 3 million.                                    Finance and Accounting outsourcing mag:

*Indian software services companies typically make more than              http://www.faotoday.com/
50 per cent of their revenue from the United States.
                                                                         http://www.docstoc.com/docs/265997/October-
Outsourcing industry                                                      News-Summary-for-Offshoring-and-Outsourcing-
* About four-fifths of the world's 500 largest companies already          to-India
farm out some work to India, which churns out about 2.5 million
graduates every year, though only about 15 per cent are                  http://www.scribd.com/doc/925804/Accenture-
suitable for employment in the sector.
* The United States accounts for more than two-thirds of the              trends
outsourcing market, followed by Europe with 25 percent.

* An average Indian graduate earns rupees 15,000 ($366) a
month, but wages are rising 10-15 per cent a year.

* As of March 2007, nearly 553,000 people were employed in
more than 400 outsourcing or back-office firms in India.

                                                                                     Offshoring & outsourcing newsletter- mid march, 2008

                                                                   Evalueserve launches NOIDA center
                                                                   SOURCE: The Hindu
ARTICLES:                                                          DATE: March 11th, 2008

                                                                   Research and analytics firm Evalueserve on Monday
                                                                   inaugurated a new operations centre in Noida, as part of efforts
Copal Partners eyes LPO business                                   to reduce travel time for employees living in and around the
                                                                   satellite town. ―This new office in Noida is aimed at reducing
SOURCE: EconomicTimes                                              travel time for the employees living in this zone of the NCR and
DATE: March 14th, 2008                                             at increasing their work-life balance. It will also give us access
                                                                   to a wider talent pool considering the firm is growing at a very
ARTICLE                                                            fast pace and hiring approximately 100 employees every
                                                                   month,‖ Mr Ashish Gupta, COO, said in a statement. - Our
 Knowledge process outsourcing (KPO) firm Copal Partners is        Bureau
planning to enter the legal process outsourcing (LPO) space
through acquisition of existing LPO firms in India.

―We are in discussions with 10 LPO firms in India whose
revenues are in the range $5-75 million. We hope to close one      „CSO Forum‟ set up to tackle cyber crimes in
or two acquisitions this year,‖ said Copal Partners president
Joel Perlman. LPO includes outsourcing of functions like legal
research, litigation support, contract drafting & review and
paralegal services.
                                                                   SOURCE: SIFY
Copal Partners, which specialises in equity and credit research    DATE: March 14th, 2008
and caters to investment banking firms, mutual funds and
hedge funds, is also eyeing the market research market. ―We        ARTICLE
have started some work in the area of market research in
telecom and technology. We would like to expand that,‖ Mr          A forum of Chief Security Officers of IT companies in Chennai
Perlman said.                                                      has just been formed. Members of the forum will exchange
                                                                   notes and ideas on various measures to be taken to tackle
The KPO firm employs about 500 people, mostly research and         cyber crimes
analytics staff in Gurgaon. It plans to nearly double its
employee strength to 900-1000 people by the end of this year.      This was revealed by the Tamil Nadu Secretary, Dr. C.
                                                                   Chandramouli, at ‗Nasscom Cyber Safe 2008‘, a two-day
Copal Partners posted revenue of $30 million last year and         seminar on cyber security organised here by the southern
aims to close the current financial year with revenue of about     chapter of Nasscom.
$50 million. Deutsche Bank, Merrill Lynch and Citigroup
together hold a 25% stake in the KPO firm, while the promoters     Dr. Chandramouli said thedid an exercise to find out how
and the management hold the rest. The company had planned          prepared IT companies were against any threats. ―What will
an initial public offering (IPO) on the London Stock Exchange      you do, if someone enters your office armed with a gun and
but postponed the decision due to adverse market conditions.       threatens you? Or, whom will you call if there is a sudden fire
                                                                   break-out?‖ these were the kind of questions the department
―An IPO would give us a better positioning as people take          put to the companies.
listed companies more seriously. We can also use public stock
as a currency for acquisitions,‖ Mr Perlman said. The firm         ―No one had a proper answer,‖ Dr. Chandramouli said. He
could offer about 25% equity to the public when it finally lists   stressed it was necessary that regular drills be conducted in
on the LSE.                                                        companies so that all employees know how to react in an
The Indian LPO space, which has for long been the domain of
various small and mid-size players, recently saw the entry of      Vulnerable sector
Infosys, India‘s second-largest IT firm. Infosys LPO targets
large and mid-size service firms and corporates in North           Dr. Chandramouli observed that the IT sector is more prone to
America, Europe and the Middle East.                               threats because it has become a national symbol of
                                                                   development. Cyber crimes are also becoming easier — a
Other players in the LPO market are WNS (Holdings) Ltd,            person could walk in and out of a company with all the data in
Mindcrest and Pangea3. A recent study by Value Notes               his pen drive.
forecast revenues from offshoring legal services in India to
reach $640 million by the end of 2010.                             The CSO Forum will seek to address such issues and perhaps
                                                                   evolve some guidelines on cyber safety. Incidentally, the Tamil

                                                                                       Offshoring & outsourcing newsletter- mid march, 2008

Nadu Government itself will soon bring out a manual of good          Trinity Industries partnership with an Honorable Mention in the
practices for IT companies, Dr. Chandramouli said.                   2007 "Awards of Distinction."

Speaking at the conference, R. Dhamodaran, Country Head of           Clarence T. Schmitz, OPI‘s Chairman and Chief Executive
the IBM India Software Group, said that there is a need for          Officer, noted, ―This ranking is a testament to our approach
strong private-public partnership to enforce methods to prevent      which places value creation – and thus customer satisfaction –
cyber crime, else it will become difficult to foster business on     as our top priority. We focus on developing a flexible and
the Internet. ―While we encourage more people to use the             productive relationship, and fully customize our offerings so as
Internet for their business transactions, it becomes necessary       to best meet the unique needs of each client. We work to
to ensure that this channel of reaching out to the public is         develop relationships that extend beyond what is typical of a
secure,‖ he said.                                                    client and vendor, and instead seek to operate in the spirit of a
                                                                     true partnership.‖
Low on priority
                                                                     The complete Enterprise FAO Bakers Dozen listing can be
He said it was not just the prerogative of the information           found in the January/February 2008 issue of FAO Today
provider to ensure safe distribution of data, but also that of       magazine, or online at
other stakeholders to responsibly deliver it to the end-user.        http://www.faotoday.com/magazine.asp?artID=1952.

According to data from the Computer Security Institute,
financial fraud in the US has overtaken virus attacks and
amounts to losses of over $66 million for individuals and
corporations. Satish Das, Chief Security Officer, Cognizant,         Cognizant signs up AstraZeneca for $95 million
urged the police to take cyber crime as seriously as any other
crime.                                                               KPO deal
Email harassment for instance, is low priority among the police,     SOURCE: The Telegraph
which is understandable as the police is used to handling a          DATE: March 10th, 2008
more tangible form of crime, he said. ―But we need legal help.
IT companies can help the police locate the culprits and impart      ARTICLE
technical training to make them aware of cyber crime,‖ he said.      Cognizant has bagged a five-year contract worth $95 million
                                                                     for data management from pharmaceutical firm AstraZeneca.
Survey Shows OPI “Has the Happiest                                   This is one of the largest knowledge process outsourcing deals
                                                                     for an India company.
Customers” in Finance & Accounting
                                                                     Under the agreement, Cognizant will provide a spectrum of
                                                                     centralised data management services for AstraZeneca‘s
                                                                     global clinical development programmes.

SOURCE: Press Release                                                ―We will help AstraZeneca centralise and streamline its clinical
DATE: March 12, 2008                                                 data management operations through improved process
                                                                     standardisation, consistency of delivery, economies of scale
Outsource Partners International, Inc. (OPI), a leading provider     and cost savings, which the company can reinvest to support
of finance, accounting & tax business process outsourcing            its research and development programmes,‖ said Cognizant
(BPO) and related services, today announced that it has              president and CEO Francisco D‘Souza.
ranked No. 1 in Customer Service and No. 2 Overall among
finance and accounting outsourcing providers. This marks the         Cognizant‘s responsibilities include data management
fourth consecutive year that OPI has been included in FAO            planning, clinical study set-up for electronic data capture,
Today magazine‘s annual listing of the top providers of FAO.         medical coding, adverse event reconciliation and clinical data
                                                                     management. AstraZeneca announced its plans to centralise
FAO Today’s Enterprise FAO Bakers Dozen listing was based            these services last year as part of its effort to improve research
upon intelligence gathered from a survey conducted late last         and development.
year. FAO buyers were asked to respond to a series of twenty-
five quantitative and qualitative questions which sought to
                                                                     According to a KPMG study, the knowledge process
collect information on the breadth of services provided and
                                                                     outsourcing (KPO) market is estimated to grow by anywhere
customer satisfaction rates.
                                                                     between $10 billion and $17 billion in another two years.
                                                                     Financial services KPOs are expected to reach $5 billion by
This is not the first time that OPI has been recognized for client
                                                                     2010, the study said.
satisfaction. Last year, OPI and Trinity Industries were
commended for developing a full relationship that embodies
outsourcing best practices. Together, they received the              The study said gains from KPOs would be substantially higher
―Relationship of the Year" award as part of FAO Today                than that from business process outsourcing units. However,
Magazine's 2007 Global Executive Awards. Furthermore, a              current service contracts for KPOs are smaller in size than
panel put together by FAO Research commended the OPI and             their BPO counterparts.

                                                                                      Offshoring & outsourcing newsletter- mid march, 2008

Billing rates for KPOs range from $10 to $45 per hour, while        which opened a new office in Sydney, Australia, in response to
BPO billing rates vary between $4 and $15 per hour.                 growing customer demand. Through the new office, Aptara will
                                                                    scale its business process outsourcing (BPO) services to a
The KPO industry, however, faces a shortage of trained and          growing number of Australian customers.
skilled personnel.                                                  Gurvinder Batra, chief technologist and senior vice president of
                                                                    publishing for Aptara, noted that the opening of
The typical resource cost per full-time equivalent in India is
between $15,000 and $40,000. For BPOs it ranges between             the Sydney office underscores the growing popularity of
$4000 and $10,000.                                                  integrated publishing technologies.

Cognizant‘s healthcare and life sciences practice has 10,000        Gurgaon – the price of growth
professionals, including doctors, pharmacologists, biomedical
engineers, pharmacists, biostatisticians and medical writers.       SOURCE: Business Standard
AstraZeneca had engaged Cognizant in business services              DATE: March 6th, 2008
across North America, Europe and Asia-Pacific in 2004.

                                                                    CITIES The suburb is creaking under the weight of its own
AUSTRALIAN Organizations cautious about
                                                                    A 16-and-a-half-hour power switch-off! That‘s what the power
BPO risk                                                            supplier to Gurgaon — Dakshin Haryana Bijli Vitran Nigam —
                                                                    announced for the industry as the year 2008 began. Other
SOURCE: TMCNet                                                      users were let off with a kindlier nine-hour ―cut‖, but that is too
DATE: March 10th, 2008                                              dignified a word for what can only be described as a system
                                                                    breakdown in a city which was, at one time, being looked at as
ARTICLE                                                             a model for the rest of the country. It is a city creaking under
In a recent research report, IDC said that, even though             the weight of its own growth. And the appaling power situation
Australian organizations see business process outsourcing           is just one example of that. Clogged roads are another. The
(BPO) as a vehicle for cutting back office costs and improving      water table is fast depleting. Law and order is an area of
processes, they are nonetheless cautious about the                  concern. And then there is all the sub-city infrastructure —
considerable compliance risks associated with BPO—including         sewerage, water drains, waste management — which is far
privacy and data protection, intellectual property rights and       from model, if it exists at all. Realty rates have shot up
executive accountability.                                           reflecting the huge gap between supply and demand. Every
                                                                    new project in the city means an additional load on the already
 Aprajita Sharma, an IDC analyst, explained that BPO pilots will    stretched, and scant, infrastructure of the city, leading to some
drive more new deals in the Australian region and become an         rather extreme suggestions from those who have already got a
important inroad for a BPO go-to-market strategy, as clients        foot into Gurgaon. ―They should not allow any more investment
are more receptive to pilots before signing long-term, full-scale   for the next few years. The infrastructure cannot take it,‖ says
BPO contracts.                                                      an agitated Mohit Jain, the past president of the Gurgaon
                                                                    Chamber of Commerce and Industry and director of the
Sharma believes this will happen primarily in areas that are        Gurgaon based The Malt Company (India) Ltd. This attitude
considered ripe for outsourcing, such as benefits                   reflects quite a U-turn for a city which has thrived on the growth
administration or human capital management. Agreements are          and population spillover from Delhi. Part of the National Capital
normally signed at the start in North America and Europe, the       Region (NCR), Gurgaon evolved from an old economy style
Middle East and Africa (EMEA) where BPO engagements tend            manufacturing hub (think Maruti) to a new economy suburb,
to be more mid- to long-term (5-10 years). In Australia there is    exporting garments, software and services around the world. It
a shift toward trial/pilot BPO projects taking precedence.          has become modern, younger and trendier (think malls), all
In its report, Australia Customer Priorities for Business Process   thanks to private enterprise, and to realty developers like DLF,
Outsourcing Services, IDC predicted that that during 2008           who have built islands of ―excellence‖ for commercial and
finance and accounting will be the drivers of BPO in Australia      industrial users in an erstwhile village. But they are just that —
with processing of checks, credit cards and bills being the main    islands! Despite the fact that developers have paid what are
forms of business. The research firm also sees human                called external development charges to the state government,
resources (HR) as another driver. More companies will thus          they are still waiting to see development beyond their
embark on payroll outsourcing and will most likely combine that     immediate boundaries. ―I see the city as a classic urban
with the underlying implementation of the technology                disaster,‖ says TCA Srinivasa-Raghavan, a Business Standard
component.                                                          columnist who is also associated with the Asian Institute of
                                                                    Transport Development.
The complete report presents the perceptions and buying
intentions of Australian buyers for business process                POOR GOVERNANCE OR OVER-INVESTMENT?
outsourcing (BPO) services.
                                                                    Most blame the disaster on poor governance, a claim which is
In example of BPO‘s role in Australia is the case of Aptara, a      vehemently denied by the state government. The crises, I am
global provider of integrated content transformation solutions,     told, is a natural outcome of all the investment that has poured

                                                                                       Offshoring & outsourcing newsletter- mid march, 2008

into the state — and Gurgaon city — since the Congress party         be fed into the grid to ensure uninterrupted power supply,
took over the reins of government three years ago. ―The state        albeit for a price. To address the declining availability of water,
attracted Rs 60,000 crore worth of investment since it was           CII is also pushing for sops for construction of water harvesting
formed in 1966. We have managed Rs 45,000 crore                      structures, which it wants to make mandatory for every
investment in the ground in the last three years…and further         building. Connectivity has already improved with Delhi, thanks
investment proposals of Rs 78,000 crore are in the pipeline,‖        to the expressway though the toll continues to be an unwieldy
says Haryana‘s Power Minister Randeep Singh Surjewala. The           Rs 16 or Rs 24 or Rs 49, depending on your vehicle type. Why
increase in business activity is also one of the reasons for the     the toll cannot be a rounded number, which does not involve a
power crises in the state, which is a part of a larger               struggle for loose rupees, is foxing. The power problem is set
countrywide problem of shortage of power. ―Haryana is facing         to be resolved in the next two years, promises Surjewala: ―We
a power crises, like the rest of the country,‖ says Surjewala.       are adding 7,000 mw over the next four years (5,000 mw within
Ironically, Haryana was the second state in the country, after       the state and 2,000 mw to be secured through competitive
Orissa, to embark on the road to power reforms in the late           bidding from other states) to wipe out the demand-supply gap.
1990s. The problems are so acute that companies already in           We are also investing an unprecedented Rs 14,000 crore to
Gurgaon are expanding ―out‖ of Gurgaon, attracted by the tax         augment transmission and distribution systems.‖ The
concessions given to the special category states like                connectivity problem will be largely resolved with the metro
Uttarakhand, lower realty and labour rates in neighbouring           coming in. As for intra-city transport, there are a few proposals
states like Rajasthan or states which offer other competitive        floating around. ―One change that we see is that projects are
advantages. Leading apparel exporter Orient Craft for example        actually happening,‖ says CII‘s Kapur. And if that trend
is now setting up new units in Andhra Pradesh. ―We are               continues, Gurgaon may yet offer nirvana to its residents by
looking at cheaper locations,‖ admits Sudhir Dhingra, the            2010.
managing director of the company. He is one of the many
investors who end up paying about Rs 10 per unit of captive          Businesses negotiate outsourcing price cuts amid
power against about Rs 4 for state generated power. This has         recession fears
dented margins, especially for power-intensive industries.
Some companies, especially auto ancillaries, are looking at the      SOURCE: ComputerWeekly
option of ―importing‖ power from other states by utilising open      DATE: March 7th, 2008
access regulations, according to Sambitosh Mohapatra of
PricewaterhouseCoopers, but surplus power is hard to come            Global businesses are demanding large discounts from
by in the region. There is no intra-city transport system and the    outsourcers amid fears over economic downturn.
connectivity with Delhi is also fairly limited for those without a   According to a 12-month study of global companies carried out
private vehicle. Rajeev Talwar, group executive director at          by Compass Management Consulting of 120 outsourcing
DLF, identifies connectivity and power as the two main               deals, businesses are requesting discounts of up to 23% from
bottlenecks which need immediate action. It, however,                outsourcers in return for longer contracts
continues to draw people from across the world. Sample this          But the renegotiations could threaten the effectiveness of the
call which was received in the city from Pennsylvania last           contracts, said Geraldine Fox, global sourcing head at
week.                                                                Compass Management Consulting. She warned that lower
                                                                     price contracts could lead to quality slipping and longer
THE CONTRA SIGNS                                                     contracts could leave firms with out-of-date IT.
―Hi. We are looking at setting up a base in Gurgaon. Can you         ―The business today is not going to be the same as the
guide us.‖ Kavita Nair, deputy director at the Confederation of      business in eight years‘ time and the economic environment
Indian Industry (CII) who is in charge of the Haryana cell, gets     will not be the same either,‖ Fox said.
a few such calls every week. More people want a foot into            Phil Morris, managing at sourcing consultancy Equaterra, said
Gurgaon rather than a step out, especially those associated          it is risky to place inappropriate demands on the supplier. ―I
with the services sector. Look at the good things that Gurgaon       believe the emphasis should be buying services at a price
offers. It is more spaced out than Delhi. It is close to the         appropriate for the market and at a level that is sustainable.‖
airport. Residential and commercial spaces are modern and            ―If it is clear that the outsourcer cannot do it at that price the
well-equipped. And then there is the TINA (There Is No               service will go down,‖ he said.
Alternative) factor. Since minimum service standards for             Robert Morgan, director at Hamilton Bailey, which provides
modern Indian cities are still-in-the-making, there is no clear      consultancy services to outsourcers, said outsourcers rarely
benchmarking of cities that is possible today. Gurgaon               make more than 8.5% and asking for large cuts in price comes
supporters contend that there is hardly another city which           at a cost.
compares with theirs. ―Where are the choices? Can you tell me        ―The outsourcer will have to take out costs by reducing the
one city in the country where infrastructure is okay? I think        service levels, taking people out or even sweating assets by
Gurgaon is the best,‖ says RICO Industries managing director         not refreshing technology as quickly,‖ he said.
Arvind Kapur, who is also the chairman of CII‘s Haryana state        Businesses can get price reductions and flexibility if they
council. Agrees Mohapatra of PWC. ―Urban infrastructure              disclose their future business plans to outsourcers, he said.
planning has been missing in most of the country. There are no       ―By understanding [a customer‘s] business strategy and
better models as of now.‖ And the denizens of the city are           applying that to the investment decisions required in
trying to work on solutions themselves. About six months ago,        technology considerable savings can be made.‖
CII, along with Gurgaon Industrial Association and RICO Auto         Guy Mason, chief information officer at rail freight company
approached the Haryana electricity regulator to propose a            English Welsh & Scottish Railway, said flexibility is more
replication of the ―Pune model‖ in Gurgaon urban area                important than price. ―Flexibility is important because the
whereby all the captive power capacity available in the city can     changing economic conditions mean there are some

                                                                                       Offshoring & outsourcing newsletter- mid march, 2008

adjustments to our business plan and we want more flexibility        Offshoring is the more profitable than having onsite resources
from the supplier.‖                                                  even though billing rates are higher.

                                                                     Even though accepting that lower onsite resources would
                                                                     mean lower volumes in dollar terms, companies would prefer a
                                                                     higher component of offshore delivery, he argued.
Clients force IT cos to cut onsite teams
                                                                     Offshore shift might mean higher margins but clearly lower
                                                                     onsite also means lower profitability, countered India Infoline
SOURCE: SIFY Business                                                analysts.
DATE: March 6th, 2008
                                                                     However, Krishnakumar Natarajan, president & CEO - IT
ARTICLE                                                              Services, at MindTree Consulting, said the trend was client-
                                                                     specific and not universal. ―There are some clients, who are
Notwithstanding the brave talk and the wait-and-watch stance         doing it because they want same work for lesser (IT) budget or
by software majors, signs that the Indian IT story is coming         higher work for same budget,‖ he said.
unstuck in the US are beginning to emerge. In one of the first
signs of cost pressures, US clients are increasingly forcing         However, all agree that the negative impact of the reducing
Indian vendors to cut down their onsite (or on the premise)          onsite resources can be countered if offshoring volume
teams, analysts said.                                                increases considerably.

Aniruddha Dange and Sandeep Muthangi of broking house                ―The negative impact can be offset only if the demand shoots.
IIFL said there is enough anecdotal evidence to show that            A weaker dollar would make it cheaper for the clients to
companies such as Citibank, Deutsche Bank and British                offshore,‖ explained Natarajan.
Telecom are reducing onsite team sizes.
                                                                     Suresh C Senapathy, Wipro executive vice-president-finance,
They are clients of companies such as Infosys, Tata                  and chief financial officer said most IT services vendors
Consultancy Services, HCL Technologies and Tech Mahindra             encouraged a higher offshore strength as that saved costs and
and the news is not all good for them, for a 10 per cent volume      lessened visa hassles for them.
shift from onsite to offshore could result in 350 basis points
being knocked off revenue growth rates, Dange and Muthangi           Having said that, there is no way any vendor can afford to have
said.                                                                onsite component lower than 20 per cent of the project
                                                                     strength which is the industry benchmark, said another senior
The trend is particularly seen in the financial services sector.     Satyam official preferring anonymity, adding that he did not
                                                                     have evidence of clients forcing companies to cut down on
Citibank, for instance, has cut onsite work in certain projects by   onsite execution.
75 per cent even as the sub-prime related assets writedown
continues to take place, increasing the possibility of further       Moreover, price negotiations are mostly on the blended rate
chopping in such projects.                                           and IT services providers are looking to improve margins even
                                                                     on onsite resources through novel ways, he said.
Though confirming the trend, N Ganapathy Subramanian,
president, financial solutions vertical at TCS, maintained that      However, onsite staff cuts could be a precursor to pricing cuts,
cost pressures were not entirely responsible for it.                 feel IIFL‘s Dange and Muthangi.

―The movement of onsite to offshore is also a function of the        Clients are likely to demand price cuts next even as
maturity of the relationship between the client and the program      discretionary projects are at the maximum risk of being
as also the complexity of the project and other factors are          dropped. In the likely event of volume growth falling short of
responsible for this,‖ he said.                                      current expectation, a 2 per cent cut in onsite project would
                                                                     dampen EBITDA growth in the next financial year by 165bps,
In fact, there is a reverse team deployment happening at TCS         they stressed.
where the client insists on having its captive employees at the
offshore location rather than locating vendor‘s employees‘
onsite, he explained.
                                                                     Teradata Opens Global Consulting Centre in
―This works out to be more cost-effective,‖ said Subramanian.
                                                                     Pune, India
For the IT sector, a higher proportion of workers at the offshore
location would translate into lower topline but prop up its
margins. Virender Agarwal, director and senior vice president,       SOURCE: TMCNet
APAC-MEIA at Satyam Computer agreed there is ―definitely             DATE: March 5th, 2008
some shift toward offshoring, which has been time-tested and
in the interest of the IT vendors themselves‖.                       ARTICLE
                                                                     Teradata Corporation, which is focused on raising business

                                                                                    Offshoring & outsourcing newsletter- mid march, 2008

intelligence through data warehousing and enterprise analytics,   ―The partnership between 3i and Infosys BPO is a natural one.
has opened its Global Consulting Centre in Pune, India.           We believe that the expertise and additional resource Infosys
                                                                  brings, will further drive 3i‘s competitive advantage in India and
Teradata selected Pune because of its talented pool of mature     globally,‖ 3i Asia Managing Partner Chris Rowlands said.
IT professionals who are dedicated to an IT career path; the
educational institutions that can provide training, and the       3i already has significant operations in India through its local
facilities it offers designed for the IT industry.                growth capital and infrastructure teams, with recent
                                                                  investments including Nimbus Communications, a media and
The Teradata employees in the Pune Global Consulting Centre       entertainment company focused on TV, advertising and sports
will provide business intelligence solutions for targeted         rights, UFO Movies Pvt Ltd, the worlds largest digital cinema
industries in the Americas, including telecommunications,         chain.
retail, manufacturing, banking and insurance.
                                                                  The PE firm has also invested in Adani Power, a 2,600 MW
―We are looking at an expansion of our Teradata consulting        coal fired power plant in Gujarat and the recent successful IPO
skills in vertical industry markets with the talent in the new    of Mundra Ports, the deepest all weather natural port, on the
Pune center,‖ Robert Cromer, vice president for the Americas,     west coast of India.
Teradata Professional Services, said in a press release.
―Teradata is committed to leveraging Indian professional          Evalueserve appoints Nand Gangwani, IPO
services consultants to help businesses solve some of their       expert as new CFO
most pressing problems.‖
                                                                  SOURCE: EconomicTimes
                                                                  DATE: March 3rd, 2008
―As a technology hub, Pune is an ideal location for Teradata‘s
second global consulting center in India,‖ said David Klumb,      ARTICLE
global vice president, Teradata Professional Services. ―The
                                                                  KPO service provider Evalueserve, currently mulling over an
new capabilities will boost Teradata‘s capability to respond to
                                                                  initial public offer, on Monday said it has appointed Nand
our customers who have asked for help with accessing and          Gangwani as its new Chief Financial Officer.
leveraging the data within their enterprises.‖
                                                                  ―Nand is an accomplished finance executive with a
The Pune Global Consulting Centre will work jointly with
                                                                  demonstrated track record of raising capital from public
Teradata‘s existing global consulting centre in Mumbai, which
                                                                  markets, strategic planning, restructuring as well as growing
supports business intelligence consulting projects being
                                                                  companies with the help of acquisitions and partnerships,‖
implemented in Southeast Asia and the U.S.
                                                                  Evalueserve‘s Co-Founder and Chairman Alok Aggarwal said.
In addition, Teradata has research and development centers in
                                                                  Gangwani‘s expertise in strategic initiatives such as IPOs and
Hyderabad and Bangalore.
                                                                  growth through acquisitions and partnerships hold significance
                                                                  as Evalueserve is looking at the possibilities of launching an
                                                                  initial public offer soon.

                                                                  Previously, the company‘s India Head Ashish Gupta had told a
                                                                  newspaper that it was looking to go public in 2008 and options
                                                                  included both India and overseas listing.
3i a Private equity firm opens resource center in
                                                                  Prior to joining Evalueserve, Nand served as CFO for Napster
                                                                  and Roxio. As the CFO of Roxio, Nand led the successful
Bangalore                                                         restructuring of its software business and assisted in the
                                                                  transition of Napster to becoming a leading music subscription
SOURCE: EconomicTimes                                             service, the leading KPO service provider said.
DATE: March 6th, 2008
                                                                  Previously, he was the Vice President of Corporate and
ARTICLE                                                           Business Development at Evolve Inc, a software company,
                                                                  where he led the reshaping of the company from a professional
                                                                  services automation company to a resource management
Private equity and venture capital firm 3i on Thursday the        company.
opening of a knowledge and resource centre in Bangalore in
partnership with Infosys BPO.                                     Gangwani, an IIT-Delhi graduate and MBA in Finance from
                                                                  Bentley College, Boston, has also held business and financial
The new facility would have an initial staff of 20 and would be   management roles at Intuit, Emery Worldwide, and DHL
managed by Infosys BPO, a subsidiary of IT major Infosys          Airways.
Technologies, the companies said in a joint statement.
                                                                  Evalueserve provides custom research and analytics services
Infosys would initially focus on providing global research        to companies worldwide and was founded by IBM and
services to support 3i‘s investment business as well as           McKinsey alumni. It has over 2,100 professionals located in
delivering a centralised service for its accounts payable.        research centres in Chile, India, China and New York.

                                                                                         Offshoring & outsourcing newsletter- mid march, 2008

Is it too late to set up a captive software center
in India?                                                             Even for this next tier of cities, unless you plan on setting up a
                                                                      rather large center, the recommendation would be to find a
SOURCE: Alsbridge Press Release
                                                                      company to partner with in India and establish an outsourcing
DATE: March 5th, 2008
                                                                      relationship in a Build-Operate-Transfer (BOT) type model.
                                                                      This model has the benefit of letting you ride on the experience
Here we are already in 2008 and it is clear that the Offshoring
                                                                      of someone who is already there and has already been-there-
industry is not slowing down. The question today is, ―Is it too
                                                                      done-that. Many companies, once they start this type of
late to set up a captive software center in India?‖
                                                                      relationship, never get to the ―transfer‖ part of the cycle. If
                                                                      things are working well, why change?
The answer, quite frankly, is yes and no.
                                                                      For a software center of less than 100 people or so, BOT is
                                                                      definitely the something to consider.
First, it depends on who your company is and the brand
recognition that you would have in India. Face it— most of the
big players (Motorola, IBM, HP, GE, etc.) have been in India
                                                                      There are also companies that act as service providers in a big
for years. They spent time building brand and early entrants
                                                                      way for smaller software centers. These providers will equip
invested a lot of time and energy into building a reputation in
                                                                      you with the fitted out facilities, center management, back-
the country, nurturing relationships with government,
                                                                      office support functions (Facilities, HR, Finance, Security,
educational institutions, and other technology companies.
                                                                      Legal, etc.) and put the software people on your payroll if you
It‘s not only the multinational companies, but the local Indian
companies are now just as much of a draw for top talent. The
                                                                      In this model, if you feel you must have a legal presence in the
likes of TCS, Wipro, Infosys, and others have been working
                                                                      country in order to penetrate local markets, you accomplish
with top universities to not only recruit but also to provide input
                                                                      your goal without having to take on all of the challenges of
to the curricula in those top universities.
                                                                      doing everything yourself. These providers are working with
                                                                      multiple companies so they have a bit of sway in recruiting that
                                                                      you would not have when you are just getting started.
When I was living in Bangalore in the mid-90‘s, working for
Hewlett-Packard, we spent a lot of time working with local (and
some not so local) Universities and Institutes of Technology.
                                                                      So…are you the next hot technology that will have people
We knew then, as did others with captive centers, that a strong
                                                                      flocking to join you? If so, then no, it is not too late to set up a
relationship with professors was a requirement for getting the
                                                                      captive shop in the top tier cities in India. Your name will
programs to generate students that would fit our requirements
                                                                      attract the talent you need and your technology will keep them
and getting to top students pointed in our direction. While I
am no longer with HP, I must humbly admit that it was a smart
strategy and HP continues today to attract and retain great
talent in India.
                                                                      If not, then the recommendation is to consider second/third tier
                                                                      cities in India and even then, partnering may be the road to
                                                                      start out on. There are also other countries to consider that
Most of the long established players in the country have built
                                                                      are not at the same level of maturity as India is now with
up around the major hub cities. Bangalore, Mumbai,
                                                                      regard to the software development industry. But that is
Hyderabad, Delhi, Pune, etc. are probably not the best place to
                                                                      another article…..
set up shop if you are looking for a captive center in India and
expect to attract and retain the kind of talent one needs to be
successful. You will be up against extremely tough
competition for the top resources. It‘s also becoming                 IT firms face retention clause
increasing more difficult to find the kind of HR/Recruiting
management that you would want without getting a bit crazy on
compensation.                                                         SOURCE: Times of India
                                                                      DATE: March 6th, 2008
Unless you have very strong brand recognition in India, or
have the next wave of new technology that is so cool that all          Attrition is not an internal issue any more. It‘s, in fact, inflicting
the top people would jump at the chance to work on it, I would        insomnia among overseas clients who offshore critical
suggest staying away from the major centers and considering           operations to Indian vendors.
some of the second tier cities. I would refer you to recent
Alsbridge research on the next top 10 cities in India to

                                                                                      Offshoring & outsourcing newsletter- mid march, 2008

Clients are not willing to accept excuses about project delays      company for a year or two, and pay the company several
on account of attrition. Nor are they willing to foot financial     thousand rupees if they decide to leave.
losses resulting from delayed delivery.
                                                                    In the 1990s and early 2000s, companies such as Tata
So clients are now introducing a ‗retention clause‘ in contracts.   Consultancy Services Ltd and Wipro Ltd were notorious for
This will make enterprises responsible for retaining                demanding up to a few lakhs from (TCS) employees who left
people/teams working on the client‘s projects. Failing that, they   before their contract was up, and TCS even fought a lawsuit
would attract a financial penalty. With this, the rampant           over the practice in a California court.
practice of internal-poaching - shifting people from a dedicated
project to unrelated projects - will also come under the            The industry‘s shift away from the practice, observers say, is
scanner.                                                            partly a legal move. Third-party trainings or trips abroad may
                                                                    be the only types of bond contracts that an employer can
―Attrition can be costly. It can break down the entire delivery     legally enforce, according to Sanjay Kamlani, a co-chief
schedule. Clients today are unwilling to absorb any losses          executive officer of Pangea3, a legal outsourcing company in
arising out of people exiting at the providers‘ end. Hence, they    Mumbai.
are increasingly dictating terms with providers to include a
retention clause in the contract. It‘s fast becoming an industry    A bond contract in any other instance is ―nothing more than a
norm,‖ said Avinash Vashishta, MD, Tholons, an offshore             scare tactic,‖ he says.
                                                                    Observers also say contracts with strings attached can be win-
Pari Natarajan, CEO, Xinnov, an offshore advisory firm, said        win for both employer and employee; BPO and technology
global customers are increasingly concerned about the               workers can now join companies and pledge to stick around, in
productivity of their offshoring partner and have realized that     exchange for getting a bump up the skills ladder or the
employee turnover is one of the key hindrances to productivity      opportunity to learn new skills abroad.
in India.
                                                                    The exchange of training for commitment has become more
Clients make significant investments to put teams and               common at mid-size companies. Globerian India Pvt. Ltd , an
processes in place at their providers‘ premises. ―Under the         outsourcing company that handles medical billing for clients in
retention contract, providers are obligated to retain crucial,      the US, for example, got burnt after it covered several
customer-facing staff including database administrators,            employees to get certified in the Six Sigma method of problem-
project managers, programme managers or team leads,‖ said           solving—the employees left the company as soon as they
Sabyasachi Satpathy, senior director, neoIT, a corporate            finished the course. The Six Sigma process, created by the
globalization advisory.                                             communications company Motorola Inc., is a data-driven
                                                                    approach to management.
Normally, clients and providers agree on a minimum retention
of 85% of those on a project for 18 to 24 months. Any break in      ―They get certified, and their value goes up,‖ says Thenny
this could attract a financial penalty amounting to 10% of the      Mejia, a senior vice-president at Globerian, as she explained
monthly invoice. Under this clause, the providers are also          the company‘s decision to institute bonds. ―Everybody wants to
obligated to keep their clients posted on any possible exit of      hire that person.‖
anyone in the team and what would be the alternative
arrangements.                                                       Now the company uses bonds for both Six Sigma trainees and
                                                                    for its medical coders, who have to go to the US to get certified
Training for commitment: new approach to                            before they can start working with medical records.
curbing churn rate
                                                                    Pangea3 also asks for a bond to be signed on occasion, if it
                                                                    spends a lot of money to send an employee abroad. It has sent
SOURCE: LiveMint
                                                                    about 10 lawyers to the US and Europe over the past few
DATE: March 6th, 2008
                                                                    years to train with clients or get advanced degrees, says
                                                                    Kamlani. The company asked two of them to sign a bond
                                                                    agreeing that, if they quit within a year, they would pay back
                                                                    the company for their trip.
In the early battles against attrition, some companies resorted
to bonds to keep people around, and departing employees
                                                                    The effort to tie bond contracts not just to training courses and
would pay a fine for breaking contract.But as churn rates still
                                                                    overseas exposure but also to full degree programmes is led
crawl upward, employers are rethinking that strategy. Now,
                                                                    by Genpact Ltd. Officials in the recruitment and BPO space
they are linking overseas travel, education leaves and training
                                                                    say Genpact recently instituted a five-year bond tied to partial
opportunities with the amount of time a worker owes a
                                                                    tuition reimbursement for in-house MBA and other certificate
                                                                    programmes, but the firm said it ―would not be in a position to
                                                                    talk about the contract.‖
Bonds will get tied not to employment, but the nature of on-the-
job training provided to employees,‖ says Ashutosh Sinha,
                                                                    But even the use of specialized bond contracts is growing rare,
recruitment director at business process outsourcing (BPO)
                                                                    according to recruiters in the field. ―They‘re trying to safeguard
giant Convergys Corp.Also known as ―service agreements‖ in
                                                                    themselves,‖ says Vinod Meghrajani, who heads the IT and
the outsourcing and information technology (IT) industries,
                                                                    related services vertical at the human resources consulting
bonds generally require an employee to agree to stay with a

                                                                                          Offshoring & outsourcing newsletter- mid march, 2008

group MaFoi Management Consultants Ltd, when asked                      pipeline and we are not just looking at the banking and
about the use of bonds in the industry. ―But companies are              financial services industry. The deals are from all verticals like
more focusing on other hiring factors. What are the softer              retail and travel.‖
aspects that makes a person stick around?‖
                                                                        Low-cost product
Especially at large companies, the war for talent and the
struggle to retain it is forcing recruitment directors to think         TCS today launched a low-cost product for small firms. IT-as-
along those lines. At Convergys, for example, after cutting its         a-Service (ITaaS) is an innovative business model that will give
six-month bond for anyone with at least one year of call centre         small and medium businesses the experience of customised,
experience (and seeing a 10% jump in the applicant pool), the           low-cost solutions scalable to their growing business needs.
company is now considering getting rid of its bond all together.        The service will initially be offered in the domestic market and
                                                                        later expanded overseas. TCS is looking at annual revenues of
TCS, too, experimented with getting rid of some of its stringent        $495 million from the new activity in about five years.
bond requirements, according to sources at the company, but
a ―training agreement‖ for fresh recruits on the company‘s              ―It is possible to develop a Rs 200-crore business in four to five
website includes a provision for a Rs50,000 deposit, refunded           years,‖ Chandrasekaran said. ―Our aim is to become a leading
after the two-year contract is up. When asked for comment, a            end-to-end business solution provider in the SMB segment,‖
TCS spokesperson said the company was ―not very keen‖ to                said S. Ramadorai, chief executive officer of TCS.

Wipro did not respond to calls or emails for comment, but one           TCS in Cincinnati
worker, on condition of anonymity, said a fine is still levied on       SOURCE: The Hindu
some exiting staffers.                                                  DATE: March 2nd, 2008

But the rationale for bonds in the BPO world is still a sound           ARTICLE
one, Convergys‘ Sinha says. ―In the IT industry, for example,           The US subsidiary of Tata Consultancy Services (TCS) has
people pay for certain training to get into jobs. Here it is free for   received incentives worth more than $19 million (Rs 76 crore)
them,‖ Sinha says, but it‘s making them ―much more                      for setting up base in Cincinnati in the US.
                                                                        This facility will serve as the North American headquarters of
TCS feels US pinch                                                      TCS and as a development centre with information technology
SOURCE:The Telegraph                                                    solution delivery capability, according to the Ohio Department
DATE: March 6th, 2008                                                   of Development Web site.

ARTICLE                                                                 ―This $20-million [Rs 100-crore] project is expected to create
The slowdown in the US economy has finally started to hurt              1,000 positions within the first three years of the company‘s
India‘s software giants.                                                operations,‖ the Web site said. However, this could not be
                                                                        verified with TCS.
Tata Consultancy Services (TCS), the country‘s largest
software exporter, today admitted that two of its top 15 clients        It is learnt that the $19-million tax incentive includes a 90 per
based in the US had ―delayed a couple of assignments‖.                  cent, eight-year job creation tax credit, valued at more than
                                                                        $15 million.
Until now, software companies have maintained that there has
been no sign of any decline in IT spending in the US after              The US subsidiary, Tata America International Corporation,
reports of a looming recession.                                         has spent $13 million for purchasing a 1,96,000-square-foot
                                                                        building at Clermont county in Cincinnati spread out across
N. Chandrasekaran, chief operating officer of TCS, refused to           222 wooded acres. A company spokesperson said that the
say whether the project delays would impact the company‘s               Cincinnati facility would be inaugurated on March 17.
earnings in the fourth quarter ending March 31.
                                                                        Ohio state has also awarded TCS a $2.5-million ‗rapid
Earlier, the company had said salary hikes this year would be           outreach grant‘ to help pay for the building and its renovation,
around 10 to 13 per cent — lower than that of the previous              which will cost the company $7 million.
                                                                        TCS selected this location for its large pool of highly skilled
This is the first time that the company has admitted that there         workers, its excellent access to the other major states in the
are ―delays‖ in decisions from the client side.                         US, and for the proximity of Cincinnati Northern Kentucky
                                                                        International Airport, the spokesperson added.
While announcing the third-quarter results in mid-January, the
company had downplayed the effect of the slowdown by                    Analysts feel that Cincinnati will enable TCS to provide the
saying, ―The jury is still out on the slowdown; we are cautiously       same time zone advantage to its American clients. The
confident about the future.‖                                            Clermont County site is expected to employ software
                                                                        engineers, pre-sales professionals, and administrative support
The company had emphasised that customers were migrating                staff.
to higher revenue bands. ―Twenty-five large deals are in the

                                                                                  Offshoring & outsourcing newsletter- mid march, 2008

With this, TCS joins companies such as Cisco, IBM and more        SOURCE: EconomicTimes
than 2,000 business technology firms that have a significant      DATE: March 12th, 2008
presence in the region.
                                                                  To tap local talent pool in Latin America, global IT and
Nokia Siemens, TCS sign outsourcing deal
                                                                  business process outsourcing giant Cognizant today
                                                                  inaugurated its 35th global delivery centre in Buenos
                                                                  Aires, Argentina.
SOURCE: The Hindu
DATE: March 1st, 2008                                             The new centre would support Cognizant‘s North
                                                                  American customers in a similar time zone, leverage
ARTICLE                                                           techno-functional and lingual capabilities available in the
The Finland-based telecom gear manufacturer Nokia Siemens
Networks has signed a multi-million euro deal with Tata
                                                                  region to service global customers, Cognizant said in a
Consultancy Services to transfer product engineering and R&D      statement.
services, as well as parts of the Operations and Business
Software (OBS) business unit activities from Nokia Siemens        Cognizant‘s new facility has the capacity to
Networks to TCS.The reassigned parts belong to the Nokia          accommodate about 250 professionals.
Siemens Networks development centre in Düsseldorf,
Germany, including 90 employees who will be transferred to        ―……our global sourcing capabilities will be
TCS, as part of this engagement. With this agreement, Nokia       strengthened by our new Argentina delivery centre,‖
Siemens Networks and TCS will create an efficient set-up,         Cognizant President and CEO Francisco Dsouza said.
whereby TCS will provide global R&D services to Nokia
Siemens Networks by leveraging its expertise in the               ―Our investments in newer global, regional and local
telecommunications sector.                                        delivery centres will help our clients seamlessly harness
                                                                  optimal talent globally for providing differentiated value
 Valuable Partners ―for many years, Tata Consultancy Services
has been a valuable partner to Nokia and Siemens, our parent      to their end customers.
companies. TCS brings to the table an in-depth experience in
outsourcing projects, and a proven track record of successfully   ―It is truly an exciting time to be in Argentina as the
transferring and integrating customers‘ R&D personnel. This       country continues to grow its technology exports, and
deal provides the employees in Düsseldorf with an excellent       with our strong talent base in India, we look forward to
opportunity to work with an international teams in a global       being a part of the growing relations between India and
company,‖ said Mr Juhani Hintikka, Head of the Operations         Argentina as well,‖ he added.
and Business Software Business Unit, Nokia Siemens
Networks.                                                         Cognizant‘s Buenos Aires regional delivery would
                                                                  leverage the recently launched Cognizant 2.0 platform.
―The agreement with Nokia Siemens Networks reiterates TCS‘
capability to enhance customers‘ business by leveraging our       This platform enables all of Cognizant‘s global, regional
superior R&D services and strong domain. As the R&D partner
                                                                  and local development centres to seamlessly and
for Nokia Siemens Networks, TCS will share its innovative
approaches, global best practices and benchmark standards to      virtually collaborate through one central platform using
ensure excellence.                                                the Web 2.0 technologies and deliver significant time-to-
                                                                  market, cost and transformational value to clients.
―The new regional delivery centre for telecommunications
customers in Düsseldorf — where the transferred employees
will work — is strategic to us, as Germany is a key European
market,‖ said Mr N. Chandrasekaran, COO and Executive
Director of TCS. ―With its strong domain expertise, the
worldwide delivery structures based on the company‘s
proprietary Global Network Delivery Model and its strategic
alliance partners, TCS is well-placed as a strong competitor in

―The integration of Nokia Siemens Networks employees would
establish TCS‘ local presence and strengthen its position as a
global player. This is especially important in Germany, where
brand recognition is key,‖ said Mr Graham Pascoe, partner
with the analyst house PriceWaterhouseCooper Advisory.

Cognizant opens new delivery center in


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