How to keep your job safe

Although the severe recession time is over, the risk is not all clear. It will take some more time for economy to get stable and recession to be wholly out of scene. So, along with knowing about how to keep job safe, you must also be prepared for a layoff. Here are some ways to tackle with this grave problem.

Create an Emergency Fund: Keep some of your money aside to cover your basic living expenses for about six months. This should include paying your rent or mortgage, buying monthly supplies of food and repaying loan premiums. It will be wise to keep them away as short-term deposits so that you earn interest as well as they are available in the near future without any loss on interest.

Cut Back on Your Expenditures: Refrain from buying expensive items that are not basic to your living. In fact, this way you'll save money for your emergency fund too.

Keep Away Your Credit Cards: Don't be tempted with those credit cards. Debts call stress and they are complete “no no” when you are seeing layoff in the near future. If you have to use these cards, do it cautiously.

Enlarge Network: Try to get known to as many people as you can in your field of work. A lots of friends and contacts in industry means a better chance of finding work quickly in case you lose your job.

Enhance Your Skills: Use your downtime (when you are not working) as an opportunity to develop your skills and knowledge to a higher level. This can even help in making changes in your job profile- some other work that hasn't got affected by recession.

Jobs are Back

The dragon of economic recession has engulfed every sector and undoubtedly the employment sector in the India job market scenario is the first one to have a hard hit because of this. Globally numerous companies are laying off their employees. In India the conditions in the beginning of 2009 were quiet similar when a job dip came and with this the job market reached at 29%. But due to financial insight of India's leaders, the Indian job market is showing the promising growth and it has gone to 51% in the second quarter. So there is a rising trend in the Indian job market. These figures are shown in the quarterly survey by Global Placement Report on employment trends for Indian job market with 30 key countries. It says that Indian's job market is the strongest.

India is one of the strongest nations that is growing profusely in every sector. Hyderabad, NCR, Bangalore & Chandigarh have become the IT hubs that generates numerous jobs even during the recession period in India job market. According to the Boston Consulting Group the sector like IT, health, banking, retail and outsourcing along with others will have the requirement of 85-90 million people even during the hard economic times. The another survey by HR consultancy Manpower projects is showing that jobs in India are not much affected by the recession. In Hyderabad the largest banks are opening their branches and huge construction for that is going on at a fast pace. In the near future it is expected to generate 2,00,000 new jobs in financial and banking domain freshers as well as experienced fellows.

Also the outsourcing sector like BPO, KPO & other call center are the major job providers in India. HCL, Wipro, Converges, Excel are few to name are the top guns in BPO industry. These big companies are recruiting numerous candidates. Apart from this, the sectors of health, insurance, pharma are also showing significant growth, which again is the symbol for rising trend in Indian job market. If we consider the govt sector then Indian Railways is the biggest employer in India with 1.42 million employees. Not to forget Indian railways is also the fourth largest employer in the world. All the state level, the railway industry is expected to hire new professionals in the coming years.

Top ten companies by NASSCOM (the National Association of Software & Services Companies) who are hiring:

• Tata Consultancy Services
• Infosys Technologies
• Wipro Ltd
• Cognizant Technology Solutions (India)
• HCL Technologies
• HP India
• MphasiS Ltd
• Intelenet Global Services Ltd
• IBM-Daksh Business Process Services Pvt Ltd
• Genpact India Pvt Ltd

Job market in India is thus flourishing and giving all sorts of career opportunities.

Indian IT Sector the New Reality 2010

NEW DELHI: India’s $60-billion technology services industry may have hoped for a rebound in 2010 after gloomy 2009, but days into the New Year,the initial optimism is fast wearing thin.

Industry officials, analysts and other experts believe that India’s IT sector, a habitual growth monster until the crisis period last year, is unlikely to return to the ‘business as usual’ situation that existed before the crisis and will have to soon recalibrate itself to a new reality and new growth strategies.

The US and European markets, which account for about 80% of Indian software exports, are yet to show signs of a pickup in demand for outsourcing that was expected in the run-up to New Year. Taking note, industry lobby group Nasscom said it does not see any immediate upward revision in the exports growth target, which it had pegged to an all-time low of 4-7% in mid-2009.

“It’s a demand environment that appears permanently damaged,’’ said Vineet Nayar, CEO, HCL Technologies. Other business services providers like Infosys Technologies, Wipro Technologies and Genpact share the same sentiment.

After a compounded growth of over 30% since the 2003-04 dotcom bust, software export growth fell to 16.3% at $46 billion last fiscal against 27% at $40 billion in 2007-08. Last year saw Indian companies embracing survival strategies, moving to fixed costs and bundling software services with back-office operations and remote infrastructure management, to retain customers and fuel growth.

HCL’s Nayar calls it coping with a new ‘normal’ where, “we will see lower ‘normal’ levels of expenditure, lower volumes, hard costs, lower margins and lower annual increases”.

Besides tough global headwinds, Indian providers are also up against a stronger rupee that will erode margins. A Bank of America-Merrill Lynch (BoA-ML) tech sector report expects the Indian currency, which has appreciated about 4% vis-à-vis the dollar in the last quarter, to strengthen further over the next few quarters at Rs 45 by March-end and Rs 43 by December 2010.

That is bad news for Indian providers, already coping with higher costs due to wage hikes and increased sales and marketing spends.

“Budgets could remain flat for sometime,” says Suresh Vaswani, joint CEO, Wipro Technologies adding that customers continue to demand more for less.

BoA-ML also notes that Indian majors will face stiffer competition from global vendors. New competitors such as Dell, which bought out Perot Systems in September 2009 to strengthen its services offering, are beginning to turn the heat on Indian IT. Dell, for instance, plans to target $20-50 million contracts, the sweet spot for Indian technology majors.

Others such as IBM, Accenture and HP now have strong low-cost service delivery options. Their deeper domain expertise also gives these firms another edge over Indian providers.

And Indian tech companies may be among the few sectors that see little hope in\ the recovery gathering pace. In any case, these companies don’t see a return to the giddy business growth of yesteryears. To corroborate this, HCL’s Nayar points to data from S&P 500 companies.

An analysis shows that 75% of S&P 500 companies recorded a negative growth in the June 2009 quarter. Though the situation is expected to reverse by this June, only 24% companies are expected to grow more than 10% from the year before compared to 50% of them in 2008.

“Clearly, we are looking at a market of different shape and size ahead,” says Mr Nayar. Increasing costs are another worry. The BoA-ML report sees wages and marketing spends climbing as companies target new service lines, markets and geographies.

So how will companies counter the likely stresses and strains of 2010?

Companies will have to evolve new business models to grow in a tough market environment, says Nasscom president Som Mittal. Wipro, for instance, sees new business coming from adoption of cloud computing, green and collaboration technologies. The company is also eyeing more business from the Indian and Middle East markets.

“Customers are not looking at just any vendor but also transformation partners who have their skin in the game,’’ says Mr Vaswani. Infosys, meanwhile, is ramping up its sales force and adding practice and product specialists to its ranks.
BoA-ML recommends that to cope with the new market dynamics, companies may require more locals onsite, better system integration skills, more contracts on pricing models like `gain sharing’ (pricing linked to revenue), automation for infrastructure services and so on.

“The way forward is disruptive innovation,” says Mr Nayar, adding that competing with established leaders in their business models can only bring incremental growth.

“Global CIOs today are not looking for technology solutions. They are looking for business solutions. So from offering new delivery models such as pay per use to taking over entire IT infrastructure of the client to large multi-year SAP implementations, we are doing it all.’’

Whatever the strategy, the beginning of 2010 is not different from that of 2009 — uncertainty dominating the minds of company heads, rather than the cautious optimism they were predicting in December.

“Countries and companies still have job losses to think about. If job losses keep rising, it’s a problem,’’ says Pramod Bhasin, president & CEO, Genpact.

Wipro to hire Experienced Resources

With an increase in business, India’s third-largest IT services company Wipro is holding recruitment drives to hire experienced IT professionals (termed lateral hiring) across the country. The company said in a statement today that it plans to organise two-day walk-in interviews for experienced IT professionals in Bangalore, Chennai, Mumbai, Pune, Hyderabad, Noida and Kolkata, starting November 14.

The drive is a part of its regular hiring in line with business demands, the company said. Vice-President (Talent Acquisition) Pradeep Bahirwani said the company would hold recruitments simultaneously across the country to provide applicants a quick process to allow them to consider opportunities in other cities.

“We are looking to meet applicants across skill requirements in all business divisions with experience levels ranging from 2-14 years,” he said.

He added the company had released recruitment advertisements to inform applicants of the drive.

“We encourage applicants to apply directly to us and not fall prey to fraudsters misusing company names and duping candidates,” he added.

Wipro has also announced plans to hire BSc, BCM and BCA students graduating in 2010 for its Wipro Academy of Software Excellence.

Mid Tier IT Companies eye local deals worth 2 Billion USD

Mumbai: As the big companies are chasing the lucrative domestic market, the mid tier technology firms like Patni Computer Systems and Hexaware are attempting to enter the market by jointly bidding with experienced bidders, reports The Economic Times.

The Indian government departments and other state owned firms will spend around $2 billion on IT during the next 12 months. Hexaware, MindTree and Patni are among the many mid-tier technology firms seeking to explore new business with an experienced partner.



For instance, Hexaware is pursuing some large deals as part of a consortium and several smaller ones on its own. Its strategy for the Indian market will be different from its strategy for overseas markets, said Hexaware's Vice Chairman and CEO, PR Chandrasekar.

"If we treat India as just another location for our services, it will not work. It will need fairly dedicated focus and some innovation on how we source talent and price our offerings. You also need to leverage your niche capabilities, especially if you are not one of the big players," said Chandrasekar, who was earlier with Wipro.

For putting better focus on the Indian market, companies such as Hexaware and Patni have recently formed focused business units. As Narendra Upasani heads Hexaware's India business, Deepak Khosla is responsible for growing Patni's revenues from the country.

Hexaware will work as part of a consortium because the large contracts in the government and public sector projects usually require the bidder to have a track record in executing similar projects.

Guru Malladi, a Partner at Ernst & Young said it will be challenging for mid tier technology firms to take on bigger rivals. "A Rs. 5,000 crore project, for example, can never be delivered by a single player. But I do see an element of challenge for mid-size players who have so far not operated in the domestic market. Large players have to sometimes rely on small players but they may not see value in mid-size players in terms of cost or efficiency arbitrage," said Malladi.

"Globally, this kind of scale is not available anywhere, even if it may not be the largest in revenues," said Jeya Kumar, CEO, Patni Computer.

Like Hexaware, Patni is also chasing contracts in the domestic market as part of a consortium. "With the kind of large deal sizes we are seeing, you have to have a multi-vendor strategy," added Kumar. Apart from the government, Hexaware will focus on sectors like travel and transport, insurance, hospitality and logistics, and technology offerings across sectors.

According to Malladi, the mid size players have to be more strategic in their outlook using their skills to enter the market. Hexaware, along with others like Patni and MindTree are turning towards India, drawn by the large opportunity and significant growth potential.

Entry Level Salaries Down by 20% in IT

Bangalore: One may boast of being employed in IT in the current scene, however they have to work twice as much for getting an interview and the annual salary is peanuts compared to earlier days. A worsening economic crisis, increased availability of skilled workers and lower demand for software services have brought down the entry-level salaries for IT professionals in the country by up to 20 percent, according to experts tracking the sector.


Every year, around 3,00,000 computer science and engineering graduates seek employment with hundreds of tech firms, including big names such as Tata Consultancy Services (TCS), Infosys and Wipro. This year, more than half of them were left unemployed because tech firms were already finding it tough to manage resources sitting on the bench, according to Economic Times.

"The entry-level salaries are down by at least 10-16 percent. Last year, a number of companies gave away offer letters but did not recruit. On top of that, there is a new pool of qualified professionals being churned out this year - all this has created an oversupply in the entry-level IT job market where salaries typically sway between Rs. 3 lakh per annum and Rs. 5 lakh on the higher side," said GC Jayaprakash, Principal Consultant of Stanton Chase International.

Until two years ago, almost all computer and engineering graduates were absorbed by India's outsourcing industry, comprising top tech firms such as TCS, Infosys, Wipro and many others. However, as customers delayed and shelved outsourcing projects, these tech firms also postponed campus hirings. Many students had to approach potential employers directly, since companies did not visit their campuses for placements. "We formed groups and toured companies, and agreed to settle at lower salaries because it's better to be employed at lower salary than having no job at all," said Srilekha Varma, who recently accepted a job offer from a Chennai-based IT firm specializing in banking software.

In a normal year, computer science graduates were offered entry-level salaries of Rs. 3.5-5 lakh. However, companies are now hiring freshers at Rs 1.7-3.5 lakh. However, human resources heads at tech firms, including Wipro, India's third-largest software exporter, say professionals have become more realistic about what they want from their employers. "I don't think salaries have come down, but the environment has indeed helped us in containing salary hikes," Pratik Kumar, Head of Human Resources at Wipro said.

But few companies have not forgotten the offers made. TCS said it would do new campus hiring in January 2010 and will honor all 24,000 offers made for financial year (FY09). "Around 1,800 graduates have joined us in second quarter (Q2) and another 8,000 will join in Q3, rest of the graduates will join based on the demand," a TCS spokeswoman said. Infosys said for FY10, it has made 20,000 campus offers and expects an 80 percent conversion rate i.e. 16,000 of these offers to join the company. "We are honoring all our hiring commitments," an Infosys spokeswoman said.

HP to ourpace the market in 2010

Hewlett-Packard executives expect sales of IT products to rebound in the coming year and they said the company is positioned to outpace the market and record overall sales growth between 3 and 4 percent in 2010.

"We think we have the best portfolio of technologies and services in the industry," said CEO Mark Hurd, speaking at a securities analyst meeting Thursday. "We're pretty well-positioned to go out in the marketplace and win. I think HP's best days are ahead of it, not behind it."

"Our current view is that the IT market returns to growth in fiscal 2010. And given the strength of our portfolio and ongoing investments in market coverage, we do expect to grow faster than the market," said CFO Cathie Lesjak.

HP is in the midst of its fourth fiscal quarter that ends Oct. 31. For the third quarter ended July 31, the company reported a 2 percent decline in sales to $27.5 billion and a 19 percent drop in earnings to $1.6 billion.

But the focus of the analyst meeting was fiscal 2010. Hurd said HP's addressable market, including PCs, servers, storage, printers, networking, software and services, is $1.3 trillion.

Hurd said he expects sales growth in the IT market to resume in 2010, then added: "We will grow faster than the IT market."

HP predicts that its sales in fiscal 2010 will reach $117 billion to $118 billion, up 3 to 4 percent over fiscal 2009, Lesjak told analysts. Earnings will be between $3.60 and $3.70 per share.

The CFO said HP is forecasting that sales from its personal systems group will grow between 3 and 5 percent in fiscal 2010, but sales from its imaging and printing group will be flat by up to 2 percent.

Enterprise systems and storage technology sales will grow between 2 and 4 percent in fiscal 2010, as will HP services. HP software sales will grow between 7 and 9 percent.

Hurd said HP's cost structure is "much improved from several years ago," but later added: "We don't quite have HP operating as effectively as we can." He said there is still "material opportunity for us" to improve the company's operating efficiencies.

One place HP is still cutting costs is in its EDS services unit, which it renamed HP Enterprise Services this week. So far this year, HP has cut $900 million in operating costs out of the operation through the company's integration efforts, Lesjak said, with plans to cut another $1.2 billion through 2010.

Top Outsourcing Comanies of the world

he International Association of Outsourcing Professionals has announced the world's best outsourcing service providers in 2008.

The Global Outsourcing 100 list has 6 Indian companies among the top ten. In the global 100 ranking, Infosys is ranked third, followed by Capgemini and TCS at fifth and sixth positions, respectively.

'Global Outsourcing 100' is an international list of companies that provide the full spectrum of outsourcing services. The selection criteria include the size and growth of the company, customer experience, depth and breadth of competencies and management capabilities.

Following are the top 10 global outsoucring companies, excluding the Indian firms in the list:

The Top 10 global outsourcing companies
Accenture (Rank 1)-- Key strength: Customer testimonials
IBM (Rank 2) -- Key strength: Size & growth
Sodexo (Rank 4) -- Key strength: Global presence
Capgemini (Rank 5) -- Key strength: Achievement recognition
Hewlett Packard (Rank 8) -- Key strength: Outsourcing experience
EDS (Rank 12) -- Key strength: Outsourcing experience
ACS (Rank 13) -- Key strength: Balanced performance
CGI group (Rank 14) -- Key strength: Customer testimonials
SPi (Rank 17) -- Key strength: Customer testimonials
Colliers International (Rank 18) -- Key strength: Global Presence

IBM has 36% market share in India

IBM, the world’s biggest software services provider, continues to gain more business in the domestic information technology market, and is set to control almost half of the domestic outsourcing market by 2010.

At least two experts tracking India’s $5.6-billion market for software outsourcing said, requesting anonymity, that IBM currently has around 36% share, and is set to control almost half the domestic outsourcing market by 2010.

“In terms of revenues, IBM’s share will be 50-60% already,” the expert helping Indian enterprises plans their IT spend told ET. “In terms of number of contracts, the company should be able to achieve 50% share in a year or two.”

Top Indian software exporters such as TCS, Infosys and Wipro are also attempting to address the lucrative Indian market for services at a time when their key markets, the US and Europe, are seeing a slump.

However, Indian tech firms will find it tough to challenge IBM’s strengths in offering hardware, software, outsourcing and consulting, as an integrated solution to clients.

Apart from mega outsourcing contracts worth anywhere between $500 million and $1 billion from telcos such as Bharti Airtel, Idea Cellular and Vodafone, IBM has been able to remain aggressive when it comes to smaller, but strategic deals from companies like Tata Sky and HPCL.

“We helped Tata Sky differentiate and achieve a competitive positioning by offering innovative services such as prepaid recharge options for subscribers,” said Ponani Gopalakrishnan, vice-president of IBM’s India Software Labs.

Indian companies, like their counterparts in the US and Europe are seeking to bring down their operational costs by 10-30%. Customers such as Tata Sky and HPCL are increasingly turning to IBM for innovative solutions that help them achieve competitive edge.

The HPCL contract worth around $2.2 million, for implementing radio frequency identification device, will help the petroleum company streamline its processes of bottling, supplying and tracking over 500,000 LPG cylinders in the first phase.

Ms Gopalakrishnan who holds over 20 patents granted by the US patent office, along with a few hundred researchers at the lab are solving business problems and helping new businesses such as Tata Sky raise entry barriers for new entrants through innovative solutions.

“We helped Tata Sky integrate its back-end capabilities with IT infrastructure using SOA,” said Ms Gopalakrishnan. SOA, or service-oriented architecture, helps enterprises integrate their business processes, and deliver flexible IT-based services to users. Tata Sky aims to have around eight million subscribers by 2012.

While some of these outsourcing contracts are smaller in size when signed, IBM is able to evolve these engagements into bigger, multi-year contracts.

No Hikes at Infosys

Top IT companies such as TCS, Wipro and Cognizant have kicked off promotions and salary hikes for some employees but the country’s second largest software exporter Infosys prefers to wait and watch till the environment becomes more stable, according to the company’s CEO and MD Kris Gopalakrishnan.

Talking on the sidelines of ICT event Connect 09, Gopalakrishnan also shared his views on the 3-year extension of tax benefits on STPI units proposed by Union Minister A Raja and also a possible solution to counter the recent changes in UK’s immigration norms. Excerpts from the interview:

Some companies in the top five have announced promotions and hikes. When can Infosys employees expect something similar?

The thing is the industry is still facing uncertain times. We would like to look at the situation. As it develops, as it evolves, we are constantly looking at it and then when we decide we will let you know.

Union Minister for IT and telecom A Raja said that he plans to extend the tax benefits on STPI units by another three years from 2011 to 2014. What are your views on the same?

If it is done properly, it is going to help the industry. So, what is needed is extension of the 10-year holiday to 13 or 15 years. Then it will help, because most of the STPs have come out of the 10-year holiday. The 3 year extension will also help but in a smaller way.

As the law stands today, the tax break is available for new units. When you create a SEZ it’s a new unit, when you create a STP, it’s a new unit. So the benefits are available only for new units as it stands today. You need to extend the benefit to existing units by extending the term to 13 years or 15 years.

Recently, there’s also been a lot of noise about stricter immigration norms in UK, where lobbyists are trying to work out rules that will benefit local workers. How will this impact Infosys, for which UK & Continental Europe is the second-biggest revenue generator after US?

Till now, the impact has been minimum. But definitely there is a change in attitude because unemployment is going up in these countries. So, they are looking at how they can tighten their immigration rules. This is also targeted towards illegal immigrants. And what is needed is to make sure that you work with these governments to reduce the impact. India is becoming a very attractive location for overseas people, for foreigners to work in. So we can have a counter agreement with these countries.

And we need to canvass for a different kind of visa, which is a work permit visa. Today immigrant visa is used for work permit. So, it’s confusing the issue, because most employees going there are not going to immigrate. They are just going to work and come back.

Nasscom, CII are working with the govt of India, with these governments to make sure that our perspective, our voices are heard and a proper solution is found. This is also part of the WTO discussions.

TCS nets project from Andhra Pradesh

MUMBAI: Tata Consultancy Services (TCS), has secured a five-year project to build and operate a State Wide Area Network (SWAN) in Andhra Pradesh. The project will be based on a Build, Own, Operate and Transfer (BOOT) model. This is the fourth SWAN project TCS has bagged in a row.

Wipro, an outsourcing firm also announced that it had won a three-year IT services contract from Aquarion Water Company, one of the largest water utilities in the U.S. Financial details of the deal were not disclosed.

The project will enable the Andhra Pradesh government to start and run various e-governance projects and citizen services. This would bring about significant efficiencies in G2G and G2C services of the state, which will help in bringing complete transformation in the e-governance structure. The project would be rolled out in 12 months and TCS will then maintain it for five years.

"We are happy to partner with Tata Consultancy Services for this project. This ambitious APSWAN project is an initiative of the state government to take a wide array of government services to the common man in the remotest corner of the state," Dr. Sameer Sharma, (IAS) IT Secretary & Chairman of Andhra Pradesh Technology Services told IndiaInfoline.

TCS has however not disclosed the financial details of the contract. The IT firm is currently developing similar projects for three other regional governments in the country, it said in a statement.

"This win is yet another endorsement of TCS' capabilities in the full services space. We are extremely happy to engage further with the Andhra government. For APSWAN, we will lay a statewide network of IT infrastructure and set up common service centres for citizens to take advantage of e-government services delivered at their doorstep. TCS would set up a state-of-the-art Network Operations Centre (NOC) and helpdesk for round the clock monitoring of the facility and services," said Tanmoy Chakrabarty, Vice President and Head of government ISU.

IT Outsourcing india to Lose the Crown by 2020

IT Outsourcing
Who will hold the offshoring crown in 2020?

How India could lose its grip on the market without an education and innovation overhaul

Noshir Kaka is a director in the Mumbai office of analyst house McKinsey & Company. In an exclusive interview, silicon.com reporter Nick Heath spoke to Kaka about his forthcoming report on how India's 50 per cent share of the global offshore technology and business services market could slip away by 2020.

To view the full article Strengthening India's offshoring industry, just published on McKinsey Quarterly, click here.

silicon.com: What will happen to India's share of global IT and BPO market by 2020?

Kaka: Dropping market share is one of scenarios that we have projected by 2020 if India chooses not to release the capacity in its education system.

India produces about three million graduates a year. The entire offshoring industry across IT and BPO is 2.1 million people, so clearly there're enough graduates - the real issue is the suitability of candidates. Effectively we are using a tenth of our workforce that is suitable for this industry. If that trend continues you will have a shortage of suitable talent.

The primary cause is the quality of communications and language skills, the second is that some people are not educated well enough to be able to serve a multinational corporation.

The combined market share of 50 to 53 per cent, which is what India has today, you could see that combined market share decline because India does not have the supply side availability.

But today the new Indian education minister has proposed a public-private partnership in India's education system, where 2,500 model schools would be created, which is something we have been shouting from the rooftops for for a long time.

When will the decline begin to happen?

We have seen an increase in India's market share in 2008.

The global financial crisis has given India a bit of breathing room, it's dropped the growth rates. In 2009/10 we will see low growth, so a supply side constraint will not come through in the next two years.

Beyond that, if gets back to original growth rate and we don't see any change in the education system, we could see those supply shortfalls happening very quickly thereafter.

Which countries look most likely to take that market share?

You have got to separate out those countries that are the volume hubs and those that offer more niche services.

When you look at the volume hubs, it's very hard to get away from China and Russia, which are two of the largest by population locations. China tends to be a lot more engineering, design and infrastructure services led, more catering to North Asia. Russia tends to be outstanding for software product development.

In Latin America, Brazil is one of the few nations that offers an emerging working population of that size. [Much of Latin America] is Spanish speaking, southern-US focused.

In Eastern Europe the talent pools are not as deep as in India and China and more fragmented by language.

Vietnam and Egypt has a reasonable talent pool and a lot of government support to promote this industry, support by real initiatives on the ground making changes to the education system and infrastructure to support this industry.

Which location will be the first offshoring destination choice for the UK and Europe in 2020?

For the Anglo Saxon world, the US and UK predominantly, India will continue to be the country of choice. Even with its talent constraints that I talked about, India continues to introduce about a third of the suitable talent in the world. I don't think that India's dominant position is by any means threatened in the near future.

Which of the global outsourcing companies will dominate by 2020?

You will see global systems integrators that will be very successful, some of them already have very large global footprints and have embraced a global delivery model and are moving to scale very rapidly.

You will also find a few of the Indian top tier companies, in the BPO and on IT services space, among the world's top ten - if you project their growth rates out.

You will see also the stabilisation in growth of the captives [inhouse offshore operations] turned third parties, such as Convergys did many years ago spinning out from Bell South. You will find you will have a few captives that have achieved the scale and size and become very successful third parties.

Will companies still be setting up their own inhouse offshore operations or captives by 2020?

As the market matures for commoditised services it gets tougher and tougher to establish the cost structure or attract the talent that would be viable in a country like India.

When you go for a commoditised service the case for outsourcing that in an offshore environment is growing as the capability of the vendor base grows.

For example there are very few IT captives on the application development and maintenance side. The ones that are there are very large, have been there for some time and can warrant the scale economies.

You will begin to see a very similar trend on the business services side.

What sectors will outsource the most work by 2020?

Fast forward to 2020 and we see almost 80 per cent of the incremental growth coming outside of today's core verticals of banking, insurance, telecoms and manufacturing. They won't decline but there are other areas that will assume greater or as much significance for outsourcers.

Today, in terms of outsourcing, government or public sector is slightly smaller than BFSI [financial sector]. The second sector we are excited about is healthcare, with the demographic changes imminent in US and most of Europe we think that healthcare provision are going to go through the roof. Automation and offshoring is one of the levers that government and companies will use to take care of that.

The two others are utilities and media.

Outside of the verticals we think the Bric [Brazil, Russia, India and China] nations are going to be a great source of domestic outsourcing growth for many companies.

The offshoring industry has largely focused on Fortune 1000 clients and we think going forward small and medium business will be a very interesting source of growth.

What type of new tech services will be being outsourced by 2020?

Energy efficiency and climate change, mobile applications and clinical products are just three examples.

In energy efficiency, another McKinsey study estimated that up to a third of the carbon abatement potential worldwide in greenhouse gases will be directly or indirectly induced by technology. If you look at the innovation around smart grids, industrial innovation or green buildings, a lot of this is technology enabled. That is a huge opportunity to innovate from a low cost environment.

Or it could be another product innovation such as the Tata Nano car.

If you look at what's happening in India or any other of the low-cost countries, a lot of the work that we do is replication of a service done somewhere else.

We have a whole new opportunity on to offer new products and services that have not been created somewhere else.

What effect will protectionism have on the offshoring industry?

We saw it in 2001 after the dot com bubble burst and we are seeing it again.

As economic cycles go up or down and unemployment grows you will see some degree of noise and bills being introduced.

We did some research showing the economic growth enabled by offshoring $1 of work from North America to India creates wealth worth more than that value in North America. It's an economic win-win.

So far I have not seen major political movements being pursued in earnest by both governments and we are very hopeful that the trade barriers stay down and we don't get a whiplash effect that will hurt both countries.

Weak Server Sales in Europe

European server sales have dropped to the lowest level ever recorded by analyst IDC.

Research and analyst firm IDC has reported the lowest levels of server revenue it has ever seen in the second quarter of 2009.

According to IDC’s Quarterly Server Tracker for Europe, Middle East and Africa (EMEA), server vendor revenue in the second quarter of 2009 reached $2.9bn (£1.8bn), 35.8 per cent down on the same period last year, with the number of servers shipped dropping below half a million, 33.9 per cent down on 2008.

"Conditions remain tough because customers have been limiting IT spending to the bare essentials to keep their IT infrastructure running, and this has negatively impacted hardware investment," said IDC analyst for European Systems and Infrastructures Solutions Beatriz Valle.

"IDC sees signs of stabilisation this quarter, including modest growth in average selling prices and quasi-flat quarter-on-quarter revenue decline."

Virtualisation on x86 systems was seen as the growth engine by server vendors hoping for a traditionally strong fourth quarter, according to the research. But IDC pointed out that it would take much longer than that for EMEA server revenue to match the peak of $5.4bn (£3.3bn) seen in the fourth quarter of 2007.

IDC confirmed the market trend towards x86 servers, which outperformed non-x86 servers, taking 52.3 per cent of total revenue, declining 33 per cent from last year. This compares with a steeper 38.6 per cent decline for non-x86 systems.

IDC's European Systems and Infrastructure Solutions research analyst Giorgio Nebuloni said that blade systems are expected to be less affected by the economic downturn, due to increased consolidation within budget-constrained companies.

"[Vendors are] escalating the number of integrated, richly configured solution blocks based on a scalable layer of blade servers, in an attempt to decommoditise the upper end of the x86 business," he said.

Windows and Linux-based systems showed similar annual declines of about 32 per cent, but Windows was the only main operating system whose market share increased both quarterly and annually. Operating systems running on non-x86 hardware were worst hit, with Unix system revenue below $1bn (£611m) for the second consecutive quarter, with revenue down 38.7 per cent annually.

HP was EMEA's top server vendor for the sixth consecutive quarter, with ProLiant server sales worth around $700m (£428m), 72 per cent of its revenue, up from 66.7 per cent in the same quarter of 2008.

In second place was IBM continuing the transition from System p to Power systems, and growing its market share 1.4 per cent. Power systems revenue edged closer to $400m (£244m), accounting for 41.9 per cent of the vendor’s total. However, mainframe revenue dropped by nearly half, down 46.7 per cent annually.

Whats happening on the Cloud

According to my strategy professor Gordon Walker: "The trigger point [for shakeout to begin] is when one or more firms achieve a level of productivity that neither weaker rivals nor potential entrants can match. Thus, the shift in entry and exit rates is ultimately caused by successful and sustainable growth strategies.

"Only the presence of one or more firms whose dynamic capabilities create dominant, defendable market positions can deter entrants and force weak competitors to leave the industry." (From page 137 of Modern Competitive Strategy published by McGraw-Hill/Irwin)

Now I can tell you, to be sure, that there is no shortage of entrants into the cloud application platform industry.

Force.com may have started things off a few years ago but today there are at least 40 companies, and probably more than that, who play in the space.

An upcoming Gartner report profiles many of these companies. I don't think we're in the shakeout period yet; however, I put better-than-even money on the idea that we're in the last stages of expansion before a shakeout gets started.

I submit as evidence the following:

1. CogHead, a leading (but small) technology company in the cloud application platforms space, went bust last December. Its assets were ingested by the large, enterprise-flavoured SAP. I am not sure what SAP plans to do with those assets but I don't believe they bought CogHead's stuff to put it in a museum.

2. Microsoft Azure (and .NET Services), which is kind of a hybrid approach somewhere between Amazon EC2 (cloud system infrastructure) and Google App Engine (APaaS), will hit general availability sometime soon. This will mark the first big-time enterprise software player to have their own cloud application platform offering.

3. VMWare has jumped into the fray with its planned acquisition of SpringSource - whose CloudFoundry offering constitutes a cloud application platform, which has to be the main reason the company shelled out more than $400m for what is a tiny open-source company (admittedly, Spring, around which the core business of SpringSource is built, is a great and widely-adopted framework for Java programmers).

It will be interesting to see how VMWare plans to incorporate the SpringSource and Hyperic assets into its portfolio, and what (if any) other complementary acquisitions they will make. I'm not sure what to expect but if I were a small cloud application platform start-up counting on a neutral VMWare container within which to run my 'shared-hardware' multi-tenant platform, I'd be a little bit more worried than I was a few weeks ago.

The future for application platform as a service (APaaS) and other types of cloud application platforms looks very bright to me. I'm particularly bullish on APaaS because of the productivity benefits available to developers using a combination of development of new code and composition of business-oriented services and components offered by the provider.

I don't think there's a big enough market for all of the companies producing cloud application platform software to wind up as winners, though.

I also think the time is drawing close where the other mega-vendors - IBM, Oracle, and SAP - must either launch their own cloud application platforms or acquire one, or risk being left behind.

Keep your eyes open for acceleration in the demise of cloud application platform companies, and deceleration among new entrants.

Eric Knipp is senior research analyst at Gartner.

Comments or opinions expressed on this blog are those of the individual contributors only, and do not necessarily represent the views of Gartner, Inc. or its management. Readers may copy and redistribute blog postings on other blogs, or otherwise for private, non-commercial or journalistic purposes. This content may not be used for any other purposes in any other formats or media. The content on this blog is provided on an 'as-is' basis. Gartner shall not be liable for any damages whatsoever arising out of the content or use of this blog.

Europe Lags behind US in Tech Spending

The rate of recovery in tech spending in the US is going to be twice the rate of Western and Central Europe next year as America steps out of recession quicker.

Europe has been experiencing a deep recession and with the problems originating in the US those factors have pointed to the recovery starting on the other side of the Atlantic first before spreading to the UK and the rest of Europe.

According to Forrester research the US will see a 8% increase in technology purchases next year compared to 4% in Western and Central Europe with €297bn being spent this year in Europe with the major countries all seeing drops ranging for IT goods and services from 12% here in Britain to 3% in France and Germany in 2009.

In the Forrester report, European IT market outlook 2009 to 2010, the analyst Andrew Barels, said that the market for IT goods and services would decline in Europe by 6.3% this year and would be slow to recover: "In both regards it will lag behind the US tech market, which will have a smaller drop in 2009 and stronger growth in 2010."

"The main reason? The European economic recession has turned ouyt to be deeper than the US recession, with Europe's downturn starting later and probably lasting into 2010 . All categories of IT purchases will be down, with computer equipment and communications equipment being especially weak," he stated in the report.

There have already been sings that the US economy has stablised with plenty of CEOs and financial officers making that call in statements accompanying recent financial results. But in Europe only Germany and France have officially recently come out of recession with the UK still lagging behind.

TCS to hire 25000

Bangalore: In a move that could bring a smile to many faces, Tata Consultancy Services (TCS) has announced that it will hire 25,000 people globally in 2009, with 90 percent of them in India alone. Though the number is bigger when compared to the hiring these days, it is less than last year when TCS appointed around 35,000 people.

With this recruitment drive, TCS also plans to expand its presence into the tier-II cities in India. "We will be hiring 25,000 people this year, which means roughly 25 lakh square feet of work space required and, therefore, we need to grow outside the metros. Tier-II cities are our only focus for expansion in the country as the top rung are clogged and saturated," said Tanmoy Chakrabarty, Vice-President and Head of Government Industry Solutions unit at TCS.

Following this hiring spree, the total global manpower of TCS would go up to more than 1.8 lakh. This will put the IT services provider among large private Indian employers like Tata Steel, which has the total employee strength of two lakh. Going forward, the company, which has an estimated 32 percent market share, plans to cash in on the Indian government's plan to invest Rs. 40,000 crore on IT services.

Currently, 70 percent of the IT segment's revenue is from India, while the rest comes from the U.S., Latin America, Africa and South East Asian countries. However, the revenue contribution from Indian government businesses to the total company revenue of $6 billion is less than five percent, which the company intends to increase to more than 10 percent in the next three years.

Tough for Indian IT Pros in UK

Bangalore: The UK government has accepted recommendations for stricter immigration norms and restricting job opportunities for skilled migrant workers from countries like India, reports Economic Times.

The Migration Advisory Committee (MAC) report submitted by the committee's Chairman, Professor David Metcalf to UK's Home Office last month recommended that the threshold salary levels for allowing entry of a graduate skilled worker be raised from the current 17,000 pounds. This will make it tougher to earn points needed for allocation of work permits.


With more stringent norms, companies like TCS, Infosys, Wipro and Tech Mahindra which serve British customers such as BT, British Petroleum and British Airways by sending Indian professionals to the country on short term project assignments, may now have to look for local UK workers.

"These changes will ensure that businesses can recruit the skilled workers that the economy needs, but not at the expense of British workers, nor as a cheaper alternative to investing in the skills of the existing workforce," Home Secretary Alan Johnson said in a statement issued by the UK Border Agency. He also added that the threshold of income at which migrant workers become eligible for work permits will now be raised to 20,000 pounds.

As per rules, companies will need to advertise for available positions for four weeks before employing migrant workers. "This will mean that, from next year, all jobs must be advertised to British workers in Jobcentre Plus for four weeks - extended from two weeks - before companies can seek to employ individuals from outside Europe. This will ensure that British workers not only are first in line for jobs but also have more time in which to apply," the Home Office said.

MAC's recommendations for tougher intra-company transfer rules - a route adopted by many tech firms for sending Indian workers to work with customers onsite in the country, have also been accepted.

IT BPO Mergers and Acquisitions go Slow

The pace of IT and BPO companies merging is slowing down. The reason for this is simple, at one point in time during December to February the morale and business confidence was its lowest and valuations had come down to multi year lows. However since february the markets have now again reverted and regained the lost ground.

This has resulted in valuations going up and hence mergers and acquisitions at these levels are risky.

Bangalore: In 2009, it seems that IT and BPO companies have stayed away from blockbuster merger and acquisition (M&A) deals. According to the data tracked by Grant Thornton, an accounting and consulting firm; against the total deals value of $1.3 billion in January-July 2008, the M&A space grossed only $616 million this year.

While the Tech Mahindra-Satyam deal bolstered the domestic numbers, the total value of cross-border deals (outbound and inbound combined) fell 83 percent to $156.5 million during January-July this year. The cross-border deal volume at 13 deals was a fraction of last year's level (47 deals).

A total of 16 PE transactions in the IT and BPO space grossed $108.6 million in January-July 2009, compared with 39 deals that yielded $258.3 million in the corresponding period last year. S Mahalingam, CFO and Executive Director, Tata Consultancy Services said, "The subdued level of M&A activity underlined the industry's thinking that given the tough environment, the focus should be on driving the day-to-day business."

According to Nasscom, India's IT and BPO industry is expected to clock an export revenue growth rate of 4-7 percent in the financial year (FY) 2010, substantially lower than the 16.3 percent recorded in FY 2009. Harish H V, Partner - Grant Thornton India said, "The entire mood in the industry had been weak due to the slowdown in key export markets. M&A was not on the top of the mind for most players. Although we expect the activity to pick-up in the coming months, the full-year numbers will still be lower than last year."

IT unemployment hits five-year high

The economy may be showing its first green shoots but the IT industry doesn't seem to be showing any signs of perking up just yet.

Unemployment in the IT and telecoms industry has hit a five-year high, new research from industry skills body e-skills has found. In the first quarter of this year, the unemployment rate among ICT workers hit 4.8 per cent - its highest level since the first quarter of 2004.

IT strategy and planning workers were among those thought to be hardest hit, with a seven per cent quarter-on-quarter fall in employment rates.

ICT job advertisements declined significantly across the board in the first three months of this year, with situations vacant down by 27 per cent quarter-on-quarter for permanent workers and 32 per cent for contractors.

Despite growing unemployment, those currently in ICT work are apparently faring well, earning an average of £730 per week - up four per cent year-on-year and 40 per cent higher than the national average.

The majority of bonuses too are still surviving the recession, with around five per cent of staff picking up something extra in their pay packet in the first quarter of this year, down from six per cent in the corresponding period last year.

"It's still tough out there but overall ICT pros are still not doing so badly when you look at the big picture," the report noted.

Profits up for IT Companies

Logica almost doubles profit for most recent half-year while CSC sees net income grow 5.5% despite revenue dip

Two IT services companies reported growing profits last week, providing some much-needed good news for the IT sector.

European IT services and BPO firm Logica grew pre-tax profits to £24 million for the second half of its financial year, up from £12 million for the same period last year. The company reported revenue growth of 6% (after correcting for the number of working days) to £1.87 billion, driven in the main by a 10% boost in outsourcing revenues.

At the same time, Logica cut the total number of subcontractors it employs by 20%. Beyond the 1,900 redundancies it has already declared, Logica said there would be no more job cuts for internal staff.

Meanwhile, US IT services and outsourcing company CSC managed to grow net income by 5.6% to $131 million for its most recent financial quarter, despite a decline in revenues of 12% to $3.9 billion.

CSC’s commercial outsourcing division and managed services arm each saw revenue fall steeply: by 22% to $840 million and by 17.6% to $1.56 billion respectively. These were tempered, however, by a 1.7% revenue increase for the North American public sector division to $1.52 billion.

The company also announced its intention to acquire the Brazilian division of bankrupt US management and technology consultancy BearingPoint. CSC described Brazil as South America’s “largest, most important and growing market”.