NEW DELHI: Software companies, led by Infosys Technologies and Tata Consultancy Services, are set to report higher revenues for the December quarter as firms such as British Petroleum increased outsourcing, but a stronger rupee and higher wages could reduce profitability, say analysts. Although profitability may fall, industry may cheer the revival of order flow after more than four quarters of uncertainty on new businesses as companies in the West grappled with recession and credit crisis. Revenues may rise as much as 4% on quarter, some analysts say.
“The macro situation has improved. The order book is better now. Companies might outperform vis-a-vis guidance,’’ said Harit Shah, research analyst at Karvy Stock Broking. The $60-billion Indian IT sector that depends on the US and Europe for most of its revenues, has been facing tough business conditions for more than a year as their clients such as Citigroup and General Electric were cutting costs as the credit crisis reduced demand. But the situation has improved in the past few months with steady flow of orders as developed economies emerged out of recession. But the appreciation of the rupee against the US dollar, would reduce profitability.
“We are seeing stability and an improvement in demand that we had talked about the last quarter,’’ said Suresh Vaswani, joint CEO, AT Wipro Technologies. The rupee’s rise from 49-50 levels in Q2 to 46-47 levels in the third quarter will impact margins. For every 1% strengthening in rupee, margin impact can be up to 50 bps in large companies, analysts said.
The rupee has been one of the best performing currencies in the region in the December quarter as global funds poured money into India expecting a strong economic growth. The quarter saw deals like British Petroleum global vendor consolidation contract worth over $2 billion shared among others by TCS and Infosys. Also, implementation of software packages such as SAP and Oracle which were onsite heavy are now about 60% offshore. IT companies like HCL Technologies have gained from this shift and HCL’s buyout of Axon helped.
The revival of order flow has also brought in higher costs for companies as they paid more wages, in some cases as much as 11% more, to retain talent to execute orders. And companies could not raise the fees they charged for services as they had to compete aggressively for new orders. “There will be a margin impact of about 25 bps due to salary hikes and variable payout,” said Shashi Bhushan, senior research analyst at Prabhudas Lilladher. “Pricing has been muted with a positive bias that is not too bad for this year,”he said.
The revival of businesses may ensure continued order flows, but may not necessarily lead to rising profitability as the currency movements may be adverse. “Margins are not sustainable as the rupee is strengthening,” Bank of America-Merrill Lynch wrote in a report. BoA-ML sees rupee/dollar at 45 at March end and at Rs 43 at end December 2010 and this will have a negative impact on margins in coming quarters.
Wages will climb up even as pricing will be under pressure. Discretionary sales and marketing spends will also move up.
Showing posts with label IT Industry in India. Show all posts
Showing posts with label IT Industry in India. Show all posts
Monday, January 4, 2010
Sunday, September 27, 2009
No pay hike at wipro
Wipro has announced that it will not be giving its employees any wage hikes this fiscal year. The company also said that it would honor its commitments to fresh graduates it hired last year but on a staggered basis. The students will have to wait longer before being absorbed in the company.
Wipro had issued offer letters to over 7000 students from various universities who have graduated this year.
Pratik Kumar, vice president (human resource) at Wipro said, "We will honor our commitments made to the students last year but it will be on a staggered basics since we don't want them to sit in the bench. We will also have no wage hike during this fiscal."
Since we are not sure how many we can absorb this fiscal, some of the freshers could spill over next fiscal, he said.
Wipro will be going for fresh recruitments only during Jan-Feb of 2010. Kumar also said Wipro would go for lateral hiring depending on business generation.
The company has also made it a policy to approach students only during their last semester unlike earlier when it approached them during the 6th semester.
Wipro had issued offer letters to over 7000 students from various universities who have graduated this year.
Pratik Kumar, vice president (human resource) at Wipro said, "We will honor our commitments made to the students last year but it will be on a staggered basics since we don't want them to sit in the bench. We will also have no wage hike during this fiscal."
Since we are not sure how many we can absorb this fiscal, some of the freshers could spill over next fiscal, he said.
Wipro will be going for fresh recruitments only during Jan-Feb of 2010. Kumar also said Wipro would go for lateral hiring depending on business generation.
The company has also made it a policy to approach students only during their last semester unlike earlier when it approached them during the 6th semester.
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.
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.
US Technology Industry loses 1,15,000 jobs in first half of 2009
Seems Indian techies have been luckier than their counterparts in the US. According to a study by TechAmerica Foundation, US technology industry cut 115,000 jobs in the first half of 2009, compared to the 72,900 tech jobs added in the same period in 2008.
However, in the US too, the tech sector seems better than other industry verticals. While between June 2008 to June 2009, tech lost 224,100 jobs, a 3.7% decline; the US private sector shed jobs at a higher pace of 5.1%.
The Washington-based non-profit foundation also said that high-tech manufacturing in the US continues to shed jobs, having lost 69,500 from January to June 2009. The high-tech services sectors shed 45,500 jobs from January to June 2009, a 1% drop.
The report also said that for the first time in its 5-year history, all three services sectors saw losses: engineering and tech services lost 21,500 jobs, while communications services shed 13,600 jobs. In software services the job cuts stood at 10,400.
However, in the US too, the tech sector seems better than other industry verticals. While between June 2008 to June 2009, tech lost 224,100 jobs, a 3.7% decline; the US private sector shed jobs at a higher pace of 5.1%.
The Washington-based non-profit foundation also said that high-tech manufacturing in the US continues to shed jobs, having lost 69,500 from January to June 2009. The high-tech services sectors shed 45,500 jobs from January to June 2009, a 1% drop.
The report also said that for the first time in its 5-year history, all three services sectors saw losses: engineering and tech services lost 21,500 jobs, while communications services shed 13,600 jobs. In software services the job cuts stood at 10,400.
Saturday, September 26, 2009
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.
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.
Patni Targets Acquisitions in US and Continental Europe
Bangalore: Patni is eyeing two acquisitions; one each in the U.S. and Continental Europe, and plans to close at least one transaction by November 2009. The company has been negotiating with both these companies for the past three months and possibly within the next few weeks, the term sheets are likely to be exchanged. A term-sheet refers to an agreement between two companies to pursue negotiations to conclude a potential M&A (Mergers and Acquisitions) transaction.
Multiple sources familiar with Patni's acquisition plans said that the company wants to cross the $1-billion mark in revenues through inorganic growth, and compete more effectively with TCS, Infosys and Wipro for large multi-year outsourcing contracts. An anonymous source said that Patni was chasing an enterprise resource planning (ERP) services firm in continental Europe with around $400 million in revenues, while the U.S. target with expertise in insurance solutions area is closer to $150 million in revenues. Banking and financial services industry (BFSI), which includes serving customers such as Guardian Life Insurance, is one of the fastest growing businesses for Patni.
In a telephonic interview to the Economic Times, Patni CEO Jeya Kumar said that the company was indeed pursuing acquisition opportunities for accessing newer markets and scaling up existing domain capabilities. "We would either acquire a company for its pure IP within a particular domain, or for gaining access to a growing market."
According to U.S. based financial analyst, Patni should have around $400 million in cash by the end of 2009. Kumar, who joined Patni in February earlier this year, has been working on transforming Patni's internal processes. Experts such as James Friedman of Susquehanna International Group (SIG) said that the company has already moved in sync with tier-I suppliers by improving its operating margins from around 11 percent last year to almost 17.5 percent during the second quarter ended June this year.
"Patni has accomplished these goals through a combination of cost-cutting initiatives, including headcount reductions, travel controls, onsite/offshore adjustments, and utilization efficiencies. More surprisingly, the company has managed to grow again, with revenues increasing 3.5 percent quarter-over-quarter (QOQ)" said Friedman.
Multiple sources familiar with Patni's acquisition plans said that the company wants to cross the $1-billion mark in revenues through inorganic growth, and compete more effectively with TCS, Infosys and Wipro for large multi-year outsourcing contracts. An anonymous source said that Patni was chasing an enterprise resource planning (ERP) services firm in continental Europe with around $400 million in revenues, while the U.S. target with expertise in insurance solutions area is closer to $150 million in revenues. Banking and financial services industry (BFSI), which includes serving customers such as Guardian Life Insurance, is one of the fastest growing businesses for Patni.
In a telephonic interview to the Economic Times, Patni CEO Jeya Kumar said that the company was indeed pursuing acquisition opportunities for accessing newer markets and scaling up existing domain capabilities. "We would either acquire a company for its pure IP within a particular domain, or for gaining access to a growing market."
According to U.S. based financial analyst, Patni should have around $400 million in cash by the end of 2009. Kumar, who joined Patni in February earlier this year, has been working on transforming Patni's internal processes. Experts such as James Friedman of Susquehanna International Group (SIG) said that the company has already moved in sync with tier-I suppliers by improving its operating margins from around 11 percent last year to almost 17.5 percent during the second quarter ended June this year.
"Patni has accomplished these goals through a combination of cost-cutting initiatives, including headcount reductions, travel controls, onsite/offshore adjustments, and utilization efficiencies. More surprisingly, the company has managed to grow again, with revenues increasing 3.5 percent quarter-over-quarter (QOQ)" said Friedman.
IT Companies to Pay Tax on Softawre Purchases
Bangalore: According to a new order given by the Karnataka High Court, IT companies will now have to pay tax in case of software purchases from global vendors like Microsoft.
By this order, the technology firms will have to withhold between 10-20 percent of their software purchase payments in the future, reports Economic Times.
The division bench constituting Justice D V Shylendra Kumar and Justice Arvind Kumar pronounced the judgement on Thursday afternoon while upholding an appeal by the Income Tax Department that technology firms were legally obliged to withhold tax on software purchases. The order is with retrospective effect.
The IT department argued that any software purchase amounted to royalty payment for a license to use it and it should not be taken as a mere purchase of goods that are excluded from withholding tax.
The order could impact branded software vendors such as Microsoft, their third party distributors like Sonata Software, hardware manufacturers like Samsung and GE who rolls up branded software with their products, technology firms like Infosys or even the local arms of HP and IBM which could be licensing software from their parents.
This is the first court order that has gone against the taxpayer in income tax disputes relating to withholding tax on software purchase. In fact, the Karnataka High Court intervention came after the Income Tax Tribunal had ruled in favour of taxpayers, which prompted the department to go for an appeal.
"The bench did not venture into the question whether purchase of software amounted to royalty payment or not. The court said firms buying software should not sit on judgement whether the recipient is obliged to pay tax in the country. They have to deduct tax the moment they make payments to a non resident party. To an extent, this leaves several issues open ended," said Abhishek Goenka, Partner, BMR Advisors.
More knowledge on the ruling could only be obtained when the affected parties will study the court order in detail. The certified copy on the ruling is expected in coming days.
"More than technology services firms, it is branded software distributors and hardware manufacturers who bundle the software are going to be affected in a significant way. Several companies could become interested parties with this litigation going forward, as they need to address the question whether they are obliged to pay taxes in the country for sale of software," said Goenka.
By this order, the technology firms will have to withhold between 10-20 percent of their software purchase payments in the future, reports Economic Times.
The division bench constituting Justice D V Shylendra Kumar and Justice Arvind Kumar pronounced the judgement on Thursday afternoon while upholding an appeal by the Income Tax Department that technology firms were legally obliged to withhold tax on software purchases. The order is with retrospective effect.
The IT department argued that any software purchase amounted to royalty payment for a license to use it and it should not be taken as a mere purchase of goods that are excluded from withholding tax.
The order could impact branded software vendors such as Microsoft, their third party distributors like Sonata Software, hardware manufacturers like Samsung and GE who rolls up branded software with their products, technology firms like Infosys or even the local arms of HP and IBM which could be licensing software from their parents.
This is the first court order that has gone against the taxpayer in income tax disputes relating to withholding tax on software purchase. In fact, the Karnataka High Court intervention came after the Income Tax Tribunal had ruled in favour of taxpayers, which prompted the department to go for an appeal.
"The bench did not venture into the question whether purchase of software amounted to royalty payment or not. The court said firms buying software should not sit on judgement whether the recipient is obliged to pay tax in the country. They have to deduct tax the moment they make payments to a non resident party. To an extent, this leaves several issues open ended," said Abhishek Goenka, Partner, BMR Advisors.
More knowledge on the ruling could only be obtained when the affected parties will study the court order in detail. The certified copy on the ruling is expected in coming days.
"More than technology services firms, it is branded software distributors and hardware manufacturers who bundle the software are going to be affected in a significant way. Several companies could become interested parties with this litigation going forward, as they need to address the question whether they are obliged to pay taxes in the country for sale of software," said Goenka.
Wipro BPO to hire 15000
Kozhikode: Wipro BPO has announced that it will hire 15,000 employees this year, for its operations at different centers in India. The company, which is part of the IT bellwether Wipro has already recruited around 8,000 employees and is in the process of selecting another 7,000 over the next six months, for which it has been holding job fairs in association with various universities, reports The Hindu Business Line.
Out of the total recruitments, 1,200 - 1,500 people will be hired from the southern region. Praveen Kamath, Associate Vice President of Wipro-BPO, said that the company now had over 24,000 employees on its roll at 15 locations spread across Eastern Europe, China and the Philippines, apart from India. "The BPO division was one of the fastest growing businesses of Wipro and it would require about 15,000 new recruits annually," he added.
According to Kamath, the company is focusing on undergraduates for 40 percent of the requirement and graduates and post-graduates for the remaining 60 percent. Besides, the company will also provide opportunity for the further education of the selected candidates while being on the job.
Out of the total recruitments, 1,200 - 1,500 people will be hired from the southern region. Praveen Kamath, Associate Vice President of Wipro-BPO, said that the company now had over 24,000 employees on its roll at 15 locations spread across Eastern Europe, China and the Philippines, apart from India. "The BPO division was one of the fastest growing businesses of Wipro and it would require about 15,000 new recruits annually," he added.
According to Kamath, the company is focusing on undergraduates for 40 percent of the requirement and graduates and post-graduates for the remaining 60 percent. Besides, the company will also provide opportunity for the further education of the selected candidates while being on the job.
Monday, September 14, 2009
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.
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.
TCS, Wipro, Infy win 1.5 Billion Contract
TCS, Infosys, Wipro win $1.5 billion outsourcing contract
With this, BP has reduced the number of its technology vendors from 40 to five and expects to save as much as $500 million over the next five years
Bangalore: India’s top three technology firms—Tata Consultancy Services Ltd (TCS), Infosys Technologies Ltd and Wipro Ltd—have each won part of a five-year software outsourcing contract valued at around $1.5 billion (Rs7,320 crore) from British oil and gas firm BP Plc.
IBM Corp. and Accenture Ltd are the other vendors.
With this, BP has reduced the number of its technology vendors from 40 to five and expects to save as much as $500 million over the next five years, a company spokesman said.
“Over the last 12 months, we undertook an effort to consolidate our technology vendor base and eliminated 35 of them. These five were selected for scale and ability to support us from around the world,” BP’s spokesman David Nicholas said over the phone from London. “Otherwise, with 40 vendors, we would have spent $2 billion.”
He declined to specify individual contract values.
IBM said in a statement it has won the largest pie of the contract to manage and run all of BP’s enterprise applications and service desk responsibilities, but did not specify the value. The three Indian vendors, which were part of the earlier line-up of 40 information technology firms, will carry out application development and maintenance work for the British firm.
“The engagement with BP underscores our ability to help global corporations become more competitive in the current economic scenario...,” N. Chandrasekaran, chief operating officer and executive director of TCS, said in a statement.
The Indian vendors may not earn significant revenue from the deal, but it will help them gain expertise in the manufacturing domain in the European market, where they are keen to expand services, said Sabyasachi Prasad, partner with Tholons Inc., an advisory firm for offshore exploration firms.
Europe accounted for around 30% of India’s software exports of $46.3 billion in fiscal 2009. BP’s chief information officer Dana Deasy said in a statement issued by Infosys that the deal would help BP simplify and streamline processes and bring down its overall cost base.
In July, BP said it had already exceeded the $2 billion reduction in cash costs targeted for 2009 and expected a further $1 billion in savings over the rest of the year.
“Our extensive capabilities and experience in oil and gas domain will enable us to deliver significant value to the energy major’s business,” Suresh Vaswani, joint chief executive at Wipro, said in a statement.
With this, BP has reduced the number of its technology vendors from 40 to five and expects to save as much as $500 million over the next five years
Bangalore: India’s top three technology firms—Tata Consultancy Services Ltd (TCS), Infosys Technologies Ltd and Wipro Ltd—have each won part of a five-year software outsourcing contract valued at around $1.5 billion (Rs7,320 crore) from British oil and gas firm BP Plc.
IBM Corp. and Accenture Ltd are the other vendors.
With this, BP has reduced the number of its technology vendors from 40 to five and expects to save as much as $500 million over the next five years, a company spokesman said.
“Over the last 12 months, we undertook an effort to consolidate our technology vendor base and eliminated 35 of them. These five were selected for scale and ability to support us from around the world,” BP’s spokesman David Nicholas said over the phone from London. “Otherwise, with 40 vendors, we would have spent $2 billion.”
He declined to specify individual contract values.
IBM said in a statement it has won the largest pie of the contract to manage and run all of BP’s enterprise applications and service desk responsibilities, but did not specify the value. The three Indian vendors, which were part of the earlier line-up of 40 information technology firms, will carry out application development and maintenance work for the British firm.
“The engagement with BP underscores our ability to help global corporations become more competitive in the current economic scenario...,” N. Chandrasekaran, chief operating officer and executive director of TCS, said in a statement.
The Indian vendors may not earn significant revenue from the deal, but it will help them gain expertise in the manufacturing domain in the European market, where they are keen to expand services, said Sabyasachi Prasad, partner with Tholons Inc., an advisory firm for offshore exploration firms.
Europe accounted for around 30% of India’s software exports of $46.3 billion in fiscal 2009. BP’s chief information officer Dana Deasy said in a statement issued by Infosys that the deal would help BP simplify and streamline processes and bring down its overall cost base.
In July, BP said it had already exceeded the $2 billion reduction in cash costs targeted for 2009 and expected a further $1 billion in savings over the rest of the year.
“Our extensive capabilities and experience in oil and gas domain will enable us to deliver significant value to the energy major’s business,” Suresh Vaswani, joint chief executive at Wipro, said in a statement.
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.
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.
"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.
US should be concerned about OutSourcing
From steel to textiles, industries that once employed cities worth of Americans have disappeared, the work heading overseas. The common argument is that globalization is nothing to worry about in the long view because those lost jobs, many of them blue-collar, are being replaced with high-tech ones.
However, in this flat world, even high-tech, high-skill jobs are heading overseas — often with the United States’ urging, says Ron Hira, assistant professor of public policy at Rochester Institute of Technology.
“The narrative is offshoring doesn’t affect the total number of jobs in the U.S., what happens is the change in the mix,” said Hira, who wrote a chapter about the offshoring of research and development for Manufacturing a Better Future for America, published in July by the Alliance for American Manufacturing. “The problem with that is it’s not clear it’s only low-level jobs moving offshore. What it doesn’t talk about is the fact trade can be win/lose. When China gets better at the things the U.S. is good at, the U.S. can get poorer.”
Hira, also the author of Outsourcing America, in 2005, talked recently about his views. Here are excerpts:
On jobs moving overseas:
Hewlett-Packard Co., when it took over Electronic Data Systems, announced it was going to lay off about 24,000 workers as part of the restructuring plan. That work is not going to disappear. At least half of those jobs will end up in low-cost countries somewhere. They’ll be basically offshored.
IBM has gone from a 6,000 headcount in 2003 in India to, they won’t say exactly how many, but estimates are over 90,000. That’s a 16-fold increase in six years.
People say these are kind of the lower-wage, lower-level jobs within IBM, within EDS. But that’s not true, either. There are a number of R&D centers that are being opened up in India and China. Boeing just recently announced an R&D center opening in Bangalore (India). Google has a facility in Bangalore. Microsoft has cutting-edge basic research being done in China. The offshoring of R&D and innovation is clearly happening. Clearly, high-skill, high-wage jobs are moving offshore.
On how much of this is going on:
No one has a really good handle, in part because the companies have a strong interest in not talking about these things. They don’t want to get the bad press on it. They don’t want to get on the Lou Dobbs list, so to speak, of companies that are offshoring. They don’t want their current employees to know because they need a lot of them to train their foreign replacements. One of the main things, (they don’t) want their customers to know. Once the customer knows you’re offshoring work, they know you’re getting cost savings and they expect you to pass along some of those cost savings to them.
On how this is different from the rise of Japan in the 1980s:
They made better consumer electronics, they made better cars. They had a better management system. What did (GM) have to do? They learned the Toyota manufacturing system, they learned from Japan. This time around it’s not GM vs. Toyota. This time around it’s IBM competing its U.S. workers vs. its Indian workers. This time around, what do you do? How do you make these American workers justify their five-times salary differential?
On companies’ motivations:
From the companies’ point of view, they’re acting rationally. One of the big problems in the public discussion was really started in 2004 when presidential candidate John Kerry called CEOs who offshore and outsource “Benedict Arnolds.”
The CEOs of these companies making the decisions aren’t compensated by how many U.S. workers they have (or) how much R&D they keep in the U.S. vs. Singapore or China. They’re compensated by their profits, their focus on shareholders. We have a systems issue here, where the interest of IBM or Kodak isn’t necessarily in the interest of the U.S. They’re global companies — why should they care more about their U.S. workers than their Indian workers or their Chinese workers?
Sam Palmisano, the CEO of IBM, wrote sort of the manifesto — “The Globally Integrated Enterprise” — where he talks about companies having been restructured and the notion of a multinational corporation has become anachronistic. In the past, you set up an IBM India to serve the Indian market (and) an IBM China to serve the Chinese market. That’s no longer true. We’re going to do the design and development from wherever it makes sense geographically. So we have an integrated enterprise across these country boundaries.
On what is to be done:
We should open our eyes that there’s a problem here from a U.S. national interest point of view. Politically, we have to have countervailing forces. These companies have huge influence over policy and the political process. They have millions of dollars they spend on lobbying. They have a huge presence in Washington and rightfully so; they’re big employers.
But there’s no group that represents the national interest in any way in Washington to counterbalance this. Which is why you see no action in Washington to address these issues. Who represents American workers in this debate? Who represents accountants? Who represents engineers? No one.
However, in this flat world, even high-tech, high-skill jobs are heading overseas — often with the United States’ urging, says Ron Hira, assistant professor of public policy at Rochester Institute of Technology.
“The narrative is offshoring doesn’t affect the total number of jobs in the U.S., what happens is the change in the mix,” said Hira, who wrote a chapter about the offshoring of research and development for Manufacturing a Better Future for America, published in July by the Alliance for American Manufacturing. “The problem with that is it’s not clear it’s only low-level jobs moving offshore. What it doesn’t talk about is the fact trade can be win/lose. When China gets better at the things the U.S. is good at, the U.S. can get poorer.”
Hira, also the author of Outsourcing America, in 2005, talked recently about his views. Here are excerpts:
On jobs moving overseas:
Hewlett-Packard Co., when it took over Electronic Data Systems, announced it was going to lay off about 24,000 workers as part of the restructuring plan. That work is not going to disappear. At least half of those jobs will end up in low-cost countries somewhere. They’ll be basically offshored.
IBM has gone from a 6,000 headcount in 2003 in India to, they won’t say exactly how many, but estimates are over 90,000. That’s a 16-fold increase in six years.
People say these are kind of the lower-wage, lower-level jobs within IBM, within EDS. But that’s not true, either. There are a number of R&D centers that are being opened up in India and China. Boeing just recently announced an R&D center opening in Bangalore (India). Google has a facility in Bangalore. Microsoft has cutting-edge basic research being done in China. The offshoring of R&D and innovation is clearly happening. Clearly, high-skill, high-wage jobs are moving offshore.
On how much of this is going on:
No one has a really good handle, in part because the companies have a strong interest in not talking about these things. They don’t want to get the bad press on it. They don’t want to get on the Lou Dobbs list, so to speak, of companies that are offshoring. They don’t want their current employees to know because they need a lot of them to train their foreign replacements. One of the main things, (they don’t) want their customers to know. Once the customer knows you’re offshoring work, they know you’re getting cost savings and they expect you to pass along some of those cost savings to them.
On how this is different from the rise of Japan in the 1980s:
They made better consumer electronics, they made better cars. They had a better management system. What did (GM) have to do? They learned the Toyota manufacturing system, they learned from Japan. This time around it’s not GM vs. Toyota. This time around it’s IBM competing its U.S. workers vs. its Indian workers. This time around, what do you do? How do you make these American workers justify their five-times salary differential?
On companies’ motivations:
From the companies’ point of view, they’re acting rationally. One of the big problems in the public discussion was really started in 2004 when presidential candidate John Kerry called CEOs who offshore and outsource “Benedict Arnolds.”
The CEOs of these companies making the decisions aren’t compensated by how many U.S. workers they have (or) how much R&D they keep in the U.S. vs. Singapore or China. They’re compensated by their profits, their focus on shareholders. We have a systems issue here, where the interest of IBM or Kodak isn’t necessarily in the interest of the U.S. They’re global companies — why should they care more about their U.S. workers than their Indian workers or their Chinese workers?
Sam Palmisano, the CEO of IBM, wrote sort of the manifesto — “The Globally Integrated Enterprise” — where he talks about companies having been restructured and the notion of a multinational corporation has become anachronistic. In the past, you set up an IBM India to serve the Indian market (and) an IBM China to serve the Chinese market. That’s no longer true. We’re going to do the design and development from wherever it makes sense geographically. So we have an integrated enterprise across these country boundaries.
On what is to be done:
We should open our eyes that there’s a problem here from a U.S. national interest point of view. Politically, we have to have countervailing forces. These companies have huge influence over policy and the political process. They have millions of dollars they spend on lobbying. They have a huge presence in Washington and rightfully so; they’re big employers.
But there’s no group that represents the national interest in any way in Washington to counterbalance this. Which is why you see no action in Washington to address these issues. Who represents American workers in this debate? Who represents accountants? Who represents engineers? No one.
Thursday, September 10, 2009
US Unemployment Rate in July Increases
Job cuts announced by US employers jumped 31 per cent in July to over 97,000, increasing for the first time in six months, warning of a further hike in downsizing activity by the last quarter of the year, a report said on Wednesday.
After falling to a 15-month low in June planned job cuts announced by US employers jumped to 97,373 in July. It was the first increase in monthly job cuts since January, global outplacement consultancy Challenger, Gray & Christmas Inc said here in its latest report.
"After June's surprisingly low job-cut total, a July rebound was not entirely unexpected. While there are signs that the economy is stabilising and the pace of layoffs slowing, we are still a long way from a full recovery. In fact, monthly job cuts are likely to return to levels in excess of 100,000 by the fourth quarter," Challenger, Gray & Christmas CEO John Challenger said.
Job cuts had fallen 33 per cent in June to 74,393, the lowest monthly total since March 2008. The July total was 6 per cent lower than the same month a year ago, when employers announced 1,03,312 cuts. So far this year, employers have announced 9,94,048 job cuts, 72 per cent more than 5,79,260 layoffs through the first seven months of 2008.
The July surge in job cuts was led by firms in the transportation industry, which announced plans to reduce payrolls by 27,954 positions, a five-fold increase from the June layoff total of 5,587.
The telecommunications sector also experienced an increase in layoffs last month with job cuts surging to 17,601 in July from 802 in June.
Meanwhile, the automotive sector, which leads all other industries in year-to-date job cuts with 1,22,212 layoffs has seen layoff announcements decline in each of the last three months. These companies announced 2,716 job cuts in July.
"Declining layoffs in the automotive industry may not be indicative of a turnaround. Instead, these employers simply may not have any room for additional job cuts if they hope to build new fleets of more eco-friendly cars," Challenger added.
With consumer and business spending at a standstill transportation companies have little choice but to make further cutbacks in staffing, it said, adding, that a surge in hiring could take place around the holidays.
Other sectors which saw downsizing during July are government/non-profit (7,131), industrial goods (6,548) and financial (5,030). While economic conditions and cost-cutting claimed over 58,000 jobs, voluntary severance led to 15,070 job cuts in July.
Employers also announced plans to hire a total of 17,183 employees with retail (14,200) and aerospace/defence (1,160) leading the pack.
After falling to a 15-month low in June planned job cuts announced by US employers jumped to 97,373 in July. It was the first increase in monthly job cuts since January, global outplacement consultancy Challenger, Gray & Christmas Inc said here in its latest report.
"After June's surprisingly low job-cut total, a July rebound was not entirely unexpected. While there are signs that the economy is stabilising and the pace of layoffs slowing, we are still a long way from a full recovery. In fact, monthly job cuts are likely to return to levels in excess of 100,000 by the fourth quarter," Challenger, Gray & Christmas CEO John Challenger said.
Job cuts had fallen 33 per cent in June to 74,393, the lowest monthly total since March 2008. The July total was 6 per cent lower than the same month a year ago, when employers announced 1,03,312 cuts. So far this year, employers have announced 9,94,048 job cuts, 72 per cent more than 5,79,260 layoffs through the first seven months of 2008.
The July surge in job cuts was led by firms in the transportation industry, which announced plans to reduce payrolls by 27,954 positions, a five-fold increase from the June layoff total of 5,587.
The telecommunications sector also experienced an increase in layoffs last month with job cuts surging to 17,601 in July from 802 in June.
Meanwhile, the automotive sector, which leads all other industries in year-to-date job cuts with 1,22,212 layoffs has seen layoff announcements decline in each of the last three months. These companies announced 2,716 job cuts in July.
"Declining layoffs in the automotive industry may not be indicative of a turnaround. Instead, these employers simply may not have any room for additional job cuts if they hope to build new fleets of more eco-friendly cars," Challenger added.
With consumer and business spending at a standstill transportation companies have little choice but to make further cutbacks in staffing, it said, adding, that a surge in hiring could take place around the holidays.
Other sectors which saw downsizing during July are government/non-profit (7,131), industrial goods (6,548) and financial (5,030). While economic conditions and cost-cutting claimed over 58,000 jobs, voluntary severance led to 15,070 job cuts in July.
Employers also announced plans to hire a total of 17,183 employees with retail (14,200) and aerospace/defence (1,160) leading the pack.
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.
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.
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.
Saturday, August 22, 2009
IT Spending to fall faster
Spending on software and IT services will fall by 1.3 per cent to £39.5bn in 2009, according to figures from Pierre Audoin Consultants (PAC) and TechMarketView.
The figures are slightly worse than the one per cent decline forecast early in the year.
Many UK organisations have either frozen or cut their discretionary IT budgets, driving a 3.9 per cent drop in software investment and a 5.5 per cent decrease in project services spending.
The decline will be partially offset by a 3.1 per cent rise in outsourcing spend, as businesses aim to reduce their IT operating costs and focus on core, strategic activities.
Nick Mayes, analyst at PAC London, said the pipeline of new contract opportunities is expanding slowly, although clients continue to negotiate aggressively with suppliers.
"However, large suppliers with mature global delivery networks, intimate client relationships and annuity-based outsourcing businesses continue to fare better, as evident in the results of Logica, Atos Origin and Capgemini," he said.
The public sector remains the biggest spender on software and IT services, representing nearly 25 per cent of the UK market. It is also due to grow by 4.3 per cent this year to support border control and defence initiatives.
Spending under a prospective Tory government would not necessarily slow, according to Anthony Miller, managing partner at TechMarketView.
“There may well be a hiatus in kicking off new government IT projects pending the election,” he said.
“But whichever colour of party we see in government next year, we expect that the pace of outsourcing – and, dare we say, offshoring – will undoubtedly increase, more so with the Tories."
The industry sectors that will cut software and IT services investment the most severely this year are retail, services and manufacturing.
The figures are slightly worse than the one per cent decline forecast early in the year.
Many UK organisations have either frozen or cut their discretionary IT budgets, driving a 3.9 per cent drop in software investment and a 5.5 per cent decrease in project services spending.
The decline will be partially offset by a 3.1 per cent rise in outsourcing spend, as businesses aim to reduce their IT operating costs and focus on core, strategic activities.
Nick Mayes, analyst at PAC London, said the pipeline of new contract opportunities is expanding slowly, although clients continue to negotiate aggressively with suppliers.
"However, large suppliers with mature global delivery networks, intimate client relationships and annuity-based outsourcing businesses continue to fare better, as evident in the results of Logica, Atos Origin and Capgemini," he said.
The public sector remains the biggest spender on software and IT services, representing nearly 25 per cent of the UK market. It is also due to grow by 4.3 per cent this year to support border control and defence initiatives.
Spending under a prospective Tory government would not necessarily slow, according to Anthony Miller, managing partner at TechMarketView.
“There may well be a hiatus in kicking off new government IT projects pending the election,” he said.
“But whichever colour of party we see in government next year, we expect that the pace of outsourcing – and, dare we say, offshoring – will undoubtedly increase, more so with the Tories."
The industry sectors that will cut software and IT services investment the most severely this year are retail, services and manufacturing.
Saturday, August 15, 2009
Indian Companies Among Top Ten IT Infrastructure Outsourcers
Indian outsourcing companies figure among the top ten worldwide in IT infrastructure services, reflecting the growing appeal of offshore delivery of these services, according to outsourcing consultancy Technology Partners International (TPI).
Indian outsourcers figured in the top ten by value of contracts closed in the first half of this year, not only in their traditionally strong area of application development and maintenance (ADM), but also in infrastructure services, Siddharth Pai, a partner at TPI, said on Thursday.
That Indian companies such as HCL Technologies and Wipro have made it to the top ten in infrastructure services, a relatively new area in IT services for Indian outsourcers, suggests that customers are now considering seriously the option of remote delivery of these services from offshore locations like India, Pai said.
Indian companies figured in the top ten last year in ADM but not in infrastructure services, according to TPI data.
TPI released its index this week covering the global commercial outsourcing market in the second quarter and the first half of this year.
The market for outsourcing has shrunk to US$40.2 billion in contracts in the first half of this year from $51.5 billion in the first half of last year. TPI monitors contracts of a value of $25 million and above.
It is unlikely that the outsourcing market this year will grow to last year's level of $93.1 billion, and is more likely to end this year with total contracts of less than $80 billion, Pai said.
Top Indian outsourcers have reported flat or declining revenue in the quarter ended June 30. Infosys, India's second largest outsourcer, has forecast that revenue for its fiscal year ending March 31, 2010 will decline by 3.1 to 4.6 percent over revenue in the previous year.
Indian outsourcers figured in the top ten by value of contracts closed in the first half of this year, not only in their traditionally strong area of application development and maintenance (ADM), but also in infrastructure services, Siddharth Pai, a partner at TPI, said on Thursday.
That Indian companies such as HCL Technologies and Wipro have made it to the top ten in infrastructure services, a relatively new area in IT services for Indian outsourcers, suggests that customers are now considering seriously the option of remote delivery of these services from offshore locations like India, Pai said.
Indian companies figured in the top ten last year in ADM but not in infrastructure services, according to TPI data.
TPI released its index this week covering the global commercial outsourcing market in the second quarter and the first half of this year.
The market for outsourcing has shrunk to US$40.2 billion in contracts in the first half of this year from $51.5 billion in the first half of last year. TPI monitors contracts of a value of $25 million and above.
It is unlikely that the outsourcing market this year will grow to last year's level of $93.1 billion, and is more likely to end this year with total contracts of less than $80 billion, Pai said.
Top Indian outsourcers have reported flat or declining revenue in the quarter ended June 30. Infosys, India's second largest outsourcer, has forecast that revenue for its fiscal year ending March 31, 2010 will decline by 3.1 to 4.6 percent over revenue in the previous year.
Saturday, August 1, 2009
Indian IT the Trends on Emplyment
The Quarterly Results of Top Indian Companies are out, some of them have done well in terms of profit growth however what needs to be seen is that the employment numbers (Net Additions) for almost everyone is negligible or Negative.
The Big Indian IT Companies were growing at 30% plus in revenue terms and hiring 10,000-20,000 Freshers each, the attrition rate was also high as emplyees left for better opportunities elsewhere.
Now the situation has completely reversed, the number of emplyees has actually come down for most of the biggies rather than going up, this despite of the fact that fresher and lateral hiring in niche areas is still continuing, this infact lays bare the claim of these companies that they are not laying off.
For the IT worker this is a time for self realization, it is true that 20-30% of the workforce would be performing below performance standards and the weeds need to be rooted out, however the employees need to introspect and see themselves in the mirror, that instead of wasting the bench time on gossips and playing games if they had done technology upgradation of their skills they would still be having a job. The Emplyees are as much to blame for a layoff as no sensible company would throw out good people, and even if they are thrown out there are enough opportunities in the market to go to.
The Big Indian IT Companies were growing at 30% plus in revenue terms and hiring 10,000-20,000 Freshers each, the attrition rate was also high as emplyees left for better opportunities elsewhere.
Now the situation has completely reversed, the number of emplyees has actually come down for most of the biggies rather than going up, this despite of the fact that fresher and lateral hiring in niche areas is still continuing, this infact lays bare the claim of these companies that they are not laying off.
For the IT worker this is a time for self realization, it is true that 20-30% of the workforce would be performing below performance standards and the weeds need to be rooted out, however the employees need to introspect and see themselves in the mirror, that instead of wasting the bench time on gossips and playing games if they had done technology upgradation of their skills they would still be having a job. The Emplyees are as much to blame for a layoff as no sensible company would throw out good people, and even if they are thrown out there are enough opportunities in the market to go to.
Lower Salaries for Laid of Techies
Bangalore: Till a few months ago, IT professional T.V. George was earning Rs.70,000 per month, plus perks. But after losing his high-paying job, and being unemployed for three months, George, 31, has started giving tuitions in mathematics and physics to aspiring engineering students in his neighbourhood.
"Now, I am earning Rs.15,000 per month. It's been hard. I got married only a few months before losing my job. So, when I lost my job, I was in a difficult position. Thankfully, I had some savings. With the savings, I am paying my rent and for a few other necessities," George, who was employed with a top U.S. IT company, told IANS.
"After losing my job, I tried my best to get a new job. But I remained unlucky. So to help run my home, I decided to give coaching classes to aspiring engineering students."
George is not alone. Recession has hit the IT sector in Bangalore, with scores of techies losing their jobs. Some have been forced to take up low-paying jobs as they wait to bounce back when the recession ends.
Dipankar Dutta, 27, working with an Indian IT company as software engineer, lost his job almost eight months ago.
Today he has a job, but as a content writer in a tech firm.
"Thankfully, writing has been my forte. So, I landed this job of a content writer. Otherwise I would have been in a soup. Since I cannot afford to stay in Bangalore without a job, I compromised and settled for the new job with a much lower pay package," said Dutta.
Scores of IT and ITES professionals in Bangalore have lost their jobs in recent times, an effect of the global economic meltdown. But there is no precise count of the numbers.
According to the latest employment and business outlook report by Bangalore-based staffing firm Teamlease, at 23 percent the attrition rate in this city is higher than in any other city in India.
The report was based on interviews with HR heads, CEOs and senior executives of 495 companies in Bangalore, Chennai, Hyderabad, Kolkata and Pune.
"The city accounted for the highest attrition rate. IT accounts for over 80 percent of the city's total labour pool. The attrition rate was 23 percent in the last quarter, against the previous quarter's 16 percent. Much of the attrition could be involuntary attrition (or layoffs)," Teamlease General Manager Surabhi Mathur-Gandhi said.
India's Silicon Valley has seen thousands of people getting pink slips in recent months. And many more are under the threat of losing their jobs.
"It's painful to lose your job, in today's expensive world. Those who have lost their jobs are desperate now, thus they are settling for low paying jobs," Karthik Shekhar, General Secretary of UNITES-Professionals, an unrecognised union of IT/Call Centre/BPO employees, told IANS.
"Every day we meet young men and women who have lost their IT jobs recently. All they want is a job. But getting a job in the IT sector is very difficult. So, they have no option but to settle for jobs outside their fields and that too with low paying packages," Shekhar added.
It's encouraging that today's youths are ready to move ahead in their lives. Instead of waiting for the economy to revive, IT professionals have started exploring other fields and this is a positive sign," said B.N. Gangadhar, professor of psychiatry at the National Institute of Mental Health and Neuro Sciences (Nimhans), Bangalore.
Mohammed Khan, a trained software engineer, told IANS: "Initially it was difficult, but I am happy with my choice. After losing my job with an IT firm, now I am working as a sales executive. I am hoping the economy will recover soon and all the techies who have lost their jobs will get new jobs in their field."
Source: IANS
"Now, I am earning Rs.15,000 per month. It's been hard. I got married only a few months before losing my job. So, when I lost my job, I was in a difficult position. Thankfully, I had some savings. With the savings, I am paying my rent and for a few other necessities," George, who was employed with a top U.S. IT company, told IANS.
"After losing my job, I tried my best to get a new job. But I remained unlucky. So to help run my home, I decided to give coaching classes to aspiring engineering students."
George is not alone. Recession has hit the IT sector in Bangalore, with scores of techies losing their jobs. Some have been forced to take up low-paying jobs as they wait to bounce back when the recession ends.
Dipankar Dutta, 27, working with an Indian IT company as software engineer, lost his job almost eight months ago.
Today he has a job, but as a content writer in a tech firm.
"Thankfully, writing has been my forte. So, I landed this job of a content writer. Otherwise I would have been in a soup. Since I cannot afford to stay in Bangalore without a job, I compromised and settled for the new job with a much lower pay package," said Dutta.
Scores of IT and ITES professionals in Bangalore have lost their jobs in recent times, an effect of the global economic meltdown. But there is no precise count of the numbers.
According to the latest employment and business outlook report by Bangalore-based staffing firm Teamlease, at 23 percent the attrition rate in this city is higher than in any other city in India.
The report was based on interviews with HR heads, CEOs and senior executives of 495 companies in Bangalore, Chennai, Hyderabad, Kolkata and Pune.
"The city accounted for the highest attrition rate. IT accounts for over 80 percent of the city's total labour pool. The attrition rate was 23 percent in the last quarter, against the previous quarter's 16 percent. Much of the attrition could be involuntary attrition (or layoffs)," Teamlease General Manager Surabhi Mathur-Gandhi said.
India's Silicon Valley has seen thousands of people getting pink slips in recent months. And many more are under the threat of losing their jobs.
"It's painful to lose your job, in today's expensive world. Those who have lost their jobs are desperate now, thus they are settling for low paying jobs," Karthik Shekhar, General Secretary of UNITES-Professionals, an unrecognised union of IT/Call Centre/BPO employees, told IANS.
"Every day we meet young men and women who have lost their IT jobs recently. All they want is a job. But getting a job in the IT sector is very difficult. So, they have no option but to settle for jobs outside their fields and that too with low paying packages," Shekhar added.
It's encouraging that today's youths are ready to move ahead in their lives. Instead of waiting for the economy to revive, IT professionals have started exploring other fields and this is a positive sign," said B.N. Gangadhar, professor of psychiatry at the National Institute of Mental Health and Neuro Sciences (Nimhans), Bangalore.
Mohammed Khan, a trained software engineer, told IANS: "Initially it was difficult, but I am happy with my choice. After losing my job with an IT firm, now I am working as a sales executive. I am hoping the economy will recover soon and all the techies who have lost their jobs will get new jobs in their field."
Source: IANS
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