he International Association of Outsourcing Professionals has announced the world's best outsourcing service providers in 2008.
The Global Outsourcing 100 list has 6 Indian companies among the top ten. In the global 100 ranking, Infosys is ranked third, followed by Capgemini and TCS at fifth and sixth positions, respectively.
'Global Outsourcing 100' is an international list of companies that provide the full spectrum of outsourcing services. The selection criteria include the size and growth of the company, customer experience, depth and breadth of competencies and management capabilities.
Following are the top 10 global outsoucring companies, excluding the Indian firms in the list:
The Top 10 global outsourcing companies
Accenture (Rank 1)-- Key strength: Customer testimonials
IBM (Rank 2) -- Key strength: Size & growth
Sodexo (Rank 4) -- Key strength: Global presence
Capgemini (Rank 5) -- Key strength: Achievement recognition
Hewlett Packard (Rank 8) -- Key strength: Outsourcing experience
EDS (Rank 12) -- Key strength: Outsourcing experience
ACS (Rank 13) -- Key strength: Balanced performance
CGI group (Rank 14) -- Key strength: Customer testimonials
SPi (Rank 17) -- Key strength: Customer testimonials
Colliers International (Rank 18) -- Key strength: Global Presence
Showing posts with label Outsourcing. Show all posts
Showing posts with label Outsourcing. Show all posts
Sunday, September 27, 2009
Monday, September 14, 2009
Accenture Layoff
Accenture said Thursday that it will thin its ranks of senior executives.
The company, which announced the layoffs in a statement, said it will cut its senior executive ranks by 7 percent. Accenture will take a charge of $128 million to cover severance and other layoff costs.
In another cost cutting move, Accenture said that it is cutting its office space to save on real estate. That move will result in a charge of $119 million.
Accenture CEO William Green said the senior executive layoffs will ensure the company “has the right people, skills and capabilities, at the right levels and in the right places.”
The cost cuts are expected to be complete in the fiscal first quarter. Accenture also stuck with its fourth quarter revenue target of $5 billion to $5.2 billion.
The company, which announced the layoffs in a statement, said it will cut its senior executive ranks by 7 percent. Accenture will take a charge of $128 million to cover severance and other layoff costs.
In another cost cutting move, Accenture said that it is cutting its office space to save on real estate. That move will result in a charge of $119 million.
Accenture CEO William Green said the senior executive layoffs will ensure the company “has the right people, skills and capabilities, at the right levels and in the right places.”
The cost cuts are expected to be complete in the fiscal first quarter. Accenture also stuck with its fourth quarter revenue target of $5 billion to $5.2 billion.
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.
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.
Saturday, August 22, 2009
Big Outsources increase share
The biggest IT outsourcing companies grew their combined market share in Europe last year, as IT services remains a bright spot in the recession-hit technology sector, according to research by IDC.
The study showed that the 50 biggest service providers in Western Europe increased their share of the market by 9.7 per cent in 2008, from 53.4 per cent to 55.5 per cent of the sector – with their combined sales worth $152bn (£92bn).
The total Western European services market grew 5.3 per cent, based on local currencies, boosted by a double-digit increase in business process outsourcing, said IDC.
The figures compare favourably with the hardware and software sectors, both of which have been shown to have shrunk over the past year by a range of different research studies.
IDC also said that it expects there will be further consolidation in the outsourcing market, following on from major acquisitions such as HP’s purchase of EDS.
"With a few exceptions, most of the vendors in the top 50 ranking enjoyed growth driven by increased sales, combined with small acquisitions to strengthen their presence in specific geographies or industries, or to gain global sourcing capabilities," said IDC research manager Laura Converso.
The three fastest growing companies in the sector last year were Italian firm Gruppo Engineering, Steria and Indian outsourcer Wipro, while Tata Consultancy Services (TCS) became the first offshore firm to make it into the top 20 suppliers.
"Pure-play offshore vendors continue to quickly penetrate the European services market. TCS is the first so-called offshore provider to reach the top 20 IT services ranking, marking a symbolic breakthrough," said Converso.
The study showed that the 50 biggest service providers in Western Europe increased their share of the market by 9.7 per cent in 2008, from 53.4 per cent to 55.5 per cent of the sector – with their combined sales worth $152bn (£92bn).
The total Western European services market grew 5.3 per cent, based on local currencies, boosted by a double-digit increase in business process outsourcing, said IDC.
The figures compare favourably with the hardware and software sectors, both of which have been shown to have shrunk over the past year by a range of different research studies.
IDC also said that it expects there will be further consolidation in the outsourcing market, following on from major acquisitions such as HP’s purchase of EDS.
"With a few exceptions, most of the vendors in the top 50 ranking enjoyed growth driven by increased sales, combined with small acquisitions to strengthen their presence in specific geographies or industries, or to gain global sourcing capabilities," said IDC research manager Laura Converso.
The three fastest growing companies in the sector last year were Italian firm Gruppo Engineering, Steria and Indian outsourcer Wipro, while Tata Consultancy Services (TCS) became the first offshore firm to make it into the top 20 suppliers.
"Pure-play offshore vendors continue to quickly penetrate the European services market. TCS is the first so-called offshore provider to reach the top 20 IT services ranking, marking a symbolic breakthrough," said Converso.
In India, Global Crisis Is Not All Bad News
About 60 percent of India’s outsourcing business comes from the United States, and 40 percent of the work is in the banking, insurance and financial services sectors.
“We now have to look at other regions of the world, like Japan, the Middle East and the Nordic countries,” said Som Mittal, president of the National Association of Software and Services Companies, or Nasscom. “The current crisis has sharpened our realization that we cannot put all our eggs in the U.S. basket.”
Perhaps the biggest and most sustaining change has been its climb up the value chain of services in recent years — from back-office support functions to what the industry calls “knowledge process outsourcing,” which includes legal services, hardware network management and engineering design.
One of the country’s biggest technology companies, Bangalore-based Infosys, has been making a deliberate effort to scale back assembly-line software development and ramp up more technically complex services such as engineering design.
“It is a strategic shift we began making some years ago,” said S. Gopalakrishnan, the company’s chief executive officer. “Our efforts to expand our services to include high-end consulting, systems management and product engineering and design work may help weather the storm.”
Infosys’s fastest-growing business is in product and machine design for American aerospace, automobile and construction firms, but the company has also set up consulting businesses in China, the Middle East and Mexico.
Meanwhile, the legal services branch of India’s outsourcing industry is experiencing a boost as a direct result of the global crisis, as bankruptcies, mergers and acquisitions proliferate and demand grows for help with litigation.
“We now have to look at other regions of the world, like Japan, the Middle East and the Nordic countries,” said Som Mittal, president of the National Association of Software and Services Companies, or Nasscom. “The current crisis has sharpened our realization that we cannot put all our eggs in the U.S. basket.”
Perhaps the biggest and most sustaining change has been its climb up the value chain of services in recent years — from back-office support functions to what the industry calls “knowledge process outsourcing,” which includes legal services, hardware network management and engineering design.
One of the country’s biggest technology companies, Bangalore-based Infosys, has been making a deliberate effort to scale back assembly-line software development and ramp up more technically complex services such as engineering design.
“It is a strategic shift we began making some years ago,” said S. Gopalakrishnan, the company’s chief executive officer. “Our efforts to expand our services to include high-end consulting, systems management and product engineering and design work may help weather the storm.”
Infosys’s fastest-growing business is in product and machine design for American aerospace, automobile and construction firms, but the company has also set up consulting businesses in China, the Middle East and Mexico.
Meanwhile, the legal services branch of India’s outsourcing industry is experiencing a boost as a direct result of the global crisis, as bankruptcies, mergers and acquisitions proliferate and demand grows for help with litigation.
Outsourcing faces new era of scrutiny
Outsourcing faces new era of scrutiny
LONDON (Reuters) – Outsourcing, Indian-style, is challenged as never before by an erosion in business confidence that makes corporate spending, even to generate quick cost-savings, harder to justify.
“No New Investment” is the order of the day; cost avoidance, the mantra; zero percent, the growth target in the current era of uncertainty.
Software service providers emerged out of the 2000-2002 technology spending bust with sales growing up to 50 percent a year as they won over companies to contract out inefficient operations instead of managing them in-house.
But shocks to the world economy seen over the past 18 months are triggering reassessments of corporate growth expectations, cost considerations and operational accountability. It’s no longer safe to assume that the logic that drove outsourcing in the past will drive it again, once the economy picks up.
Here are reasons why the industry will find it difficult to repeat its past performance in the tough times ahead.
CUTTING BACK ON COST-CUTTING: The paradox at the moment is that spending on services meant to cut costs and save money is itself being squeezed.
Technology Partners International (TPI), a research firm that has tracked the outsourcing industry for 20 years, reported this week that total contract volumes fell 22 percent in the fourth quarter from a year ago.
Just how bad things could get this year is only likely to emerge as corporate customers nail down their 2009 spending plans to vendors in the next two to three months.
“The worst of the IT (information technology) spending slowdown likely remains in front of us as we start the clock on slashed 2009 budgets,” Goldman Sachs warned in a report on the software industry earlier this month.
The conventional wisdom is that companies will eventually need to cost-cut their way out of the economic morass. But as the software services industry has matured over this decade, Goldman analysts say the sector has become more cyclically dependent on overall IT spending, reducing the chances it will be an early winner in any corporate recovery.
Tata Consultancy Services, the largest of the Indian software service providers, estimates that budgets for IT outsourcing will fall between 5 and 20 percent during 2009. Market forecasters predict more declines in store for 2010.
KEY CUSTOMERS IN TROUBLE. One problem is that the $40 billion-a-year industry’s fortunes are heavily linked to the financial sector. Indeed outsourcing started out 30 years ago as a way to help banks automate tangled back-office operations.
But while it grew more diverse in the 1990s, branching into telecom, manufacturing, retail and other industries; banks, brokerages and insurers are still the biggest slice of the market at 20 percent of overall sales, Goldman Sachs estimates.
The finance sector is not just in trouble, it is experiencing a meltdown like no other since the 1970s or perhaps even the 1930s — long before outsourcing itself was invented. And while the credit crisis has left many institutions needing to slash costs, we are seeing a wholesale contraction of the market that will lead to steep reductions in overall demand. Whole parts of the business will disappear and not be replaced.
Moreover, the financial industry’s reliance on governments for bailouts has curtailed the autonomy of bosses. Governments are likely to be dubious should big banks and insurers seek to offshore financial jobs, especially in countries with mounting unemployment. Outsourcers may have to get used to having fewer, and more conservative, financial services customers.
LONDON (Reuters) – Outsourcing, Indian-style, is challenged as never before by an erosion in business confidence that makes corporate spending, even to generate quick cost-savings, harder to justify.
“No New Investment” is the order of the day; cost avoidance, the mantra; zero percent, the growth target in the current era of uncertainty.
Software service providers emerged out of the 2000-2002 technology spending bust with sales growing up to 50 percent a year as they won over companies to contract out inefficient operations instead of managing them in-house.
But shocks to the world economy seen over the past 18 months are triggering reassessments of corporate growth expectations, cost considerations and operational accountability. It’s no longer safe to assume that the logic that drove outsourcing in the past will drive it again, once the economy picks up.
Here are reasons why the industry will find it difficult to repeat its past performance in the tough times ahead.
CUTTING BACK ON COST-CUTTING: The paradox at the moment is that spending on services meant to cut costs and save money is itself being squeezed.
Technology Partners International (TPI), a research firm that has tracked the outsourcing industry for 20 years, reported this week that total contract volumes fell 22 percent in the fourth quarter from a year ago.
Just how bad things could get this year is only likely to emerge as corporate customers nail down their 2009 spending plans to vendors in the next two to three months.
“The worst of the IT (information technology) spending slowdown likely remains in front of us as we start the clock on slashed 2009 budgets,” Goldman Sachs warned in a report on the software industry earlier this month.
The conventional wisdom is that companies will eventually need to cost-cut their way out of the economic morass. But as the software services industry has matured over this decade, Goldman analysts say the sector has become more cyclically dependent on overall IT spending, reducing the chances it will be an early winner in any corporate recovery.
Tata Consultancy Services, the largest of the Indian software service providers, estimates that budgets for IT outsourcing will fall between 5 and 20 percent during 2009. Market forecasters predict more declines in store for 2010.
KEY CUSTOMERS IN TROUBLE. One problem is that the $40 billion-a-year industry’s fortunes are heavily linked to the financial sector. Indeed outsourcing started out 30 years ago as a way to help banks automate tangled back-office operations.
But while it grew more diverse in the 1990s, branching into telecom, manufacturing, retail and other industries; banks, brokerages and insurers are still the biggest slice of the market at 20 percent of overall sales, Goldman Sachs estimates.
The finance sector is not just in trouble, it is experiencing a meltdown like no other since the 1970s or perhaps even the 1930s — long before outsourcing itself was invented. And while the credit crisis has left many institutions needing to slash costs, we are seeing a wholesale contraction of the market that will lead to steep reductions in overall demand. Whole parts of the business will disappear and not be replaced.
Moreover, the financial industry’s reliance on governments for bailouts has curtailed the autonomy of bosses. Governments are likely to be dubious should big banks and insurers seek to offshore financial jobs, especially in countries with mounting unemployment. Outsourcers may have to get used to having fewer, and more conservative, financial services customers.
Friday, April 24, 2009
Anti India Bill Introduced in the US
WASHINGTON: A legislation has been introduced in the US Senate on reforming the H-1B and L1 visa programmes, popular among Indians, under which th e American firms looking for skilled foreign professionals are required to make a "good faith" attempt to recruit local workers first.
Given that the skilled professionals from India are the one who account for the maximum number of H-1B and L1 visas, Indian professionals followed by those from China are likely to be hit the most if the legislation introduced by Senators Chuck Grassley and Dick Durbin is passed by the Congress and then signed into law by the President.
The bill, introduced yesterday, requires all employers who want to hire an H-1B guest worker to first make a good faith attempt to recruit a qualified American worker. Employers would be prohibited from using H-1B visa holders to displace qualified American workers.
"Our bill will put a stop to the outsourcing of American jobs and discrimination against American workers," Senator Durbin said in a statement. "The H-1B visa programme should complement the US workforce, not replace it," he argued.
The bill prohibits the practice of 'H-1B only' ads and prevents employers from hiring additional H-1B and L-1 guest workers if over 50 per cent of their employees are H-1B and L-1 visa holders, Grassley said in a statement. It gives power to the Department of Labour to investigate, audit and penalise abuse of H-1B and L1 visa employers.
However, Grassley argued the bill does not eliminate the programme or change the numerical cap of visas available to petitioning employers. "The H-1B programme was never meant to replace qualified American workers. It was meant to complement them because of a shortage of workers in specialised fields. In tough economic times like we're seeing, it's even more important that we do everything possible to see that Americans are given every consideration when applying for jobs," he said.
If there are not qualified Americans, companies can use the legal immigration programmes available, "but we must return the H-1B and L visa programmes back to their original intent," Grassley said.
"Congress created the H-1B visa programme so an employer could hire a foreign guest worker when a qualified American worker could not be found. H owever, the H-1B visa programme is plagued with fraud and abuse and is now a vehicle for outsourcing that deprives qualified American workers of their jobs," Durbin said.
He claimed that the H-1B visa programme is currently being used by some companies to outsource American jobs to foreign countries. "Under current law, an outsourcing company can use American workers to train H-1B guest-workers, fire American workers and outsource the H-1B workers to a foreign country where they will do the same job for a much lower wage. In fact, Indian Commerce Minister Kamal Nath has referred to the H-1B as 'the outsourcing visa," he said.
It was Grassley and Durbin who were mainly instrumental in the Congressional legislation early this year which stopped hiring of foreign workers by US companies receiving the federal stimulus money. As a result of this, coupled with the general economic recession, the filing of H-1B visas has dropped quite significantly.
In the first three weeks after they started receiving applications, US authorities received about 44,000 H-1B visa petitions against the Congressional mandated quota of 65,000. In previous years, they had been receiving H-1B petitions several times the number of Congressional mandated quota.
In October last year, they had released a Benefit Fraud and Compliance Assessment that highlighted rampant fraud in the H-1B programme. The report revealed more than a 20 per cent violation rate by those who use the H-1B visa programme.
"When Citizenship and Immigration Services report that there is more than a 20 per cent violation rate in the H-1B visa programme, it's pretty clear that many companies are abusing the programme and not using it as was intended. Fraud and abuse of the H-1B visa programme will not be tolerated and our bill puts companies on notice," Grassley said.
"Our legislation to reform the programme will benefit American workers, while still ensuring that US companies get the highly specialised workers they need."
Grassley alleged that fraud and abuse had become all too prevalent in the H-1B programme and thus there was need to close loopholes and enact reform.
Given that the skilled professionals from India are the one who account for the maximum number of H-1B and L1 visas, Indian professionals followed by those from China are likely to be hit the most if the legislation introduced by Senators Chuck Grassley and Dick Durbin is passed by the Congress and then signed into law by the President.
The bill, introduced yesterday, requires all employers who want to hire an H-1B guest worker to first make a good faith attempt to recruit a qualified American worker. Employers would be prohibited from using H-1B visa holders to displace qualified American workers.
"Our bill will put a stop to the outsourcing of American jobs and discrimination against American workers," Senator Durbin said in a statement. "The H-1B visa programme should complement the US workforce, not replace it," he argued.
The bill prohibits the practice of 'H-1B only' ads and prevents employers from hiring additional H-1B and L-1 guest workers if over 50 per cent of their employees are H-1B and L-1 visa holders, Grassley said in a statement. It gives power to the Department of Labour to investigate, audit and penalise abuse of H-1B and L1 visa employers.
However, Grassley argued the bill does not eliminate the programme or change the numerical cap of visas available to petitioning employers. "The H-1B programme was never meant to replace qualified American workers. It was meant to complement them because of a shortage of workers in specialised fields. In tough economic times like we're seeing, it's even more important that we do everything possible to see that Americans are given every consideration when applying for jobs," he said.
If there are not qualified Americans, companies can use the legal immigration programmes available, "but we must return the H-1B and L visa programmes back to their original intent," Grassley said.
"Congress created the H-1B visa programme so an employer could hire a foreign guest worker when a qualified American worker could not be found. H owever, the H-1B visa programme is plagued with fraud and abuse and is now a vehicle for outsourcing that deprives qualified American workers of their jobs," Durbin said.
He claimed that the H-1B visa programme is currently being used by some companies to outsource American jobs to foreign countries. "Under current law, an outsourcing company can use American workers to train H-1B guest-workers, fire American workers and outsource the H-1B workers to a foreign country where they will do the same job for a much lower wage. In fact, Indian Commerce Minister Kamal Nath has referred to the H-1B as 'the outsourcing visa," he said.
It was Grassley and Durbin who were mainly instrumental in the Congressional legislation early this year which stopped hiring of foreign workers by US companies receiving the federal stimulus money. As a result of this, coupled with the general economic recession, the filing of H-1B visas has dropped quite significantly.
In the first three weeks after they started receiving applications, US authorities received about 44,000 H-1B visa petitions against the Congressional mandated quota of 65,000. In previous years, they had been receiving H-1B petitions several times the number of Congressional mandated quota.
In October last year, they had released a Benefit Fraud and Compliance Assessment that highlighted rampant fraud in the H-1B programme. The report revealed more than a 20 per cent violation rate by those who use the H-1B visa programme.
"When Citizenship and Immigration Services report that there is more than a 20 per cent violation rate in the H-1B visa programme, it's pretty clear that many companies are abusing the programme and not using it as was intended. Fraud and abuse of the H-1B visa programme will not be tolerated and our bill puts companies on notice," Grassley said.
"Our legislation to reform the programme will benefit American workers, while still ensuring that US companies get the highly specialised workers they need."
Grassley alleged that fraud and abuse had become all too prevalent in the H-1B programme and thus there was need to close loopholes and enact reform.
Monday, April 13, 2009
11th April 09: Infosys Layoff - The IT giant Infosys Technologies fires 2100 employees - lays off fears confirmed
11th April 2009
The fear of layoff at Infosys is finally confirmed! Infosys Technologies the blue eyed company of Indian corporate community has finally shown the boot to 2,100 of its employees across the country.
Reportadly they indicated that they have done this after an annual performance appraisal exercise concluded mid-March. This is said by none other than Mohandas Pai, head of the company’s HR, that based on the performance, 2,100 employees had left (or asked to leave?) Infosys. The company had a total headcount of 1,03,078.
“The tolerance for non-performance has come down to zero,” Mohandas Pai, HR Head Infosys Appraisal conducted for 60,000 employees
- Bottom 3.5% of the people were either outplaced (soft jargon for laid off) or left
Normally the bottom size is 5%
- Trainees (about 45,000) were not part of this exercise.
It may be recalled and reported on in IndiaSummary.com that about 3 months Infosys had said it has put close to 5000 employees on scanner or performance watch.
What needs to be seen is that taking clue from the leader - whether other IT companies in India will follow the suite?
Saturday, March 28, 2009
US Could Kill Indian Outsourcing
Mumbai: George F Baker professor of economics at Harvard University, Martin Stuart Feldstein, 70, has been heading the US National Bureau of Economic Research for 25 years. Feldstein has also advised US presidents on the economy, his latest role being a member of Barack Obama’s economic recovery advisory board.
The economist was in Mumbai and spoke with Mint on a variety of issues, including the latest bailout plan of the US treasury, his worries and how planned curbs on Wall Street could impact outsourcing.
On the latest US bailout plan.
Raising concern: Martin Feldstein. Ashesh Shah / MintIt’s an ingenious plan. There are a lot of positives to be said about it. It’s goal is ambitious—take a large part of impaired assets away from banks; keep them in private hands rather than under government management; avoid nationalizing the banks, protect taxpayers in the sense that they will have some potential positive gains if things work out well (with the plan).
On his worries about the plan
One issue is: Is it enough? A trillion dollars is a lot of money even in the US. By contrast, banks have more than $10 trillion balance sheets and they have residential mortgages of $3 trillion. They have mortgage-backed securities on top of that and commercial mortgages of $2 trillion...And if this new treasury plan—the private-public partnership—doesn’t take away most of the impaired assets, then what exactly does it accomplish? It will still not put the banks in a position where...they can lend.
There’s also a question of whether the banks will actually sell the mortgages. When you are a bank looking at several hundred millions of mortgages, would you want to write them down and sell them 50 cents to the dollar?
On excess liquidity leading to inflation.
Most of the money pumped in is going directly to the Federal Reserve. The Fed’s balance sheet expands; the reserves expand; and the bank’s balance sheets expand. But they are not lending this money, they are depositing this at the Fed. And the Fed pays interest on those deposits.
I think there is a potential for inflation. It is not this year’s worry, but I think it is something that could come along. If there is $2 trillion or more excess reserves in the banks, they will have every reason to want to use those reserves to make loans. That would push up demand and could be inflationary.
Beyond what they want, the Fed can normally go into open market operations. But it doesn’t have $1 trillion or $2 trillion of assets with which to conduct open market operations. All they got is junk—for lack of a better name. And it is not clear, when the time comes, they will be able to persuade the banks to take the junk back.
On the possibility of Asia’s export-led growth model collapsing as US consumers start saving.
It won’t collapse. I think it will be less when the dollar comes down, as I think it will, and there will be more demand from the US consumers for US-made goods and services.
On outsourcing.
Well, I read in the Wall Street Journal today that IBM is laying off people in the US and expanding in India. The US companies are under financial pressure; it becomes a question of more incentives. When you need to save money, those things (a call centre or accounting back office in India or China) look attractive.
On curbs on the financial sector in the US and its impact on outsourcing in India.
It’s scary. It’s a frightening thought. What I don’t know is whether they will actually try to
enforce that and if they do, there will be indirect ways of going around it. Because of the British tradition, the English language and the quality of secondary education, India has an ability to be competitive in outsourcing.
Could we kill it unintentionally or intentionally? Yes, the US could and that is a real danger.
The economist was in Mumbai and spoke with Mint on a variety of issues, including the latest bailout plan of the US treasury, his worries and how planned curbs on Wall Street could impact outsourcing.
On the latest US bailout plan.
Raising concern: Martin Feldstein. Ashesh Shah / MintIt’s an ingenious plan. There are a lot of positives to be said about it. It’s goal is ambitious—take a large part of impaired assets away from banks; keep them in private hands rather than under government management; avoid nationalizing the banks, protect taxpayers in the sense that they will have some potential positive gains if things work out well (with the plan).
On his worries about the plan
One issue is: Is it enough? A trillion dollars is a lot of money even in the US. By contrast, banks have more than $10 trillion balance sheets and they have residential mortgages of $3 trillion. They have mortgage-backed securities on top of that and commercial mortgages of $2 trillion...And if this new treasury plan—the private-public partnership—doesn’t take away most of the impaired assets, then what exactly does it accomplish? It will still not put the banks in a position where...they can lend.
There’s also a question of whether the banks will actually sell the mortgages. When you are a bank looking at several hundred millions of mortgages, would you want to write them down and sell them 50 cents to the dollar?
On excess liquidity leading to inflation.
Most of the money pumped in is going directly to the Federal Reserve. The Fed’s balance sheet expands; the reserves expand; and the bank’s balance sheets expand. But they are not lending this money, they are depositing this at the Fed. And the Fed pays interest on those deposits.
I think there is a potential for inflation. It is not this year’s worry, but I think it is something that could come along. If there is $2 trillion or more excess reserves in the banks, they will have every reason to want to use those reserves to make loans. That would push up demand and could be inflationary.
Beyond what they want, the Fed can normally go into open market operations. But it doesn’t have $1 trillion or $2 trillion of assets with which to conduct open market operations. All they got is junk—for lack of a better name. And it is not clear, when the time comes, they will be able to persuade the banks to take the junk back.
On the possibility of Asia’s export-led growth model collapsing as US consumers start saving.
It won’t collapse. I think it will be less when the dollar comes down, as I think it will, and there will be more demand from the US consumers for US-made goods and services.
On outsourcing.
Well, I read in the Wall Street Journal today that IBM is laying off people in the US and expanding in India. The US companies are under financial pressure; it becomes a question of more incentives. When you need to save money, those things (a call centre or accounting back office in India or China) look attractive.
On curbs on the financial sector in the US and its impact on outsourcing in India.
It’s scary. It’s a frightening thought. What I don’t know is whether they will actually try to
enforce that and if they do, there will be indirect ways of going around it. Because of the British tradition, the English language and the quality of secondary education, India has an ability to be competitive in outsourcing.
Could we kill it unintentionally or intentionally? Yes, the US could and that is a real danger.
Sunday, March 15, 2009
India Inc Worried: Obama Anti Outsourcing
After a decade of outsourcing transform India into much of the world's back office, Indians are worried that President Obama's new Administration—and the slowdown in the global economy—will cast a shadow over one of the fastest-growing sectors of their economy. Obama's $787 billion stimulus plan will make it increasingly difficult for U.S. companies receiving bailout money to hire foreigners on H1B Visas. The budget the President recently presented may also make it harder for U.S. companies that send jobs overseas to receive tax benefits.
In India, where the $63 billion IT sector makes up almost 7% of the national GDP, the moves are worrying government officials. Acting Finance Minister Pranab Mukherjee groused about it over the weekend in an interview with CNN-IBN, a content partnership with Time Warner's ( owned by India's TV18. "We will have to address this issue," said Mukherjee, whose ministry has spent the last five months trying to restart India's slowing economy with tax cuts and spending plans. "We are opposing protectionism, not only here but at every forum."
WHAT'S NEXT?
Even more vexing for India's outsourcing industry is the lack of clarity about what might be coming next from the U.S. During a Feb. 24 speech to Congress, Obama said the Administration will eliminate "incentives for companies that ship jobs overseas," but the White House has not provided additional details. A line item in Obama's budget titled "Implement international enforcement, reform deferral, and other tax reform policies" is the only hint tax experts in the U.S. and in India have had about the policy. The estimates for tax revenues generated by that budget change start at $15 billion in 2009 and go up to $25 billion in 2012. Those inexact estimates, says Rosanne Altshuler, co-director of the Tax Policy Center (a joint venture of two Washington think tanks, the Urban Institute and the Brookings Institution), is an indication that the changes in tax policy have not yet been worked out, and likely will not become public until April.
Indians with a stake in the outsourcing industry are now waiting and watching. "Of course we are concerned," says Mohandas Pai, a board member and director of human resources at Infosys (, India's second-largest IT company by revenues. "But nobody knows what the devil is being referred to [in the Obama statement]."
At a time when nearly 5 million Americans have applied for unemployment benefits and another 1.7 million are working part-time jobs because they can't find full-time work, immigration and outsourcing have become key political issues in the U.S. As he did during his campaign, Obama has made clear during the first weeks of his Presidency that he intends to pursue policy changes to discourage outsourcing and the use of U.S. work visas—especially H-1B visas—that could cost American jobs. At no time has he made the exact policies clear, says Altshuler. Even within the government, the changes remain a mystery. Edward Kleinbard, the chief of staff for Congress' Joint Committee on Taxation, was forced to offer up a guess about the cryptic item in the budget during a meeting with a group of international lawyers last week. "Deferral will certainly be at play," he said, according to a report in Tax Notes, a publication of the Tax Policy Center. He was referring to how corporations are able to defer paying tax on income earned overseas until they bring that money back to the U.S.
That may not do enough to discourage outsourcing, says Andrew Kokes, vice-president for marketing at a Nashville-based outsourcing firm with 4,000 employees in India. Even if the U.S. proposes a punitive tax on companies doing work offshore or offers a tax break for those that do not, the changes wouldn't be large enough to offset the 20% to 30% benefit companies get in lower labor costs when they do certain work offshore, he says. "A tax break can't compete with that kind of arbitrage," says Kokes.
A WORLDWIDE TREND
The U.S. is not alone in this increasing aversion to foreign labor and to outsourcing. As the pain of the global economic crisis intensifies, countries all around the world are adopting policies that make it tougher for foreigners to get jobs. In the Gulf countries, where several million Indians are employed in jobs ranging from construction to banking, governments have cut down on work visas and sent unemployed Indians home by the planeload. A Dubai-based official with an airline (who asked not to be named) says construction companies chartered more than 30 flights in January alone to fly workers back to India. In Malaysia, 43 Indian workers who have overstayed their visas expect to be deported this week, as thousands more leave voluntarily. On Mar. 2, the British government started an inquiry into whether immigrant workers should be restricted to sectors of the economy that have documented worker shortages.
In India, these decisions have raised hackles. India's IT sector is seen as a source of national pride—an area where Indians see themselves as competing successfully on the global scene. Moreover, the millions of Indians living overseas send back more than $30 billion a year in remittances, making up 3% of the country's GDP, according to estimates by the International Labor Organization. Political groups, parlaying for support in upcoming elections, have grasped the issue, threatening boycotts and asking the Indian government to intervene behalf of its expatriates. "We feel that in the current economic environment it is imperative for global corporations to collaborate on technology and innovation," says Suresh Senapaty, the chief financial officer of Wipro , one of India's largest IT services companies. "Policies of protectionism will only hinder the revival of the world economy."
While the change in rules for H-1B hires may be popular in the U.S., it could have a long-term impact that policymakers are not foreseeing, according to a report on March 2nd researchers at Duke and Harvard universities. Disheartened by the change in visa rules, nearly 100,000 foreign workers could leave the U.S. and return to their home countries, researchers concluded. The two-year study asked those who had returned why they left the U.S., and found that increased opportunities in India and China made it easier for these highly trained workers to leave jobs in Silicon Valley and start businesses back in their home countries. "Short term, this will have no impact on the U.S., but long term this could spell disaster," says Vivek Wadhwa, the lead researcher on the study and a research associate at Harvard's law school. "When we start recovering, then the people we need are going to be in India and China."
Since 1990, the H-1B program has allowed foreigners holding at least a bachelor's degree to work for six-year spells at U.S. companies and to have a chance to apply for a green card. Companies such as Microsoft and Google have hired thousands of foreign workers on H-1B visas. It is unclear how many of them applied for—or received—green cards, but the green card backlog in the U.S. in 2006, the last year for which data are available, was more than 1 million.
At the same time, Labor Dept. and U.S. immigration statistics indicate that just a little more than half of the allotted H-1B visas went to the high-tech sector; others included workers in fields as diverse as academia, medicine, and the nonprofit world. Several studies have shown that while there is documented fraud in the H-1B visa system and that H-1B workers often depress the local wages for similar U.S. workers, these highly trained immigrants do fuel a disproportionate portion of U.S. innovation. Wadhwa points out that nearly half of Silicon Valley startups—including Google—were started by immigrants, and nearly a quarter of U.S. global patent applications are from foreigners. "Without doubt, these H-1B workers are adding to the innovation pool in the U.S.," says Wadhwa.
After Outsourcing: Obama After Nurses
Washington US President Barack Obama on Friday opposed the idea of inviting overseas nurses, including from India, to fill up the huge shortfall the United States is facing right now.
America like most of the Western countries is faced with acute shortage of nurses and in recent years it has allowed medical personnel from India, China and Philippines to immigrate to work in hospitals.
"The notion that we would have to import nurses makes absolutely no sense," Obama told a gathering of health experts and lawmakers at a White House meeting on health care reforms.
Instead, Obama argued that the best possible approach to meet this shortfall is to train people inside the country.
"For people who get fired up about the immigration debate and yet don't notice that we could be training nurses right here in the United States," he said responding to an observation made by Congresswoman Lois Capps from California.
"We have a huge shortage of nurses today. Estimates are that the US will be lacking over 500,000 nurses in the next seven years," said Democratic lawmaker Capps.
Last week, a legislation was introduced in the US Congress to create a special category of nursing visas, which would facilitate much faster and easier brining of trained nurses from Asian countries like India.
Called the "Nursing Relief Act of 2009" the legislation proposes to make provisions for the new category of visas for registered nurses with an annual limit of 50,000.
The legislation notes that there are more vacant nursing positions in the US than there are qualified registered nurses and nursing school candidates to fill those positions. And according to the Department of Labour, the current national nursing shortage exceeds 126,000.
Obama said there are a lot of people in the US who would love to be in the nursing profession, and yet the government is not able to providing them the resources to get them trained.
"That's something that we've got to fix. That should be a no-brainer. That should be a bipartisan no-brainer, to make sure that we've got the best possible nursing staffs in the country," Obama said amidst applause.
Friday, March 13, 2009
Barack Obama’s anti-outsourcing stance concerns India
Barack Obama’s anti-outsourcing stance concerns India
American President, Barack Obama’s anti-outsourcing movement came as a big blow to the Indian IT Industry. Of the total foreign currency earned by the Indian IT sector, 60% ($64 billion) comes from outsourcing. At present, about 1,000 American companies have shifted their jobs in abroad. Barack Obama, in his first US Congress session on February 25, 2009, said that his government would give tax breaks to companies that would retain jobs in US and vice versa. This would badly hit the American companies that have outsourced jobs in abroad.
Kamal Nath, India’s Minister of Commerce and Industry, said that he will clarify this issue with Washington. Indian government will also discuss this anti-outsourcing movement in the World Trade Organization. Mr. Nath said that his government would make sure that America’s movement is compatible with WTO when they had been talking about bi-lateral trade and movements of goods, people and services. He also said that one has to see how the US companies are using India as a base for technological development. It can not shutdown instantly.
Moreover, the US companies that are receiving bail out money would not be able to hire employees through the H-1B visa which is another major blow to the thriving Indian IT industry. As per his election agenda, Obama started this outsourcing movement to retain jobs in USA. The US President has also set goals to creat 3.5 million jobs in the country.
Obama’s decision upset the heads IT companies in India. Kris Gopalakrishnan, CEO, Infosys, said that outsourcing increased the competitiveness of US companies and it created more jobs inside the country. Ashok Soota, CMD, MindTree, said that Obama’s speech was an extension of what he had said in his campaigns. Sujata Rakhra, Vice President, Marketing and Communication, APAC, Perot Systems said that businesses today are truly global than ever before and such protectionalist measures would not only restrict innovation but would also hamper the progress of globalization.
Along with Indian IT companies, this new decision also upset many US companies that are saying that such a move would hurt US.
American President, Barack Obama’s anti-outsourcing movement came as a big blow to the Indian IT Industry. Of the total foreign currency earned by the Indian IT sector, 60% ($64 billion) comes from outsourcing. At present, about 1,000 American companies have shifted their jobs in abroad. Barack Obama, in his first US Congress session on February 25, 2009, said that his government would give tax breaks to companies that would retain jobs in US and vice versa. This would badly hit the American companies that have outsourced jobs in abroad.
Kamal Nath, India’s Minister of Commerce and Industry, said that he will clarify this issue with Washington. Indian government will also discuss this anti-outsourcing movement in the World Trade Organization. Mr. Nath said that his government would make sure that America’s movement is compatible with WTO when they had been talking about bi-lateral trade and movements of goods, people and services. He also said that one has to see how the US companies are using India as a base for technological development. It can not shutdown instantly.
Moreover, the US companies that are receiving bail out money would not be able to hire employees through the H-1B visa which is another major blow to the thriving Indian IT industry. As per his election agenda, Obama started this outsourcing movement to retain jobs in USA. The US President has also set goals to creat 3.5 million jobs in the country.
Obama’s decision upset the heads IT companies in India. Kris Gopalakrishnan, CEO, Infosys, said that outsourcing increased the competitiveness of US companies and it created more jobs inside the country. Ashok Soota, CMD, MindTree, said that Obama’s speech was an extension of what he had said in his campaigns. Sujata Rakhra, Vice President, Marketing and Communication, APAC, Perot Systems said that businesses today are truly global than ever before and such protectionalist measures would not only restrict innovation but would also hamper the progress of globalization.
Along with Indian IT companies, this new decision also upset many US companies that are saying that such a move would hurt US.
Mphasis May hir more Americans: Outsourcing
Mumbai: MphasiS Ltd, the Bangalore-based IT services firm that is now a part of international technology giant Hewlett-Packard, may add more Americans to its workforce to avail the tax breaks announced by US President Barack Obama on February 25.
Speaking to DNA Money, Ganesh Ayyar, chief executive officer, MphasiS Ltd, said, "The option of increasing Americans in our workforce is open to us in view of the recent announcements by US authorities. However, we will have to factor in many other things before that, like onsite cost versus margins. We also have to evaluate client willingness."
However, an analyst tracking the sector felt IT companies talking of recruiting more Americans and actually walking the talk were two different things. "Putting more people onsite will send their costs soaring. Moreover, clients might not be willing to pay that much," he said on the condition of anonymity. The analyst, however, added that MphasiS earns 94% of its revenues through time and material (T&M) contracts and so, is in the position to renegotiate contracts if onsite postings increase.
Of the 29,988 employees the company has, 1,721 work onsite, with the rest being offshore. As much as three-fourth of the company's revenues comes from offshore work, with onsite contributing the rest. MPhasiS' billing rate for onsite is about $71 per hour and for offshore, $17.
The US region contributed 67% to its revenues in the first quarter (November-January) of financial year 2008-09. MphasiS follows a November to October fiscal. In Q1, Europe, India and the Middle East and Asia Pacific accounted for 22%, 7% and 4% of revenues, respectively.
Its parent Hewlett-Packard, through its acquisition of US-based EDS Corporation, contributed 45% to MphasiS' revenues in the first quarter. "This is the first time we have taken into account business from Hewlett-Packard in our books after the acquisition. We will definitely look to increase its contribution further, because the EDS-Hewlett Packard combine too has grown five times in revenues. So, the relationship holds huge potential for us," said Ayyar. MphasiS gets outsourcing and infrastructure solutions projects from Hewlett-Packard.
Meanwhile, in these times of price negotiations from clients, the company may look at increasing the work hours of employees for cost benefits. However, Ayyar said, "Nothing of that sort is in practice at the moment." MphasiS added 9 new clients in its first quarter, including six through the Hewlett-Packard relationship. The company's revenues stood at Rs 9,77.7 crore in the first quarter of FY09, compared with Rs 8,94.72 crore in the quarter before that.
However, the BPO business fared badly due to project cancellations from a few clients and also due to the appreciation of rupee against the pound. MphasiS earns 43% of its revenues from the banking, financial services and insurance sector, with technology, manufacturing and retail, and telecom providing 25%, 13% and 9%, respectively.
Speaking to DNA Money, Ganesh Ayyar, chief executive officer, MphasiS Ltd, said, "The option of increasing Americans in our workforce is open to us in view of the recent announcements by US authorities. However, we will have to factor in many other things before that, like onsite cost versus margins. We also have to evaluate client willingness."
However, an analyst tracking the sector felt IT companies talking of recruiting more Americans and actually walking the talk were two different things. "Putting more people onsite will send their costs soaring. Moreover, clients might not be willing to pay that much," he said on the condition of anonymity. The analyst, however, added that MphasiS earns 94% of its revenues through time and material (T&M) contracts and so, is in the position to renegotiate contracts if onsite postings increase.
Of the 29,988 employees the company has, 1,721 work onsite, with the rest being offshore. As much as three-fourth of the company's revenues comes from offshore work, with onsite contributing the rest. MPhasiS' billing rate for onsite is about $71 per hour and for offshore, $17.
The US region contributed 67% to its revenues in the first quarter (November-January) of financial year 2008-09. MphasiS follows a November to October fiscal. In Q1, Europe, India and the Middle East and Asia Pacific accounted for 22%, 7% and 4% of revenues, respectively.
Its parent Hewlett-Packard, through its acquisition of US-based EDS Corporation, contributed 45% to MphasiS' revenues in the first quarter. "This is the first time we have taken into account business from Hewlett-Packard in our books after the acquisition. We will definitely look to increase its contribution further, because the EDS-Hewlett Packard combine too has grown five times in revenues. So, the relationship holds huge potential for us," said Ayyar. MphasiS gets outsourcing and infrastructure solutions projects from Hewlett-Packard.
Meanwhile, in these times of price negotiations from clients, the company may look at increasing the work hours of employees for cost benefits. However, Ayyar said, "Nothing of that sort is in practice at the moment." MphasiS added 9 new clients in its first quarter, including six through the Hewlett-Packard relationship. The company's revenues stood at Rs 9,77.7 crore in the first quarter of FY09, compared with Rs 8,94.72 crore in the quarter before that.
However, the BPO business fared badly due to project cancellations from a few clients and also due to the appreciation of rupee against the pound. MphasiS earns 43% of its revenues from the banking, financial services and insurance sector, with technology, manufacturing and retail, and telecom providing 25%, 13% and 9%, respectively.
Obama: Against Outsourcing
Continuing to play the anti-outsourcing card, Democrat presidential front-runner Barack Obama on Wednesday said while America cannot "shy away" from globalisation, it would have to take measures to ensure that jobs are not shipped overseas.
"We have to stop providing tax breaks for companies that are shipping jobs overseas and give those tax breaks to companies that are investing here in the United States of America," Obama said in during a debate with rival Senator Hillary Clinton in Cleaveland, Ohio.
The Illinois Senator, playing to the gallery of those workers who have been displaced in manufacturing jobs as a result of the North American Free Trade Agreement (NAFTA) and generally to the anti-outsourcing crowd, said he would ensure that every pact the US signs has environmental, safety and labour standards to protect workers and consumers alike.
"We can't have toys with lead paint in them that our children are playing with. We can't have medicines that are actually making people more sick instead of better because they're produced overseas," Obama said.
At the same time, he said, Americans cannot "shy away" from globalisation. "We can't draw a moat around us."
"The problem is we've been negotiating just looking at corporate profits and what's good for multinationals," the African-American Senator said adding, "as President, what I want to be is an advocate on behalf of workers".
Facing the heat from US presidential hopefuls who blamed "shipping jobs" to China and India for rising US unemployment, the India Inc had last week launched a counter offensive through the media, telling Americans that the industry is creating new work opportunities for them
Barrack Obama: on outsourcing
Barrack Obama: on outsourcing
President Barrack Obama's views on 'outsourcing', articulated in the run up to the US presidential elections, is a real cause for concern for the $60-billion Indian IT and ITES industry, which has grown rapidly on US orders, in the last over a decade. Obama had spelt out his views against outsourcing and is opposed to companies shipping jobs overseas.
However, one hopes pragmatism will replace the rhetoric, now that he is the US President and that he will see the mutually beneficial, 'win-win' strategic advantages of outsourcing. A closer look at outsourcing will, in fact, reveal that the game now is not just irreversible, but any adverse action against it will be mutually harmful. First of all, outsourcing in IT and ITES industries is no different from the larger trend of outsourced 'contract manufacturing' in the manufacturing sector and hence it should not be looked at with disdain.
In the past, US lost jobs in textiles and garments, shoe and toy making, and in other low-stuff industries, first to Japan, then to South Korea and later to China and other low-cost countries. Even in computer hardware, Intel ceded the low-cost advantage in chip making to companies in South Korea and Taiwan. Dell and IBM did the same in desktop computers and laptops.
Today, the ground reality is that US no longer has the capability and infrastructure to manufacture such low-cost products. The trend is the same in the IT and ITES sector and it is not an exaggeration to say that US has no (ready built) infrastructure left to enter and compete in low-end IT products and services. Indian IT industry may have grown exponentially, but mostly the work 'outsourced' is what some people call as 'coolies' jobs.
It is only recently that Indian giants, such as TCS, Infosys and Wipro are offering some competition to US biggies IBM and HP in the services contracts. But, volumes and values fetched so far are negligible. Secondly, US companies have hugely benefited by outsourcing in general and in R&D activities in particular. Some higher-end jobs outsourced to India have created high value products at low costs and the US companies have been able to sell those products globally, including in India and obtain higher returns. In fact, money spent in India in such activities may ultimately be recovered from sale of such products here.
Thirdly, Indian IT companies have themselves been huge consumers of hardware products from the US companies. Generally, US-based IBM, HP and Sun Microsystems have been in the race to sell hardware in India. Networking companies like Cisco have also been selling hardware for the fixed phones, the wireless and for the internet.
Thus while Indian software coders write codes for US companies, US companies find readymade market for 'Made in US' hardware stuff. Fourthly, Indian IT and ITES companies are also huge consumers of 'Made in US' software. Not only the hardware giants, such as IBM, HP, Sun and Cisco sell their software services, others like Microsoft now have a huge market share in all types of industrial and consumer software.
Fifthly, the outsourcing has created indirect markets for US companies, as the overall computer literacy has risen by larger penetration of computers and computers softwares. For example, by adopting e-governance, the government sector has created a huge market for hardware and software.
Markets have expanded for products related to security, data-warehousing, etc. Thus benefits to the US companies by way of local demand for computer products in India may far exceed the presumed direct loss of a few thousand jobs in US. Sixthly, it should not be presumed that if the US companies were forced to do their work locally under some legal or other compulsion, the software coders' jobs would go to US citizens only. Sooner or later, companies will find a way out to work circumvent those compulsions.In nutshell, bad times call for adopting flexible and innovative strategies and serving the customers in a better manner, so that when the markets recover, Indian IT companies develop better competencies, products, services and the skill-sets necessary to serve the future markets.
Wednesday, March 11, 2009
The 25 Most Dangerous Cities for Offshore Outsourcing
Rankings based on mean scores in ten areas of risk as reported by The Brown-Wilson Group's "2009: The Year of Outsourcing Dangerously"
Courtesy: NetworkWorld.com
1. Bogota, Columbia
2. Bangkok, Thailand
3. Johannesburg, South Africa
4. Kuala Lumpur, Malaysia
5. Kingston, Jamaica
6. Delhi/Noida/Gurgaon, India
7. Manila/Cebu/Makita, Philippines
8. Rio de Janeiro, Brazil
9. Mumbai, India
10. Jerusalem, Israel
11. Curitiba, Brazil
12. Dalian, China
13. Juarez, Mexico
14. Brasilia, Brazil
15. Chandigarh, India
16. Colombo, Sri Lanka
17. Ho Chi Minh City, Vietnam
18. Quezon City, Philippines
19. Accra, Ghana
20. Pune, India
21. Chennai, India
22. Hanoi, Vietnam
23. Bangalore, India
24. Hyderabad, India
25. Kolkata, India
The Worst Three Cities for--
Corruption & Organized Crime
1. Bogota, Colombia
2. Juarez, Mexico
3. Johannesburg, South Africa
Heightening Trans-national & Geopolitical Issues
1. Delhi/Noida/Gurgaon, India
2. Jerusalem, Israel
3. Colombo, Sri Lanka
Unsecured or Unprotected Networks and Infrastructure
1. Bogota, Colombia
2. Bangkok, Thailand
3. Kingston, Jamaica
Unstable Currency
1. Bangkok, Thailand
2. Bogota, Colombia
3. Johannesburg, South Africa
Personal Crime Rate/Police-to-Citizen Ratio
1. Bangkok, Thailand
2. Johannesburg, South Africa
3. Rio de Janeiro, Brazil
Environmental Waste & Pollution
1. Bangalore, India
2. Chandigarh, India
3. Kuala Lumpur, Malaysia
High Terrorism/Rebel Target Threat
1. Mumbai, India
2. Delhi/Noida/Gurgaon, India
3. Jerusalem, Israel
Legal System Immaturity
1. Bangkok, Thailand
2. Bogota, Colombia
3. Kingston, Jamaica
Weather/Climate Threats
1. Kingston, Jamaica
2. Manila/Cebu/ Makati, Philippines
3. Bangkok, Thailand
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