Indian IT New Services Tougher Times

The year that passed by was one of the toughest in the decade for the Indian IT industry, which reeled under the impact of the worst-ever global economic crisis.

It was a reality check for the industry, with companies facing huge uncertainty on their business outlook for most part of the year as customers held back or cancelled investments in new technology.

Towards the close of the year, the industry began to show early signs of recovery, with customers starting to take decisions on IT spends.

Shares move upReflecting the sentiment, shares of IT companies such as Infosys, Wipro, and HCL Technologies touched 52-week high in the past week, as against yearly-lows in January-March. The BSE IT Index also touched the year's high of 5190 on December 24 as against 1987 on February 24.

The image of the industry took a hit at the beginning of the year due to the $1.4-billion fraud at Satyam Computers. The timely government intervention did mitigate the impact resulting in buy-out of the Hyderabad-based firm by the Mahindras.

On an optimistic note, implementing the learnings from previous downturn in 2001-02, the large and mid-size vendors managed to handle the changing market dynamics effectively by continuing to invest in newer service offerings and expanded their delivery footprint overseas. The smaller firms, however, bore the brunt of the downturn.

The economic crisis, triggered in September 2008, had forced the Indian IT firms to innovate, finetune their business model and tighten the cost structures as the volatile currency movement affected the earnings and pricing power came under pressure with clients seeking hefty discounts of 5-20 per cent.

Such a trend not only exerted pressure on the profit margins, but also forced the companies to shed their flab, resulting in an increase in forced attrition. Though wage cuts and pay hike deferrals were more pronounced till the middle of the year, the situation improved over the past few months, companies have started effecting wage hikes and firmed up their hiring plans for the next year.

Vendor consolidation

Vendors do expect stability in the pricing going forward in 2010. A clearer picture on the 2010 budgets was expected by the end of January-March quarter though some players feel that the 2010 budgets may stay flat over 2009. The consolidation in the market place is expected to benefit the Indian vendors as they are still able to offer the cost arbitrage when compared their global counterparts.

The large Indian players have gained from the recent vendor consolidation exercises at large global clients such as BP Plc, Nokia Siemens Networks, Telstra and Aviva among others.

New pricing models based on fixed price, pay-by-use and ticket-based pricing gained currency in 2009 as the outsourcers demonstrated cost savings to their customers from such newer engagement models. The Indian vendors expect their share of revenues from such newer pricing models to go up as compared to the traditional time and material projects, where billing is done on an hourly basis for the number of persons deployed on the projects.

Newer services

2009 also saw the Indian vendors launch newer services offerings on pay-by-use or Software-as-a-Service model through cloud computing initiatives.

Companies like Wipro have set up private cloud to test and deploy their applications internally to showcase to their customers.

The year saw the large vendors sharpen their focus on the domestic market, where the emergence of large IT deals acted as an offset to the slump in business from traditional markets in US and Europe.

Indian vendors also expanded their global footprint by setting up delivery locations in Latin America, where they see traction in the market place. The industry witnessed merger and acquisition activity on a moderate scale where companies picked up the captive units and smaller niche firms to enhance their competencies.

Indian IT Sector the New Reality 2010

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Training Staff still on the agenda of Indian Companies

Indian IT majors may have tightened their belts in various areas to contain costs as a fallout of the global economic slowdown. However, most of them see continuing value when it comes to employee training, even though it skims crores of rupees off their top-lines.

Top tier IT firms — including Tata Consultancy Services (TCS), Infosys Technologies, Wipro and HCL Technologies — have identified the need to train the brains they handpick annually from India’s top engineering colleges and technical institutes as a critical task, even as the industry is seeing a degree of upturn in client demand.

India’s largest IT services provider, TCS, for instance, spends 2 per cent of its revenue every year on training new entrants. Bangalore-headquartered Infosys recently announced the opening of a grand training facility at its Mysore campus. Infosys annually spends over Rs 800 crore on training alone. Wipro spends about 2 per cent of its net sales in providing training to employees.

While Infosys and TCS have, to a certain extent, tried to centralise their training resources, Wipro’s strategy has been of a federal nature to cater to local manpower requirements. Wipro has set up an archipelago of training centres in proximity to its competency centres all over India and overseas.

“Wipro believes in taking learning as close as possible to the learner. Hence, for fresh recruits, training is conducted at the development centres where the employee is to be placed. Training happens primarily at our Talent Transformation Centres in Bangalore, Hyderabad, Pune, Chennai, Kolkata and Kochi,” says Sreekala Ramamurthy, GM (talent transformation), Wipro Technologies. Overseas recruits, she says, are either provided training at the company’s global centres like the Atlanta Development Centre or “...recruits are flown down to our India offices”.

HCL, too, has decentralised its training infrastructure across the globe because its employees are no longer confined to a particular geography or location. According to Anand Pillai, senior V-P and global head (quality, talent transformation & intrapreneurship development), HCL Technologies: “Since learners are spread across the globe, the entire training department is also spread across the world. Our programmes are standardised to cater to global learning challenges and simultaneously manage different cultural nuances and local sensitivities.”

TCS provides an Initial Learning Programme (ILP) at the company’s corporate learning centre in Thiruvananthapuram. “We invest heavily in world-class training for our employees. ILP training is primarily conducted at our corporate learning centre at Thiruvananthapuram for Indian and non-Indian trainees. We replicate our fresher training programme at Guwahati, Bhubaneswar, Coimbatore and Baroda, as well as overseas, to bring scalability to our training model,” says Ajoy Mukherjee, V-P & head (global HR), TCS.

TCS’ new facility, the Peepul Park, is spread over 12 acres of newly acquired land in Technopark. The 3.5-lakh square feet Peepul Park is snazzily designed and also houses a Leadership Development Institute. The ILP Learning Block can accommodate 1,000 employees at a time, a hostel block accommodates 500 people, with a recreation centre and library thrown in. The facility has a capacity of 1,500 people.

The ILP is replicated in overseas geographies for new hires from countries like Australia, China, India, Hungary, Uruguay, the UK and the US. TCS also ensures that it hires people with diverse educational backgrounds and across geographies.

Infosys recently expanded the company’s global training centre, located at its 337-acre Mysore campus, by setting up another dedicated facility (GEC-II) for training. However, Infosys also maintains training infrastructure at all its development centres. The company recently extended the training duration for new recruits (freshers).

“We consider training as an investment in the future. Our investments to enhance our training capabilities are in keeping with future requirements,” justifies S Gopalakrishnan, CEO and MD, Infosys Technologies.

IT Firms See Higher Demand

Bangalore: As the effects of the economic slowdown begin to wear out, India’s information technology firms are seeing more demand for building high-value applications from customers upgrading or maintaining their business software.

Enterprise resource planning (ERP), or business software, is a high-margin segment that includes consulting as a key component and commands at least 40% higher billing rates than plain-vanilla applications and development and maintenance services. Such software is typically sold and maintained by firms such as SAP AG and Oracle Corp. Indian firms began acquiring ERP capabilities only in recent years to enter the big league of companies such as International Business Machines Corp. (IBM) and Accenture Ltd.

For instance, Infosys Technologies Ltd and HCL Technologies Ltd, India’s second and fifth largest software firms, fought a bid last year to buy British ERP implementation and consulting firm Axon Group Plc HCL won.

The impetus came during the downturn, when firms in the US and Europe, the biggest markets for Indian IT firms, slashed technology budgets and spent a bare minimum on the so-called lights-on projects for maintaining existing IT infrastructure, to keep their businesses running.

Now, with a recovery in sight, firms such as British oil explorer BP Plc. and power equipment maker ABB group are again upgrading their business applications but prefer outsourcing the work to firms in low-cost countries such as India, analysts said.

Mint could not independently verify ERP contracts won by Indian firms.

“Clients are becoming more open to discretionary IT spending, especially in areas such as enterprise resource planning, in which deep spending cuts have already happened,” Harmendra Gandhi and Pinku Pappan, analysts with brokerage Nomura Financial Advisory and Securities (India) Pvt. Ltd, wrote in a 10 September report to clients.

By discretionary spending, the analysts are referring to the money that customers keep aside to spend over their planned IT budget.

“Customers are also talking about some transformation of deals, apart from offshoring support and maintenance work. Thus, the propensity to spend out of the 2009 Budget is much more now compared with that a quarter ago,” Gandhi and Pappan said.

The shift to Indian firms was also prompted by price increases at their regular vendors.

Germany’s SAP last year raised its annual support costs to 22% of the licence fee from 17% earlier, saying this would bring down the total cost of ownership of the licence for customers.

Firms had not factored in a hike in maintenance fee during the recession and “are exploring outsourcing to Indian vendors, who can maintain at half the cost, but with the risk of losing support on upgrades from the vendor,” said Asheesh Raina, a principal research analyst at Gartner Inc. “Indian companies have also been able to demonstrate maturity in offering support.”

Spending on business software was the lowest in the five years to 2009, but is expected to pick up in 2010, Raina said.

Firms such as Wipro Ltd, HCL, Cognizant Technology Solutions Ltd and even smaller companies such as Defiance Technologies Pvt. Ltd, the IT services unit of the Hinduja group, say customers are looking to improve efficiency and integrate their business software with their core processes, and not just to cut costs. But it does help that Indian ERP firms are cheaper by at least a third than Accenture or IBM.

“Saving costs and capital continues to be the most important thing clients are discussing,” said Sangita Singh, head of enterprise application services, or EAS, for Wipro. The segment contributed a third out of the 26 customers that Wipro added in the first quarter ended June.

“You don’t have many companies spending $100-200 million (Rs482-964 crore) on new licences. It may be in the range of $50-70 million. The implementation business is three to four times on licences,” Singh said.

HCL earns nearly a quarter of its overall revenue from business software projects. EAS projects accounted for 23.6% of its fourth quarter revenue of Rs2,908 crore, up from 10.8% a year ago.

2009 The Year Ahead for Indian IT

With sinking profits, eroding margins, cost-cuttings and an acquisition bid gone awry, 2008 was a year with more jeers than cheers for the country's over $50 billion IT sector, which has seen nearly a decade of uninterrupted boom.

However, as 2008 draws to a close, the sector is bracing up for a tough time ahead as the scars of global recession are showing up on the country's sunrise sector.

The sector, which has been charting a growth of over 30 per cent, had to settle for a growth rate of 20 per cent, as the global slowdown plunged the industry into unpredictable times.

In the year littered with economic disasters, the failed attempt of country's fourth largest software exporter Satyam Computer to botch up two family-promoted firms for $1.6 billion not only resulted in loss of face but also hit the reputation nurtured by the Indian IT sector over the years.

Faced with shareholder's revolt and heavy criticism over corporate governance issues, Satyam withdrew the offer within hours of making the proposal.

But within a space of 24 hours, the scrip lost over 30 per cent in India and was down 55 per cent in New York Stock Exchange trade.As a fallout, the Board size also shrank with four independent Directors resigning from the 10-Directors strong Board of the company in the wake of the fiasco.

The Satyam saga is likely to continue next year as well with the Board scheduled to meet on January 10.If Satyam made it to the headlines for a failed deal, it was HCL Technologies, the country's fifth largest software exporter next to Satyam that made the country proud by inking the largest takeover deal in the software space overseas.

HCL piped rival country's second largest IT giant Infosys to bag UK-based SAP consulting firm Axon for $658 million. While Infosys had made 600 pence per share offer for Axon, HCL made a counter bid of 650 pence a share to acquire the UK-based firm.

The year was also some significant M&As on the IT front, such as the $13.9-billion acquisition of Electronic Data Services by HP. Back home, Wipro acquired Citi Technology Services, Citigroup's IT arm in India, in an all-cash $127 million deal.

Earlier, TCS had bought out Citi's captive BPO arm Citigroup Global Services for about $505 million, which reiterates the strength of the Indian IT story. Another reason that will give the software services sector a reason to rejoice is the IT Amendment Bill.

The Lok Sabha passed the Information Technology (Amendment) Bill 2006 this month, which gives the government the power to tackle data theft. The bill might act as a shot in the arm for the BPO firms for whom data security is of utmost importance.

The Bill has provisions to deal with new forms of cyber crimes like publicising sexually explicit material in electronic form, video voyeurism and breach of confidentiality, leakage of data by intermediary and e-commerce frauds, among others.The US is the world's largest technology market and accounts for between 50 per cent and 60 per cent of the revenues of the top Indian firms. Since September, however, the economic situation in the US and the rest of the world has worsened.

Country's software lobby group Nasscom had estimated that India's software and back-office services industry would grow by 21-24 per cent in the 12 months to March, but its president Som Mittal said recently that this number could be revised downward.

With no signs of an early revival, all the IT biggies such as TCS, Infosys, Wipro and Satyam have revised their revenue guidance downwards.The currency volatility has also compounded the woes of the Indian IT sector.

If a rising rupee in the last fiscal had dented export earnings, the steady rise of the US dollar against the rupee, British pound and Euro during the second quarter (July-September) impacted revenue realisation in dollar terms since 30 per cent of the billing is done in these currencies.The sector also experienced slowdown in hiring.

Already, under pressure to cut cost, most of the IT biggies had to freeze their hiring in the year. Moreover, the joining dates of the new recruits were also postponed, ringing the alarm bells in the job market. The top five IT companies posted a 36 per cent decline in their rate of manpower addition in the last quarter.

As for hiring by BPOs -- for long looked upon as poor the cousins of information technology companies -- also faced the heat.

However, BPOs remained a bit sanguine, as Nasscom's figures indicate that the BPO sector recorded revenue growth of 31.6 per cent whereas IT companies grew at 28 per cent.In 2009, as the new administration led by Barack Obama takes a look at the outsourcing story vis-a-vis India, it is the efficiency and resilience of the IT sector which can help it sail through the troubled waters.

TCS to Layoff More in Coming Days

Sources has revealed that the TCS, India 's largest software giant is going to take few tough steps to sustain in the present environment . Since economists and experts don't see a economy recovery in the near time , most of the customers are feeling the pain of slowdown and are pressurising the outsourcers to maximise the efficiencies .

To keep itself equipped against the global economic activity , the company has rolled out four measures which are going to be implemented with immediate effect .

The four measures are as follows :
There will be no recruitment of experienced professionals unless the company feels its extremely required .

People will be given cross skill training to manage the internal needs .

Since outsourcing means saving money by working from a low cost place , the company will concentrate more on offshore leverage . Non Critical positions on onsite will be moved to offshore .

There will be no promotions until the situation improves .

If you are in the underperforming section or in the under utilised section , the company might counsel you or might even ask you to leave .

Its not only TCS , all the companies are implementing different kind of measures to sustain in the present environment . It might not sound good to the employees , but if the companies has to sustain , they have to undertake this . The companies are trying to do everything so as to retain employees . As a employee of the organisation , its time for us to stand by them and help them sustain .

Do remember that When your company does good , it will always do good to you .

Layoffs History in India by Indian IT Companies

Layoffs History in India by Indian IT Companies. TCS, Infosys, HCL Tech, Satyam, Patni, Mastek, Motorola, Capgemini, Sun, Yahoo, Hexaware, persistent and GlobalLogic layoff employees from India offices.

Please find compiled list of all layoffs across Indian IT companies. This list include layoffs from TCS, Infosys, HCL Tech, Satyam, Patni, Mastek, Motorola, Capgemini, Sun, Yahoo, Hexaware, persistent and GlobalLogic.

India’s biggest software exporter, TCS, has asked several employees at its UK office to leave, as the company prepares to trim its payroll costs and cope effectively with the recession.
India’s second largest software services firm Infosys Technologies has downsized 5 per cent workforce at Infosys Australia.
The subsidiary employs 360 people, a majority of them from Expert Information Services — the first acquisition Infosys Australia made six years ago.

IT services company HCL Technologies has asked 450 employees at its Delhi and Bangalore offices to leave. A majority of those asked to leave are on the bench.

According to a HCL Technologies executive, the company had sacked 400 people in Delhi and another 50 in Bangalore in the last one-two months. The firm had earlier asked those on the bench to get assigned to projects or face the prospect of being asked to leave the firm.
T

ainted Satyam Computer has decided to lay off employees from its sales division in order to meet operating expenses and clear its debts. Nearly 10 per cent of its claimed workforce of 53,000 is engaged in providing support functions

Last year, Patni Computer Systems too laid off over 400 employees citing non-performance issues.

Around 59 employees of IT service provider Mastek are said to have opted to leave the company, three days after they were shifted to `virtual bench’ because of slowdown.
Last month, Mastek announced that it is putting 425 employees on virtual bench for the next 12 months following a slowdown in demand. The company had given two days to the 425 employees on virtual bench, the option of leaving the organisation.

More than 200 people Motorola India had hired just a few months ago to drive its mobile handsets business were reportedly laid off late last year. The company is also reported to have issued pink slips to at least 100 of its 4,000 employees in India in December. I
The US mobile phone maker also confirmed that the India operations will also face job cuts as part of its plan to shed more than 3,000 global workforce.

IT consulting and software company Capgemini has reportedly laid-off around 2,000 employees over several months in Bangalore, Mumbai and Kolkata centres.
IT giant Sun Microsystems reportedly laid off over 150 employees in India in January. According to a news report, most of the laid off employees were software developers working at the company’s Bangalore office.

The news report adds that the company may go for another round of lay offs soon. This round is likely to impact support staff from departments like marketing, human resources and sales.
Global search engine and web services provider Yahoo in December last year laid off 45 people from its India operations as part of its worldwide firing policy due to global meltdown.
The pink slips were in line with the company’s guidance given in October for the fourth quarter of 2008, which hinted at terminating the services of about 1,500 employees worldwide during the current quarter.

Pune-based Hexaware Technologies too is reportedly trimming its headcount across India. At one of the meeting HR Head reportedly said that the company would be axing jobs and slashing salaries.

Pune-based Persistent Systems has begun evaluating employees in a manner that would enable it to justify any possible manpower restructuring, including a layoff. Persistent employs over 4,000 across nine development centres in India and abroad. According to human resource experts, such a decision possibly points to a layoff in light of the downturn, which has resulted into a downward revision of IT budgets.

GlobalLogic, one of the largest outsourced product development companies in India, has laid off about 125 employees. While 108 employees were asked to leave ‘due to poor grading in the appraisals’ concluded in October, another 17 were told to leave because their ‘skill sets fell obsolete’.

The over $100-million company, which has delivery centres in Noida, Nagpur and Pune, confirmed the layoffs but said the figure is 115. Over the last two years, Global-Logic reduced its headcount to 2,000 from 3,000.
Courtesy Indiatimes.com