Nasscom says China not a threat to India - Wipro and Smart Village, Egypt

Weekly news updates on trends and happenings in the Indian Outsourcing Industry

According to a report by Nasscom, China does not yet pose a threat to India in the outsourcing arena. On the other hand, India is threatened by Egypt this week after Wipro signed a memorandum of understanding with the country to set up a development center in Smart Village, Egypt. However, opportunities are aplenty. The legal services industry in the US presents a rosy picture for the Indian outsourcing industry by channeling more jobs into India.

- Chillibreeze Business Research Team

Wipro will set up software development centre in Egypt

Wipro, the leading consulting and information technology company from India, has signed a memorandum of understanding with Information Technology Industry Development Agency (ITIDA) of Egypt to set up a global development centre in Smart Village.

Dr Tarek Kamal, Egypt's Minister of Communications and Information Technology, was present at the signing of the deal in which Wipro will target the IT Export Services for the Middle East and global markets. Egypt is well on its way to establishing itself as an important player in the lucrative and fast-growing offshore outsourcing market. The Egyptian IT industry is behind India by 15-20 years in its development cycle and its outsourcing IT services. However, there is growing interest from Middle Eastern countries in outsourcing BPO to Egypt instead of India or Europe; this is particularly the case in the GCC.

According to the data by Mediterranean Investment Project Observatory, the GCC accounts for 29 per cent of all of Egypt's projects by value - the largest group of newly announced investment projects. The Egyptian government forecasts that foreign direct investment by year-end will reach $8 billion, an increase of 31 per cent.

26 August 2007
Source: ww.tmcnet.com

Apparel firms go for outsourcing

Mumbai-based fashion apparel manufacturer Spykar Lifestyle recently received $5 million (Rs 20 crore) investment from private equity firm Avigo Capital Partners. However, unlike most companies which use the funds to increase manufacturing, Spykar will do the opposite.

The company will soon hive off its four manufacturing units, located around Mumbai, into joint ventures. With this, the company’s entire manufacturing will be outsourced. Currently, only 20 per cent of the company’s brands are manufactured.

It is not just smaller players such as the Rs 90-crore Spykar, which think in-house manufacturing is unviable. Big Bazaar, which has labels such as DJ&C and Knighthood, does not manufacture the brands it sells. ITC, which runs the Wills Lifestyle apparel retail business, does not have manufacturing facilities. Madura Garments prefers a mix of in-house production and outsourcing.

Six months ago, Big Bazaar sold all of its five manufacturing units. The company claims that production for the domestic segment has seen a jump of 80 per cent in the past one year. Even though there had been a slowdown in the textile sector, the apparel industry would not be affected as apparel makers had hiked supply to cater to the domestic demand, he added.

The outsourcing initiatives will help companies get the benefits of lower sourcing costs without getting into issues like economies of scale. For instance, if an apparel company provides 50 designs to retailers only about 10 of them become top sellers and deliver economies of scale, say industry experts.

24 August 2007
Source: Business Standard

China no tech rival yet, says India

China's growing tech industry is unlikely to challenge India's lead in global services outsourcing in the next three to five years, but it should not be ignored.

That's according to a report from Nasscom — the Indian tech industry association — which looks at the state of the Chinese software and services industry. Nasscom says the Chinese tech market shares similarities with India in its early years but does not yet offer comparable BPO (business process outsourcing) opportunities. The report suggests China must overcome a number of challenges before it can represent a real threat to India.

Ameet Nivsarkar, vice president of Nasscom, said these challenges include the fact that, unlike in India, English — the most commonly used language in the global IT industry — is not widely spoken in China. As well as this, he added, there are very few really significant players in China, with most companies not much larger than 5,000 employees, meaning the infrastructure still needs to develop to compete globally.

But Nivsarkar said that with greater experience, the Chinese industry has the potential to build a significant BPO industry, especially with the strong government-backing the tech industry enjoys. He added that the Chinese software and services industry is about five years behind India in terms of development.

The software and services sector accounted for 0.5 per cent of China's total GDP in 2006, compared to 5.5 per cent for India. The Nasscom report suggests the two nations can learn from each other about how to manage education and skills to meet the demands of the industry.

24 August 2007
Source: news.zdnet.co.uk

In the offshore market, dollar is still a safe haven

Foreign investors with large positions in India are hedging their exposure by selling rupees in the non-deliverable forward market. Non-deliverable forwards are derivative contracts where traders take positions in exotic currencies, but settle the difference only in dollars.

As a result, the rupee, despite its strength in the local markets, is weakening in the NDF market. Thus, even though the dollar is expected to weaken over the longer term, the dollar is now increasingly perceived as a "safer haven" by foreign investors, a shift from their earlier preference for the Swiss Franc.

The much-talked about carnage in the global credit markets has generated a lot of risk aversion among investors. According to a treasury official from a multi-national bank, "despite the rising aversion for undertaking risks, not many of the investors in the offshore markets are willing to totally liquidate their investments. Hence, they are examining ways to build in structures to mitigate the underlying risks."

The NDF market offers an alternative hedging tool for foreign investors with exposure to emerging currencies. It also serves as a speculative instrument if these investors wish to take positions from the offshore market, but in the local currency. According to a report published by the Bank for International Settlements (BIS), the use of Asian NDF markets by non-residents, in a way, reflects restrictions on their access to domestic forward markets.

23 August 2007
Source: Economic Times

Software Outsourcing to India: Why?

If one consider the great benefits of Offshore Software Outsourcing to India are the significant savings and rapid results. Multi-lingual project managers and programmers, saves you from language and culture difficulties in India, not to mention global time differences unlike China.

Software Outsourcing or Offshoring Software Development process is a valuable tactic for upholding and gaining competitive advantage over the competitors when implemented to fabricate an optimum output in Information Technology business. In the existing international IT fiscal scenario, firms are Offshore Outsourcing IT services and Software Outsourcing Development from various regions, mainly India.

If one consider the great benefits of Offshore Software Outsourcing to India are the significant savings and rapid results. Multi-lingual project managers and programmers, saves you from language and culture difficulties in India, not to mention global time differences unlike China. You can save up to 30 to 40 % in the project cost by Offshore Outsourcing projects. By Outsourcing the Software project to Offshore Outsourcing center, you don't need to spend your time and resources rather you can concentrate on the core development activities of the business. There is also access to proven and standard quality of web and software solution by one who Outsource their Software Projects.

Software Outsourcing can reduce investment for resources and their maintenance cost. There would be significant reduction in project overheads and operating cost. Arrival of internet, globalization, free marketing, and liberalization has turned the world into a small global village consequently destroying all trade barriers worldwide. Huge incentive in some countries because of lower wages is also cause to move operations.

In addition to savings Software Outsourcing to India endows her patrons with software Development process improvements that translate into ongoing upgrading in Customized software cycle times, class and economic viability. By delivering at right time and fulfilling the commitment Indian Software Outsourcing operations have achieved world-class levels of consistency and quality.

22 August 2007
Source: www.fastpitchnetworking.com

U.S. firms outsource legal services to India

Bruce Masterson, the chief operating officer of Socrates Media, asked his outside counsel to customize a residential lease for all 50 U.S. states in 2003. About $400,000 was the firm's estimate. He rejected that cost and hired QuisLex, a firm in Hyderabad, India, that did the work for $45,000.

Clients are pushing law firms like Jones Day and Kirkland & Ellis to send basic legal tasks to India, where lawyers tag documents and investigate takeover targets for as little as $20 an hour. The firms are part of a trend that will move about 50,000 U.S. legal jobs overseas by 2015, according to Forrester Research in Boston.

"The objective is to have only the most valuable people in London or New York, and the others in India, China or Columbus, Ohio," said Robert Profusek, co-head of the mergers and acquisitions practice at Jones Day in New York. Profusek sends low-end work to the cheapest locations and plans to open a document center in India.

Companies with in-house legal departments in India include DuPont, Cisco Systems, and Morgan Stanley, according to ValueNotes Database, which is based in Maharashtra, India.

The Indian legal services industry will more than quadruple to $640 million by 2010 from $146 million in 2006, ValueNotes said.

One incentive for corporations to send legal work overseas is that ethics rules compel law firms to disclose their profit margins. In India, legal education is based on common law and conducted in English, requiring two or three years of classes. The country produces about 80,000 law school graduates a year, according to ValueNotes, compared with about 44,000 in the United States. Offshore companies charge $10 to $25 an hour on low-end work and $25 to $90 an hour on advanced jobs. Junior Indian lawyers might earn as much as $8,160 a year, according to ValueNotes, compared with the $160,000 average salary for associates in major U.S. cities.

21 August 2007
Source: International Herald Tribune

BPO firms unfazed by US subprime crisis

Although the financial woes of the US mortgage industry with the subprime market have had their tremors hitting some Indian information technology companies catering to the banking and financial services segment, they are unlikely to lead to any lasting or major problem for the outsourcing industry, experts said. There were only a handful of companies in the country with significant exposure to the mortgage industry and the impact would be confined to their small number. Also, large mortgage firms would withstand the crisis and probably consolidate, outsourcing more to India, they said.

Recently, India’s second largest business process outsourcing firm WNS said that one of its clients, First Magnus, had shut down leading to a ‘material adverse impact’ on its revenue Similarly, mid-tier IT services company iGate Global Solutions, relying on the mortgage industry for 10% of its revenue, had taken a topline knock in the fourth quarter of the last fiscal year. However, IT industry officials and analysts feel that there is unlikely to be any wider impact across the industry. Wipro Technologies financial solutions president Girish Paranjape said, “We don’t anticipate this affecting the IT spending by the financial institutions.”

An industry source said Infosys BPO, Genpact and i-flex could have sizeable exposure to the mortgage industry. Infosys BPO, on its part, said it has exposure to large mortgage firms that have the capacity to tide over subprime problems. Is CEO Amitabh Chaudhry told ET companies that had gone bankrupt were only small players.

iGate chief delivery officer Mohan Sekhar feels that the current situation is very unlikely to snowball into a major issue for the Indian IT industry as it is not a broadbased trend. Any impact will depend on how much of the BFSI portfolio comes from the mortgage segment.

21 August 2007
Source: Economic Times

Outsourcing the Indian defense industry

India says its defense industry would be a major source for outsourcing for global companies to discharge their offset obligations.

India's junior defense minister, Rao Indrajeet, said in terms of the procedure for implementing offset provision notified in defense procurement procedure-2006, 30 percent of the indicative cost of capital acquisitions categorized as buy global and 30 percent of the foreign exchange component in buy and make category acquisitions will be minimum required offset.

The minister informed lawmakers the offset obligations shall discharged directly by any combination of the following methods: direct purchase of executing orders for, defense products and components manufactured by, or services provided by Indian defense industries, direct foreign investment in Indian defense industries for industrial infrastructure for services, co-development, joint ventures and co-production of defense products and foreign direct investment in Indian organizations engaged in research and defense research and development as certified by defense offset facilitation agency.

"While defense equipment manufacturers in the public and private sector can, with prior approval of the government, set up joint ventures subject to a cap of 26 percent on FDI in defense sector, ordinance factories, being government department can have similar arrangements in the form of memorandum of understanding with foreign companies for co-development and co-production of defense items," the minister said.

20 August 2007
Source: United Press International