Overcome the talent crunch in India - trend in hiring in foreign countries

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

To overcome the talent crunch that companies are faced with in India and to keep up with market requirements, Indian companies like Wipro are going on a hiring binge in foreign countries. And there is good news for Wipro and Nortel – they won the Outsourcing Excellence Award for best offshore practices.

- Chillibreeze Business Research Team

Infosys going through bad phase faces talent crunch

India’s largest software exporter firm Infosys is going through a troubled phase. While on one hand Infosys CEO and Managing Director S Gopalakrishnan said the rising rupee issue is a long-term crisis, what’s also a major concern is the talent crunch that the IT industry is going through.

There were 2,50, 000 engineering graduates last year and the IT/ ITeS industry absorbed about 60 per cent of them. But this is clearly not enough for an industry which is looking to employ over 1.6 million people by the end of the year.

IT companies, especially BPOs are now resorting to what could be seen as a lowering of standards. The IT firms are also increasingly hiring locals from foreign countries.

The non-Indian workforce comprised 9.6 per cent of the IT majors’ total workforce in 2006-07, and the number is set to rise. Wipro Technologies, for instance, hired over 200 college/business school graduates from the US and Europe in 2006-07. This is a 150 per cent rise in the recruitment of locals in their overseas operations over the previous year 2005-’06.

Tata Consultancy Services (TCS), on the other hand, as its long term strategy is looking at having 15-20 per cent of their workforce from foreign countries. Infosys Technologies, during its first quarter results for financial year 2007-08, said: “Outside employment could shoot up by 25 per cent in future.” Infosys already has 3 per cent of its workforce made up of foreign nationals, and has seen their numbers grow 28 per cent from fiscal ‘05-’06 to ‘06-’07.

With these IT majors on an acquisition spree, the need for such recruits is only rising. “We recruit students from management schools and engineers from countries like Romania, Mexico, Germany and Austria. Most recruits are for our foreign operations,” says Achuthan Nair, VP, resourcing, Wipro Technologies.

To a query that most other Indian IT companies in China were expanding faster while Infosys had about 700 persons, he said the company was prepared to grow in that region.

13 August, 2007
Source: IBNLive.com

Profit Doubles at HCL Technologies

Indian software company, HCL Technologies Ltd. said Monday its profit in the most recent quarter doubled from a year ago, thanks to a slew of new outsourcing orders that more than offset the impact of a stronger rupee.

Net profit in the April-June quarter more than doubled to 4.87 billion rupees ($119.5 million) from 2.33 billion rupees a year earlier, the company said in a statement. Sales rose 28.5 percent to 16.12 billion rupees ($395.7 million), helped by the addition of 20 new clients, it said.

Most of its bigger rivals earlier reported lower profit growth because of the rupee's sharp appreciation against the U.S. dollar.

The company plans to spend $150 million in the current financial year to set up new centers and expand capacity, Nayar said. It plans to hire 25,000 employee through this year.

13 August, 2007
Source: San Francisco Examiner

Wipro plans US expansion, to hire locally

The twin factors of addressing the market requirements as well hiring talent will see $3- billion IT giant Wipro expanding further in the US with significantly large centers. Wipro Technologies is looking at having around 500 people, hired locally at Atlanta, in two-three years. “We will move very strongly in the direction of hiring people locally,” said Wipro Technologies’ IT practices president Suresh Vaswani.

The Atlanta centre is likely to open in three months. Wipro is also looking at the possibility of having facilities at Raleigh, NC, Austin, Texas and Richmond, Virginia. This could eventually see about 1,000 people being hired locally at these centers. Wipro has over 20 development centers outside India, with over half of them in the US. It has 12,000 people outside India and 7,000 in US alone. Traditionally, the centers are located close to its customers’ site and are manned by people sent from India.

Mr. Vaswani said the nature of the IT services business and the newer contracts coming up requires them to have their presence across the globe. This would mean a larger volume of business, which hitherto were not available for the Indian players.

Further, there are certain type of services which will require Wipro to have a significant presence, especially if it addresses security and IP issues. And businesses generally are not in favor of offshoring these services.

The changing market dynamics will also see the requirement of the local people as they are better equipped to deal with business situations in terms of language and culture. According to Vaswani, they would typically hire people from three streams — engineering graduates, MBAs and experienced IT professionals. Mr. Vaswani said this process would also see its headcount at the onsite locations rising by 30-35% every year.

13 August, 2007
Source: Economic Times

Wipro BPO outsources recruitment process to Merittrac

Wipro BPO, the Rs 1,000 crore arm of Wipro technologies, has outsourced its recruitment process to skills assessment company Merittrac for reducing hiring- cost by about 15-20 %.

According to industry estimates, the company -- BPO unit of the country's third largest software exporter -- hires about 2,000 employees every month after scanning 20,000 applications.

Merittrac would test candidates' skills over the telephone, for which it has already set up three Business Process Outsourcing (BPO) centers at Hyderabad, Mumbai and Bangalore with an initial headcount of 75 people, company's CEO Madan Padaki told.

Merittrac's 'spoken English evaluation framework' would be used to test candidate’s skills over the phone and help Wipro in reducing cost of hiring by 15-20 %, Padaki said. Since the start of the new programme of Merittrac for Wipro BPO, about 35,000 candidates have been evaluated.

13 August, 2007
Source: Zeenews.com

Wipro and Nortel Win Outsourcing Excellence Award

Judged 'Best Offshore' Partnership

Wipro Technologies, the global IT services arm of Wipro Limited and Nortel(a), a global leader in communications capabilities, have won the "Best Offshore award" in the distinguished 2007 Outsourcing Excellence Awards for its 16-year-old relationship.

A pioneer of offshore development in India, Nortel opened India's first offshore telecom R&D development centre with Wipro in 1991. Wipro currently provides end-to-end design, system integration, consulting, software release management and support for Nortel's carrier and enterprise product lines.

The Outsourcing Excellence Awards recognize the world's most superior outsourcing arrangements, which demonstrate best practices in creating and sustaining competitive advantage and business transformation and achieve value and mutual benefit that increase over time for the client and service provider by Everest Group.

The prestigious award was presented at the 2007 Outsourcing Excellence Awards ceremony, which held in New York on 8th August 2007.

9 August, 2007
Source: Yahoo News

India in top spot in global outsourcing

Reinforcing its prime position as the hottest destination for outsourcing, India has emerged as the largest market in the region cornering most of the global outsourcing contracts during the first half of 2007, ahead of Australia and Japan.

Talking to newspersons here today, TPI India Managing Director Siddharth Pai, releasing the latest TPI Index on outsourcing contracts, said the total value of new outsourcing contracts in the 25 million US Dollar plus bracket - where most significant outsourcing activity occurred) - was 5.4 billion USD, an increase of 100 per cent on the first half of 2006.

This strong Asia-Pacific performance was in sharp contrast to a modest overall global increase in new business of just six per cent in the first half of 2007, he said adding ''traditionally the Asia-Pacific outsourcing market has been seen as relatively immature in contrast to the Americas and European markets and thus prone to peaks and troughs in activity.

The Asia-Pacific performance has been further impacted by an increase in global share of mega relationship volume and value.

8 August, 2007
Source: newkerala.com

Outsourcing Shifting to Full Service

Outsourcing firms are transforming themselves into full-scale IT services companies.

Outsourcing firms that once focused solely on providing IT and software development services at a lower cost are increasingly reforming themselves as end-to-end IT infrastructure management firms.

The latest evidence of this trend came this week with the announcement of yet another outsourcing partnership. Through its $600 million acquisition of the infrastructure management services provider, Infocrossing, based in Leonia, N.J., the outsourcer Wipro Technologies hopes to expand its presence in the U.S. and position itself as a full-scale IT services provider.

At $18.70 per share, the deal announced Aug. 6, adds five data centers and approximately 900 employees to the Indian outsourcer, which considers global infrastructure services an important driver of its future growth.

IT outsourcing and infrastructure services for Wipro, which is headquartered in Bangalore, grew 75 percent in the past year, and the company believes this acquisition will bring in larger orders. The all-cash transaction is expected to be completed by the end of March 2008.

Tata Consultancy Services and Infosys Technologies—Wipro's larger rivals—have also been buying software services companies to increase their range of products and to win more clients. Buying competitors in the U.S. allows these firms to be nearer to their target customers, and to address customer unease about overseas outsourcing.

There are persistent concerns about the future health of the outsourcing market, even as India's biggest outsourcing firms continue to rake in large profits. Each of the top five outsourcing firms—Tata, Infosys, Wipro, Cognizant Technology Solutions and Satyam Computer Services—reported healthy profits in the second quarter of 2007.

Yet, worries about high employee turnover, a mounting qualified worker shortage, an appreciated rupee that is cutting into earnings and the increasingly protectionist stance the U.S. has assumed on foreign workers has cast a shadow on their profit and growth prospects. On May 13, U.S. Sens. Chuck Grassley (R-Iowa) and Dick Durbin (D-Ill.) sent letters to nine Indian outsourcing firms, including all in the top five, requesting details on the way they use their H-1B visas. These 9 firms were issued nearly 20,000 of the 65,000 2006 H-1B visas.

8 August, 2007
Source: eWeek.com

Indian Inc bullish on hiring plans

India Inc is set to continue its recruitment drive with executives from the country emerging as the most optimistic in the world about hiring plans, even though jobs through outsourcing route may see a downslide.

According to international consultancy firm McKinsey, companies across the world are mostly planning to increase their headcount in the next six months with firms planning new hiring being double of those looking for job cuts.

Besides, executives in India "remain by far the likeliest to hire," McKinsey said quoting a survey of 2,700 executives around the world.

However, job creation in low-cost countries like India could see an adverse impact of global giants' plan to hire mostly in their home countries.

Outsourcing has emerged as a major source of jobs in India in the past few years, with companies from the western countries moving some of their operations to low-cost offshore locations.

Another survey by technology research firm Forrester showed that the US and European companies were not satisfied with cost savings achieved through their IT-related outsourcing and might seek to bring some jobs back.

Some industry observers are still hopeful that new jobs coming through outsourcing would not come to a halt, although majority of outsourced jobs could involve new functions.

HR consultancy firm MaFoi's Associate Consultant Vansh Joshi said: "Specialized form of outsourcing like KPOs (knowledge process outsourcing) or RPOs (recruitment process outsourcing) are set for a forward march. Basic processes like voice-based processes will lose its sheen."

8 August, 2007
Source: Financial Express

Kale Consultants acquires Zero Octa

Kale Consultants (Kale), a solutions provider to the travel and transportation industry, today announced the acquisition of 100% stake in London-based Zero Octa - one of the largest and leading provider of airline revenue assurance, protection and audit services worldwide.

Zero Octa recorded revenue of $6 million in calendar year 2006, and has a client base of 30 airlines.

Third-party outsourcing for revenue management and accounting for airlines is a $100 million business with a potential to grow to $700 million in the coming few years. Post the acquisition of Zero Octa, "Kale is the unique position to capture a dominant market share," said Jain, adding: "We already have a 20-25% market share."
With Octa having 30 clients and Kale having close to 40 clients, there is a small overlap of clients, but Jain is not worried. "There is a tremendous opportunity to cross-sell and grow both the businesses. The impact will reflect in the top line and bottom-line in the second quarter of the current financial year," said Jain who is targeting to cross the $30 million mark this fiscal. 

This is Kale's third domain-focused acquisition following the acquisition of travel solutions company Cognosys Software and of three products of Speedwing, the independent operating division of British Airways Plc. "We are keen on driving further consolidation among the third party services providers in the coming years," Jain said.

7 August, 2007
Source: Business Standard