News and views about the Outsourcing sector in India

The rupee’s appreciation is taking a heavy toll in terms of margins and has even led some companies like Spectrum Global Fund Administration to shut down operation in the country. However, giants like Wipro, TCS and HCL have posted some strong reports for the quarter. These companies have minimized such currency risks by hedging and/or diversifying their businesses. According to a separate report release by Mercer, Indian IT salaries have taken a toll and India now stands fourth among the lowest paying countries.

Chillibreeze Business Research Team

Rising Rupee claims first BPO victim

The rupee's appreciation against the dollar has claimed its first victim in the business process outsourcing space.

US-based Spectrum Global Fund Administration, providing back-office operations to hedge funds in the US and the UK, is closing its facilities in India. The company had started its operations in India two years ago.

The company, which is based in Bangalore, has close to 100 employees. The centre serves about 60-70 clients of the total 110 in the hedge fund sector. The company plans to close the centre by December-end. The company has cited reasons such as increasing attrition and rising costs for closing its Indian operations.

Spectrum has around $33 billion in assets under administration, representing 110 hedge fund and fund of funds clients. Forrester Research, in a recent report, had mentioned that more than 60 per cent captive centers in India were struggling.

20 October 2007
Source: Rediff.com

Wipro riding on strong demand, Q2 net up 17%

Country’s third-largest software services exporter Wipro posted a 17 per cent rise in quarterly profit, beating forecasts, as strong demand for outsourcing offset the impact of a stronger rupee and wage rises.

Wipro on Friday said it had not seen any slowdown in IT spending by companies despite the subprime mortgage crisis and fears of an economic downturn in the US, which accounted for 63 per cent of its September quarter revenue.

The $18 billion Bangalore-based firm expected revenue from IT services to rise to $905 million, including $60 million from acquisitions, in the December quarter, up 13.6 per cent from $796.5 million in July-September. “We, as a company, have not experienced any slowdown,” chairman Azim Premji said on Friday.

During the quarter, Wipro added 5,341 employees and 59 new clients, including a US technology firm that signed a $160 million seven-year deal. The company said it was able to get higher fees from new as well as existing clients.

20 October 2007
Source: Indian Express

Rupee rise: TCS to focus on domestic biz

Tata Consultancy Services (TCS) plans to focus on domestic contracts in the wake of rupee appreciation. The company is gearing up for a ‘Rs 35-a dollar’ exchange rate scenario in the future and one of the key strategies to deal with it is to bag more local business, said Mr. N. Chandrasekaran, Executive Director and Chief Operating Officer.

Revenue growth in domestic contracts has been flat over the last two quarters and industry-wide margins on domestic contracts are 5-10 per cent lower than overseas contracts. Also, domestic contracts are largely project-based with no annuity revenue component (unlike overseas where the majority of contracts are annuity based) making it difficult to predict revenues.

However, as domestic companies increase their IT spends, particularly industries such as banking and financial services, government, telecom and retail, the company expects revenues to grow from this segment. Currently, domestic business contributes 8.2 per cent to revenues.

Other key measures taken to improve productivity include focusing on providing more of solutions than services, building up a repository of software components (code and modules) that can be re-used in projects and opting for a ‘platform BPO’ business model, Mr. Chandrasekaran said at a press conference here. A ‘platform BPO’ refers to a model where TCS would charge clients for the intellectual property it would use to build and deploy platforms that would in turn facilitate carrying out varied services.

20 October 2007
Source: Business Line

Wipro not hit by slowdown in US: Premji

Wipro said on Friday that it has not been affected by slowdown in the US and maintained that demand continued to be strong.

“We have not experienced any slowdown in the US,” said Mr. Azim Premji, Chairman, Wipro Ltd, adding that a clarity on the IT budgets of US clients for 2008 was expected sometime in December or January.

Mortgage segment

However, Mr. Premji said that it was only the uncertainty that affected the Indian IT and BPO industry. There was some uncertainty in the mortgage segment and most of that has been discounted, he added. Wipro derived less than one per cent of its revenues from the mortgage segment and is reasonably insulated, he said.

Further, Mr. Premji said the company had set up its first delivery centre in the US at Atlanta, Georgia. The company expects to have around 200 people at its Atlanta centre. Wipro has received a subsidy from the State Government to set up the centre at Atlanta, he said.

Forward covers

The strong rupee had a marginal impact on its earnings and that the company had bought forward covers worth $730 million as of September 30, to hedge against currency fluctuations. Mr. Senapaty said the company had cash and cash equivalent of close to $300 million and may leverage the balance sheet to fund any of its future acquisitions if required. The US accounted for 63 per cent of the company’s revenues, while European revenues stood at 32 per cent and Japan accounting for 3 per cent.

Revenues from BPO grew 21 per cent year-on-year to Rs 278.4 crore during the second quarter of this fiscal, while operating margins stood at 22 per cent.

19 October 2007
Source: Business Line

Product biz boosts Wipro Infotech revenues

A ninety per cent growth in its product business spurred Wipro Infotech, the India, West Asia and Asia Pacific business of Wipro Ltd, to clock a 72 per cent year-on-year growth in revenues for the quarter-ended September 2007.

Wipro Infotech recorded revenues of Rs 931.2 crore compared with Rs 542.6 crore in the corresponding quarter last year. Profit before interest and tax for Wipro Infotech grew 48 per cent to Rs 69.1 crore (Rs 46.8 crore). Wipro Infotech accounted for 19 per cent of Wipro’s total revenues.

“Our revenues have grown at three times the market growth rate in the first half of the year driven by comprehensive services portfolio,” said Mr. Suresh Vaswani, President, Wipro Infotech. “Our pipeline for large outsourcing and integrated deals is very healthy across India and West Asia,” he said.

The services business accounted for 32 per cent of total revenues during the second quarter, while products accounted for the rest. s

19 October 2007
Source: Business Line

TCS, Nielsen Co in 10-yr, $1.2 bn pact

The country's largest software firm Tata Consultancy Services (TCS) and the Netherlands-based Nielsen Company on Thursday entered into an agreement for outsourcing a portion of Nielsen's IT and operations functions. It is a 10-year agreement valued at USD 1.2 billion, TCS on Thursday said. TCS will assume responsibility for important IT and operational processes and help Nielsen to integrate and centralize multiple systems, technologies and processes on a global scale.

18 October 2007
Source: Financial Express

Indian IT workers among worst paid

The impact of the rupee rise and fed rate cut on IT salaries is yet to be seen with appraisals around the corner, but as of now India is ranked fourth on the ten worst IT paymasters globally, a recent survey said.

India remains one of the most favorite outsourcing destinations due to this low cost factor, but the future might bring with itself a completely different scenario, a survey by global human resources firm Mercer Human Resource Consulting said. There is an increasing evidence of India's growing stature and presence in the high-end value chain, where cost advantages may not be the only drivers to future growth.

While Indian IT managers stood fourth on the ten lowest paying countries with an average salary of USD 25,000, Vietnam topped the list with a meager average salary of USD 15,470, followed by Bulgaria and Philippines averaging at USD 22,240 and USD 22,280 respectively.

The other countries on the list were Indonesia at fifth with average wages of USD 31,720, followed by China (Shanghai) with earnings of USD 33,770, Malaysia (USD 35,260), Czech Republic (USD 35,880), China (Beijing) (USD 36,220) and Argentina (USD 43,180).

17 October 2007
Source: Financial Express

HCL posts 23.3% rise in net income

HCL Technologies, the fifth largest software exporter in the country, on Tuesday posted 23.3 per cent increase in its net income on year-on-year to Rs 308.4 crore for the first quarter. The quarter ended September 30 on the back of robust outsourcing deals and growth in the number of new clients.

During the quarter, the company had a forex gain of Rs 14.5 crore as it had hedged its forex significantly. In the quarter ended June 30 this year the company had a forex gain of Rs 250 crore.

The company's revenue for the September quarter was also up at 23.9 per cent on year-on-year at Rs 1,709.2 crore.

16 October 2007
Source: Financial Express