India's rising rupee: Data from MindTree and TCS

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

This week the news is about the knowledge process outsourcing industry that is now looking at China as a substitute for India. Negative effects of the rising rupee are prompting companies like MindTree to set up development centers overseas in order to avoid the swings in the currency. Despite this, India is still named the top 5 destinations for outsourcing with cities like Chennai, Hyderabad, Pune and Kolkata topping this list. What also looks positive is the prediction by TCS, India’s largest software and services firm, that outsourcing will still continue in India, in spite of plans to increase billing rate for clients due to the rising rupee.

- Chillibreeze Business Research Team

It's turn of KPO companies to train guns on China

After the IT services companies, it’s now the turn of knowledge process outsourcing (KPO) firms in India to wade into China. The booming economy of China has evinced the interest of the KPO firms based in India, that look at it as a unchartered territory but possessing innumerable opportunities. Unlike the IT services companies, the KPO firms are looking at delivering their services out of India with certain front-end presence in China.

As of now, it is only some of the basic services are being provided by the KPO firms.

Adventity CEO Kumar Subramanian says there is enough interest by global investors in China but there is lack of in-depth market data on different sectors.

Meritus CEO Balasubramanium V says the value Indian KPO firms bring is the global learnings and standards which has been lacking among the Chinese companies.

By and large most of firms are looking at a front-end office in China to interact with its customer base with the rest being delivered out of India. Further, it is not easy to build scale-able operations in China due to lack of adequate talent pool. Though language seems to a minor obstacle, there are increasing numbers of English speaking professionals, especially the Chinese coming back to China after stints in the West.

1 October 2007
Source: Economic Times

Salient talking to US mortgage companies

BPO firm Salient Business Solutions, a joint venture between the Thapar Group and Option Care Enterprises, has said that it is in discussions with several large mortgage companies in the US for outsourcing contracts based on Build Operate Transfer (BOT) model.

“Due to the sub-prime crisis in the US, medium to large firms are looking at outsourcing as means to bring down cost and improve their bottom lines. We are talking to at least half-a-dozen companies for contracts based on BOT model,” Mr. Manoj Malhotra, CEO of Salient Business Solutions, said. He said the discussions focused on end-to-end mortgage processes ranging from origination to closing.

The company is a business process solution provider in verticals and horizontal streams such as finance and accounts, healthcare, financial services, human resource, and knowledge process outsourcing. The company is also scouting for acquisitions in the healthcare and mortgage space in the US, which may provide it an opportunity to bundle or cross sell its offerings.

30 September 2007
Source: The Hindu Business Line

MindTree plans centre overseas

As part of its efforts to broadbase its cost structure in the wake of a rising rupee, MindTree Consulting Ltd is looking at setting up an overseas development centre.

“We are looking at countries where currencies don’t swing much,” said Mr. Rostow Ravanan, Chief Financial Officer, MindTree. “At present, we are evaluating Mexico in Latin America and Budapest in Eastern Europe and may finalize the location by this year-end,” he added.

The company expects to invest around $3 million in the overseas development centre, which would be staffed with about 90-95 per cent locals. The appreciating rupee had a major impact on MindTree’s June quarter earnings. The company has taken long-term forex hedges covering the next five years. After being impacted by the strong rupee in Q1, MindTree lowered its profit guidance by about 10 per cent to $22.5-22.6 million from the earlier projected $25.1-25.2 million.

30 September 2007
Source: The Hindu Business Line

Attrition may spoil KPO party, $2 bn at stake

The high-flying knowledge process outsourcing (KPO) industry in India, estimated to employ 2.55 lakh people by 2011, may lose over two billion dollars of potential revenue gains due to the job-hopping syndrome. This promising industry is facing unprecedented level of attrition, up to 30 per cent, and this is threatening to spoil its success story, according to a leading KPO and international analytics firm Evalueserve.

Besides attrition, issues like intense competition from countries like Poland, China and Philippines are also casting shadows over the industry which is projected to be worth 12 billion dollar by 2010-11.

In a recent study titled "Career Opportunities in India's KPO sector", Evalueserve had predicted that India's KPO industry might not able to generate more than 9.9 billion dollar (by 2010-11) if attrition continued unabated.

30 September 2007
Source: Financial Express

India tops new outsourcing destinations

Chennai, Hyderabad, Pune and Kolkata were rated among the top five emerging destinations worldwide in the latest ranking of top 50 promising outsourcing cities around the globe.

Bangalore, Delhi NCR and Mumbai, along with Manila and Dublin, are the five established hubs that are unlikely to fade from the outsourcing map, according to a study by services globalization & investment advisory firm Tholons and media group Global Services.

The study ranked Chennai as the top most emerging hub for outsourcing globally, with established expertise in application development and maintenance, finance and accounting, product development, engineering services and testing.

Hyderabad, with relatively low property rentals and favorable government policies, recently attracted investments from BPO majors such as HCL BPO, EXL Services and Genpact and was ranked second in the list. However, recent terrorist attacks in the state have alarmed investors, the report pointed out. Pune gained prominence among outsourcing hubs owing to lower operating costs and attrition rates compared with other metros.

Kolkata and Bangalore were emerging as workplaces for application development and maintenance and business analytics, respectively.

28 September 2007
Source: Financial Express

Don't demean BPO staff, Nasscom tells Ramadoss

Reacting sharply to comments of Union Health Minister Anbumani Ramadoss on the lifestyle of Business Process Outsourcing (BPO) employees, the National Association of Software and Services Companies (Nasscom) Friday asked the minister not to 'demean BPO employees'.

'Allegations of bad diet, excessive smoking and drinking are exaggerations that demean BPO employees,' Nasscom, a leading IT industry lobby, said.

'Nasscom is deeply distressed by the comments, as reported in the media, made by the minster of health. This is a generalized slur on half a million youngsters working in this industry,' said Nasscom in a statement.

On Sep 12, Ramadoss told IANS that his ministry is coming up with a health policy for the IT sector as youngsters of the sector are facing many health problems.

He also said that IT professionals (including BPO employees) get huge salaries but 'don't know how to spend it'.

The BPO industry is committed to the welfare of its employees. It already provides opportunities and facilities that are excellent and, arguably, better than those provided in any other sector, the statement from NASSCOM explained.

28 September 2007
Source: www.NewKerala.com

Indian IT firms told to seek big acquisitions

Indian outsourcing companies need to make big acquisitions if they are to challenge the existing world order of global IT services companies.

The top six India players: Cognizant, HCL, Infosys, Satyam, TCS and Wipro — collectively referred to as Switch — accounted for 1.9 percent of the total $672bn (£332bn) IT services market in 2006, compared to 0.5 per cent in 2001, according to figures from analyst Gartner.

It said these companies are making inroads into "key" clients, often beginning with smaller, project-based work. Despite their smaller size, it also said they are making "significant strides" to challenge the market share leaders' positions, by showing strong annual revenue growth far exceeding the rest of the market.

Gartner vice president Partha Iyengar said companies are re-evaluating their preferred vendor rankings to include Indian companies. "If the India-centric IT service providers continue to grow at the current pace, at least two companies will be a part of the top 10 companies globally," he said in a statement.

But Gartner said it will still take a number of years for Indian companies to challenge the top service providers or appear among the top three market share leaders — unless they make a major acquisition. And the analyst group said that if market share leadership in the top three is a goal, these companies would need to pursue acquisitions of "considerable size".

27 September 2007
Source: news. zdnet.com.co.uk

Outsourcing for India to remain: TCS

India's largest software and services firm Tata Consultancy Services (TCS) on Thursday said outsourcing to the country would continue, even as the company plans to raise the charges for new clients.

Outsourcing firms in India are witnessing a fall in margins due to appreciation in rupee, which is trading below the Rs 40 a dollar mark, with falling margins. Companies have to reconsider the fee they charge from customers amidst a worry that outsourcing to the country may witness a fall.

Though, there are no plans for TCS to lower or raise billing rates for existing clients, new clients would be charged more, TCS managing director and chief operating officer S Ramadorai told reporters on the sidelines of a conference.

The reason for TCS opting higher rates is because of the appreciation of rupee against the dollar and the potential subprime implication, Ramadorai pointed out. Ramadorai was confident that outsourcing of jobs to India would continue despite higher wages and attrition in the industry.

27 September 2007
Source: Financial Express