Wednesday, November 25, 2009

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Firms can mitigate IT skills shortage

The shortage of information and communications technology (ICT) skills in developed countries could become a serious issue once the worldwide economic crisis starts easing.

This will be exacerbated by the falling number of masters and PhD holders in science and engineering, restrictions on cross-border movement of IT professionals and the US H-1B visa programme. However, this vicious circle could be mitigated by the Indian service firms increasingly recruiting internationally, according to a new OECD report on employment trends in the ICT secto

The report notes that Indian tech firms like TCS, Wipro and Infosys have seen slower recruitment since the first quarter of 2008. However, the pent-up demand in the European economies and the US will ensure that good workers are available for the taking when these companies are looking to further expand their international operations.

“Concerns have been raised whether increased offshore activities could lead to a shortage of ICT skills in the OECD countries in the long term,” the report said, adding that such a shortage could reinforce the need for further offshoring as ICT skills shortage is known to be a driver for offshore outsourcing.

The report said that while no additional largescale layoffs have been announced by the top 10 IT services firms, employment levels will stay at almost the present levels until 2009-end. IT services firms like IBM and Cap Gemini have announced slower hiring for 2009. So have Indian IT giants like Tata Consultancy Services (TCS) and Infosys, which despite the crisis, still expect to grow in single digits in the third quarter of 2009-10.

The economic crisis has put IT service costs under pressure, but this may benefit outsourcing due to the increased internal cost-cutting and perceived benefits from more flexible external sourcing of IT and business process services. The recent quarterly data on the outsourcing markets indicate that despite the number of outsourcing transactions still on the rise, revenue growth through IT and BPO will probably decline in 2009, due to the falling total contract values (TCV), the OECD report said.

However, the Asia-Pacific region has been performing well with TCV in the first half of 2009 increasing over 150 per cent over the first half of 2008. The report suggested that higher TCVs in the APAC region could explain the optimism of the Indian tech service firms who have been changing their product-product mix to adapt to the changing market demands.

“Recruitments have already started to slow in the beginning of 2008 when new hiring by leading Indian service providers dropped 22 per cent in the first quarter of 2008 and by almost 50 per cent in the second quarter compared to the same period one year earlier. These lower recruitment rates are also reflected in the decreasing number of new offshore centres opened by IT services firms,” the report added.
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Symbiosys Tech to add 230 seats

Software exporter Symbiosys Technologies is planning to add another 220-230 seats by 2011. The company has set up its offshore development centre at the Visakhapatnam IT Special Economic Zone with an investment of Rs 20 crore.

Chief Minister K Rosaiah would inaugurate the 100,000 sft facility on November 25, Naresh Kumar Oruganti, chief executive officer, Symbiosys, told mediapersons here on Monday.

The company, which has offices at Hyderabad and Bangalore, expects its Vizag unit to account for Rs 14 crore software export turnover. “Currently our manpower strength is 220 and by 2011, this would increase to 450,” he said.
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China eyes Indian outsourcing cos for software solutions

As top Chinese enterprises such as Bank of China and China Telecom seek to globalise their operations, they are increasingly turning to multinational and Indian outsourcing firms, including IBM and TCS, for deploying and maintaining standard software solutions, giving them an edge over local service providers.

In many ways, Chinese customers’ shift towards global and Indian vendors is reminiscent of how top Indian customers such as Bharti Airtel preferred an IBM over domestic suppliers around two decades ago for modernising their IT and business systems.

While state-owned and local Chinese software services suppliers, such as Digital China Holdings and Neusoft, continue to work with the country’s large customers, IBM along with TCS and others are being preferred for large, complex outsourcing contracts by customers such as China Telecom and Bank of China.

“A fragmented local vendor landscape and a domestic market dominated by wholly foreign-owned enterprise customers means that it will be the major western and Indian outsourcing vendors that will reap the rewards,” said Patrick O’Brien, senior analyst at the UK-based research firm Ovum. “Apart from scale, local service providers also lack experience in handling large outsourcing contracts, something global and Indian firms are really good at,” he added.

While IBM earned nearly $690 million from China’s almost $10-billion IT services market last year, both TCS and Wipro have started making progress as well. TCS on its part, has recently won several large contracts beating local Chinese rivals, including over $100-million deal for implementing a core banking software at Bank of China.

Until recently, most companies in China were running homegrown ERP and other systems, however, many of them are now planning to deploy standardised solutions from SAP and Oracle, this is where we have better expertise,” said Girija Pande, head of TCS’ Asia business.

Chinese banks have not yet made significant technology investments, compared with their US counterparts. While only 10% of the country’s banks offer online banking, there is only one ATM machine in China for every 10,400 citizens, compared with one ATM for every 735 citizens in the US.

A core banking software based on modern platforms from TCS or Infosys will help these Chinese banks centralise their retail and wholesale banking operations, and also enable them to cope up with increased lending activities, as required by their government.

“Banking and telecom customers in China want vendors with global expertise, we recently advised one of the top three phone firms in China to go with IBM and TCS,” said an outsourcing expert, who consults Chinese customers on their outsourcing strategies. He requested anonymity because he is not authorised to speak about his engagement with these clients.

For Indian tech firms, such as Infosys and TCS, the past experience of working with large customers in the US and Europe is paying rich dividends. “Local Chinese outsourcing providers have not been providing services across the IT/BPO services spectrum, but are gradually trying to move up and address multiple market needs,” said Srinath Batni, who is a board member of Infosys’ Chinese subsidiary.

Apart from local Chinese customers, Infosys is also able to serve its global customers rolling out their operations in the country. For instance, Infosys’ core banking software Finacle has made some progress in China with significant wins at China Bank and ABN Amro’s operations in Greater China. Companies such as IBM, TCS and Infosys are also able to bring their project management experience to serve large Chinese customers.
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Wipro to hire more locals in US for Atlanta operations

Global software major Wipro Technologies is expanding its US operations and will hire about 1,000 people, including more locals, at its Atlanta development facility, the IT bellwether said on Monday.

"We are expanding our US operations to scale up our headcount to about 1,000 from 350 presently at our Atlanta centre," the company said in a statement here.

"About 80 percent of them are locals and includes graduates from leading academic institutions in Atlanta," it added.

"The local employees will support our North American clients in diverse verticals such as healthcare, manufacturing, telecom, utilities, retail and financial services," Wipro chief global delivery officer Sambuddha Deb said in the statement.

Lauding Wipro for investing in the Georgia state capital, Metro Atlanta Chamber vice-president Jorge Fernandez said the trade body's goal was not to just attract global firms, but also ensure that they thrive and grow in the US market.

"Wipro's success signifies more high-tech jobs to metro Atlanta and continues to build our reach into India," Fernandez said.

Atlanta Development Authority director Charles Whatley said Atlanta has emerged as the prime location for global firms like Wipro to set up their US headquarters.

"Wipro is finding attractive talent and our market is welcoming its services," Whatley added.
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Tata Comm, Infosys & four others in deal with US cos

Six Indian companies, including Tata Communications, Infosys Technologies and Apollo Hospitals, have signed separate collaboration agreements with US-based firms for joint business development at Washington on Monday.

The agreement signing ceremony, organised by industry body CII, coincides with the state visit of Prime Minister Manmohan Singh to the US.

Data services provider Tata Communications has inked a Memorandum of Understanding (MoU) with Tyco Electronics to work together in providing additional connectivity and transmission, using dark fibers on the submarine cable system.

Indian IT major Infosys Technologies has signed a multi-year enterprise agreement with Microsoft, to work together in areas like databases, besides infrastructure and application software.

Apollo Hospitals has signed an MoU with stem cell therapeutics company StemCyte to establish a cord blood bank facility at its Ahmedabad-based hospital.

Drugmaker Cadila has joined hands with biotech firm Novavax to support production of key vaccines in India, including the recently-developed H1N1 Pandemic Vaccine. Jubilant Organosys also entered into a joint venture with two US institutes — University of Alabama and Southern Research Institute.
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Satyam scam is of over $2.8 bn: CBI

The accounting scam at Satyam Computer Services is to the tune of Rs.14,000 crore (Rs 140 billion/$2.8 billion)) and not Rs 7,800 crore (Rs 78 billion) as the company's disgraced former chairman B Ramalinga Raju stated earlier this year, the Central Bureau of Investigation (CBI) has said. ( Watch )

The federal agency Tuesday filed a 200-page charge sheet in the special court for CBI cases here that had details of properties acquired by Raju and other accused and their financial transactions abroad through fictitious firms.

"The quantum of scam and the loss suffered by investors has been quantified. The loss suffered by investors works out to over Rs 14,000 crore," said CBI Deputy Inspector General Lakshminarayana.