The ongoing global slowdown has started to erode salaries of top executives of India's top IT services provider, Infosys Technologies. The company has decided to pay minimum discretionary pay to staff in a bid to control costs and mitigate the impact of global slowdown on Friday.
The chief executive of IT firm, Kris Gopalakrishnan, said, "This is going to be a prolonged downturn. Slow performance, the increment to its employees will be minimal this time around. "
The IT major's clients, mainly in US, the worst hit market under the impact of global slowdown, have been forced to cut budget size and reduce costs in the wake of slowing growth. The disclosure of largest ever corporate fraud in Satyam's computers also tainted the image of Indian corporate sector, deepening the existing crisis.
Mr. Gopalakrishnan said, "The environment continues to be challenging. The feed backs we are getting from clients are that the budgets are going to be down, in some cases significantly down. They are also saying that when the budgets are released there will be a delay in spending."
He also expressed reservations on U. S. President Barack Obama's pledge to discourage outsourcing and asked to jointly handle the problem instead of adopting protectionism policy.
Tuesday, March 3, 2009
H1-B, IT market, NRIs, Outsourcing
One lakh Indians will return from U.S. in next 3-5 years
Source: SiliconIndia
Washington: As many as 100,000 Indians and an equal number of Chinese will return to their native countries in the next three to five years, a move that will greatly boost their economies and undermine technological innovation in America, a new U.S. study warns.
The study on immigration by a team at Duke, Harvard and Berkeley universities led by Vivek Wadhwa, an Indian-American technology entrepreneur turned academic, says "America's loss is the world's gain".
There are no hard numbers available on how many have returned, but anecdotal evidence shows that this is in the tens of thousands, says Wadhwa, executive-in-residence for the Pratt School of Engineering at Duke University and fellow at the Labour and Worklife Programme at Harvard Law School.
"With the economic downturn, my guess is that we'll have over 100,000 Indians and as many Chinese return home over the next three-five years," says Wadhwa. "This flood of western educated and skilled talent will greatly boost the economies of India and China and strengthen their competitiveness.
"India is already becoming a global hub for R&D. This will allow it to branch into many new areas and will accelerate the trend," he says.
"The US has always had the luxury of being arrogant about immigration because it has been the strongest magnet for the world's best and brightest," but as the study shows "there are other strong magnets now".
"We are effectively exporting our economic stimulus. Policies like those which the US just enacted which prevents some banks from hiring foreign workers will have the opposite effect from what they intended - they will send jobs abroad and scare away top talent," Wadhwa said.
The study released Monday Ewing Marion Kauffman Foundation, based in Kansas City, Montana, indicates placing limits on foreign workers in the US is not the answer to America's rising unemployment rate and may undermine efforts to spur technological innovation.
"A substantial number of highly skilled immigrants have started returning to their home countries in recent years, draining a key source of brain power and innovation," said Robert E. Litan, vice president of Research and Policy at the Kauffman Foundation.
"We wanted to know what is encouraging this much-needed economic growth engine to leave our country, thereby sending entrepreneurship and economic stimulus to places like Bangalore and Beijing."
The report builds on an earlier Kauffman Foundation report by Wadhwa documenting a queue of one million H-1B holders and their families anxiously awaiting longer-term work visas and growing frustrated with the immigration process.
Until recently, America has been the prime destination for the world's best and brightest immigrants.
"Immigrants have made tremendous personal sacrifices," said Wadhwa. "They would leave behind relatives and friends and accept second-tier status in American society.
"Now countries like India and China are providing equal career opportunities and a better quality of life. So the most highly educated and skilled are often returning home."
The two-year study covered 1,203 Indian and Chinese subjects who had studied or worked in the US for a year or more before returning home.
Washington: As many as 100,000 Indians and an equal number of Chinese will return to their native countries in the next three to five years, a move that will greatly boost their economies and undermine technological innovation in America, a new U.S. study warns.
The study on immigration by a team at Duke, Harvard and Berkeley universities led by Vivek Wadhwa, an Indian-American technology entrepreneur turned academic, says "America's loss is the world's gain".
There are no hard numbers available on how many have returned, but anecdotal evidence shows that this is in the tens of thousands, says Wadhwa, executive-in-residence for the Pratt School of Engineering at Duke University and fellow at the Labour and Worklife Programme at Harvard Law School.
"With the economic downturn, my guess is that we'll have over 100,000 Indians and as many Chinese return home over the next three-five years," says Wadhwa. "This flood of western educated and skilled talent will greatly boost the economies of India and China and strengthen their competitiveness.
"India is already becoming a global hub for R&D. This will allow it to branch into many new areas and will accelerate the trend," he says.
"The US has always had the luxury of being arrogant about immigration because it has been the strongest magnet for the world's best and brightest," but as the study shows "there are other strong magnets now".
"We are effectively exporting our economic stimulus. Policies like those which the US just enacted which prevents some banks from hiring foreign workers will have the opposite effect from what they intended - they will send jobs abroad and scare away top talent," Wadhwa said.
The study released Monday Ewing Marion Kauffman Foundation, based in Kansas City, Montana, indicates placing limits on foreign workers in the US is not the answer to America's rising unemployment rate and may undermine efforts to spur technological innovation.
"A substantial number of highly skilled immigrants have started returning to their home countries in recent years, draining a key source of brain power and innovation," said Robert E. Litan, vice president of Research and Policy at the Kauffman Foundation.
"We wanted to know what is encouraging this much-needed economic growth engine to leave our country, thereby sending entrepreneurship and economic stimulus to places like Bangalore and Beijing."
The report builds on an earlier Kauffman Foundation report by Wadhwa documenting a queue of one million H-1B holders and their families anxiously awaiting longer-term work visas and growing frustrated with the immigration process.
Until recently, America has been the prime destination for the world's best and brightest immigrants.
"Immigrants have made tremendous personal sacrifices," said Wadhwa. "They would leave behind relatives and friends and accept second-tier status in American society.
"Now countries like India and China are providing equal career opportunities and a better quality of life. So the most highly educated and skilled are often returning home."
The two-year study covered 1,203 Indian and Chinese subjects who had studied or worked in the US for a year or more before returning home.
Infosys
Infosys plans to add 18,000 employees by July
Software major Infosys today said all the 18,000 students selected from various engineering colleges across the country will join the company in July this year.
“We have made offers to 18,000 students of the 2009-10 batch from different campuses. They will be joining us in July this year,” the company’s Chief Executive Officer S Gopalakrishnan said on the sidelines of a function at the Rajagiri School of Engineering and Technology here.
Infosys's Australian subsidiary, which it acquired six years ago, employs some 360 people, a majority of them from its acquisition Expert Information Services.
Infosys chief executive S Gopalakrishnan told reporters on the sidelines of a function in Kochi that the company is planning to absorb all 18,000 engineering students of the 2009-01 batch it had offered jobs.
''We have made offers to 18,000 students from different campuses for the 2009-10 batch. They will be joining us in July this year,'' he said, adding, Infosys had honoured all its previous commitments.
Although Infosys has scaled down recruitments, it is still hiring people, Gopalakrishnan said, adding, the present 16 weeks training would, however, be extended by another six to eight weeks.
He said if the situation turns worse, IT companies across the spectrum may be forced to lay off staff. "It is hoped the situation will improve by mid 2010 and in the worst case by 2014," he said.
Last year the information technology industry grew at 33 per cent. This year Nasscom expects it to be below 15 per cent.
Infosys, he said, would expand its presence in India, the Middle East and Latin America, South America, Europe and was already focussing on Japan.
“We have made offers to 18,000 students of the 2009-10 batch from different campuses. They will be joining us in July this year,” the company’s Chief Executive Officer S Gopalakrishnan said on the sidelines of a function at the Rajagiri School of Engineering and Technology here.
Infosys's Australian subsidiary, which it acquired six years ago, employs some 360 people, a majority of them from its acquisition Expert Information Services.
Infosys chief executive S Gopalakrishnan told reporters on the sidelines of a function in Kochi that the company is planning to absorb all 18,000 engineering students of the 2009-01 batch it had offered jobs.
''We have made offers to 18,000 students from different campuses for the 2009-10 batch. They will be joining us in July this year,'' he said, adding, Infosys had honoured all its previous commitments.
Although Infosys has scaled down recruitments, it is still hiring people, Gopalakrishnan said, adding, the present 16 weeks training would, however, be extended by another six to eight weeks.
He said if the situation turns worse, IT companies across the spectrum may be forced to lay off staff. "It is hoped the situation will improve by mid 2010 and in the worst case by 2014," he said.
Last year the information technology industry grew at 33 per cent. This year Nasscom expects it to be below 15 per cent.
Infosys, he said, would expand its presence in India, the Middle East and Latin America, South America, Europe and was already focussing on Japan.
L&T Info tells campus hires to look out
L&T Infotech, a wholly-owned subsidiary of engineering major LandT, a front-runner for acquiring Satyam Computer Services (SATYAM.BO : 40.3 0), has for the second time deferred the joining time of its nearly 1,000 campus hires to the third quarter of 2009. The company also advised the recruits to look for other options, citing 'global economic downturn' that affected the IT sector.
LandT has been candid about its intent of taking over the troubled IT firm, Satyam, to become a bigger player in the IT field. While company officials are mum about the deferral, analysts see the move as strategic, as LandT wants to make a commitment to the new hires only after the Satyam issue is settled.
In fact, the communication sent by the company to the campus hires, a copy of which is with FE, states, "In these circumstances (economic downturn), we have decided to add people in line with the evolving situation....the communication is intended to apprise you of the current situation and help you plan career moves and select any alternative career paths."
While LandT Infotech has close to 10,000 employees, Satyam has nearly 53,000 people on its rolls. According to the annual report, LandT had recruited over 1,000 engineers during FY2008 from 300 engineering colleges. However, it is not clear how many of them have been taken in. An email questionnaire to LandT Infotech enquiring about the delay and its reasons remained unanswered for several days.
AM Naik, chairman and managing director of LandT, which has 12% stake in Satyam, has been citing several synergies between the businesses of LandT Infotech and Satyam. According to market experts, both the companies are strong in the applications space and in integration of software like SAP and Oracle.
"In the event of a possible acquisition of Satyam by LandT, there are high chances that there will be a lot of duplication of roles since both companies offer very complimentary services. The options then will either be to ask a few people to leave or carry out a restructuring exercise where people are migrated to different roles," said an industry analyst with a global consultancy who did not wish to be named.
LandT has been candid about its intent of taking over the troubled IT firm, Satyam, to become a bigger player in the IT field. While company officials are mum about the deferral, analysts see the move as strategic, as LandT wants to make a commitment to the new hires only after the Satyam issue is settled.
In fact, the communication sent by the company to the campus hires, a copy of which is with FE, states, "In these circumstances (economic downturn), we have decided to add people in line with the evolving situation....the communication is intended to apprise you of the current situation and help you plan career moves and select any alternative career paths."
While LandT Infotech has close to 10,000 employees, Satyam has nearly 53,000 people on its rolls. According to the annual report, LandT had recruited over 1,000 engineers during FY2008 from 300 engineering colleges. However, it is not clear how many of them have been taken in. An email questionnaire to LandT Infotech enquiring about the delay and its reasons remained unanswered for several days.
AM Naik, chairman and managing director of LandT, which has 12% stake in Satyam, has been citing several synergies between the businesses of LandT Infotech and Satyam. According to market experts, both the companies are strong in the applications space and in integration of software like SAP and Oracle.
"In the event of a possible acquisition of Satyam by LandT, there are high chances that there will be a lot of duplication of roles since both companies offer very complimentary services. The options then will either be to ask a few people to leave or carry out a restructuring exercise where people are migrated to different roles," said an industry analyst with a global consultancy who did not wish to be named.
Outsourcing
Why Obama can't stop outsourcing
The Indian information technology industry has reacted with a mix of hope and caution after President Barack Obama said last week that he will not allow US companies that send jobs away to enjoy his tax breaks.
Obama is presumably talking about industry-specific tax breaks, though the details are not clear yet. But it is clear to me that he cannot go very far.
For instance, the US plan can affect General Motors, which is getting government help. I know from experience that GM is doing advanced design for its next generation of automobiles using aviation-standard materials in Bangalore. Does Obama's budget mean that GM will stop using India as a base for innovation? How will GM keep a global edge?
Now, take Accenture, which many think is a US company. It is actually incorporated in Bermuda. Will a US-based retail company (like J.C. Penney, for instance), handing over IT work to Accenture suffer from Obama's moves? If it does, and rival IBM gets a deal that Accenture might have had, remember that IBM has tens of thousands of employees in India, doing work for US clients. The simple point is that US has itself led efforts in making the world economy in an inter-connected web. The nitty-gritty of crunching IT spending is going to be painful.
US firms have already lost the game of efficiency in automobiles to the Japanese and in overall manufacturing to the Chinese. In pharmaceuticals and services, Indian firms can shake the US in everything but blockbuster product development. If you take new products, IT and distributed global research and development are at the heart of whatever remains of Ameri-can capital efficiency, innovation and competitiveness.
In other words, US firms are no longer US firms, but effectively global firms. By doing harm to what Americans call outsourcing, Obama may be axing a branch he is sitting on. Which is why I see his speech as little more than symbolic post-election posturing. If the benefits of tax breaks are outweighed by the gains of outsourcing, US firms will do what makes more sense to them.
Source: Hindustan Times
Obama is presumably talking about industry-specific tax breaks, though the details are not clear yet. But it is clear to me that he cannot go very far.
For instance, the US plan can affect General Motors, which is getting government help. I know from experience that GM is doing advanced design for its next generation of automobiles using aviation-standard materials in Bangalore. Does Obama's budget mean that GM will stop using India as a base for innovation? How will GM keep a global edge?
Now, take Accenture, which many think is a US company. It is actually incorporated in Bermuda. Will a US-based retail company (like J.C. Penney, for instance), handing over IT work to Accenture suffer from Obama's moves? If it does, and rival IBM gets a deal that Accenture might have had, remember that IBM has tens of thousands of employees in India, doing work for US clients. The simple point is that US has itself led efforts in making the world economy in an inter-connected web. The nitty-gritty of crunching IT spending is going to be painful.
US firms have already lost the game of efficiency in automobiles to the Japanese and in overall manufacturing to the Chinese. In pharmaceuticals and services, Indian firms can shake the US in everything but blockbuster product development. If you take new products, IT and distributed global research and development are at the heart of whatever remains of Ameri-can capital efficiency, innovation and competitiveness.
In other words, US firms are no longer US firms, but effectively global firms. By doing harm to what Americans call outsourcing, Obama may be axing a branch he is sitting on. Which is why I see his speech as little more than symbolic post-election posturing. If the benefits of tax breaks are outweighed by the gains of outsourcing, US firms will do what makes more sense to them.
Source: Hindustan Times
cognizant, CTS, H1-B, IT market
Indian IT cos face stiff challenges with project cancellations
Source: TheEconomicTimes
Indian IT firms are staring at significant challenges with price cuts (from clients’ end), project cancellations and ramp-downs, according to a recent India Infoline report.
While in the near term, the depreciation of the rupee is a tailwind, worsening macro indicators are yet to show any signs of bottoming out. "Unemployment in the US is at alarming levels and is still growing. Earnings downgrades at major clients have been substantial in the recent past. Current year earnings estimates were cut by 20%. Since then, they have been cut by a further 40%," the report added.
Infosys (down 1.9% at Rs 1207.65), TCS (down 3.7% at Rs 462.80), Wipro (down 2.4% at Rs 202.20), HCL Tech (down 4.8% at Rs 95.10) and Patni Computers (down 2.8% at Rs 94.95) were being sold heavily by investors. Tech Mahindra was trading 1% higher at Rs 251.15.
After proposing to restrict H1B recruitments at firms receiving TARP funding, President Obama had proposed to limit tax breaks to firms engaged in outsourcing.
"This, in our view, will have minimal impact on IT services vendors, as current tax-breaks are anyway minimal. Further, lack of clarity and practical limitations on this measure’s implementation limit its effectiveness in creating more domestic jobs at the expense of offshored jobs," the India Infoline report said.
Furthermore, the brokerage is not expecting growth in offshoring in FY09. Given the likely short-term nature of the tax-breaks (the previous AJCA-2004 repatriation tax break was for a period of one year), linking the benefits to incremental offshoring could even prove completely ineffective, notwithstanding its popular appeal, the report added.
Indian IT firms are staring at significant challenges with price cuts (from clients’ end), project cancellations and ramp-downs, according to a recent India Infoline report.
While in the near term, the depreciation of the rupee is a tailwind, worsening macro indicators are yet to show any signs of bottoming out. "Unemployment in the US is at alarming levels and is still growing. Earnings downgrades at major clients have been substantial in the recent past. Current year earnings estimates were cut by 20%. Since then, they have been cut by a further 40%," the report added.
Infosys (down 1.9% at Rs 1207.65), TCS (down 3.7% at Rs 462.80), Wipro (down 2.4% at Rs 202.20), HCL Tech (down 4.8% at Rs 95.10) and Patni Computers (down 2.8% at Rs 94.95) were being sold heavily by investors. Tech Mahindra was trading 1% higher at Rs 251.15.
After proposing to restrict H1B recruitments at firms receiving TARP funding, President Obama had proposed to limit tax breaks to firms engaged in outsourcing.
"This, in our view, will have minimal impact on IT services vendors, as current tax-breaks are anyway minimal. Further, lack of clarity and practical limitations on this measure’s implementation limit its effectiveness in creating more domestic jobs at the expense of offshored jobs," the India Infoline report said.
Furthermore, the brokerage is not expecting growth in offshoring in FY09. Given the likely short-term nature of the tax-breaks (the previous AJCA-2004 repatriation tax break was for a period of one year), linking the benefits to incremental offshoring could even prove completely ineffective, notwithstanding its popular appeal, the report added.
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