Source:TheEconomicTimes
Bangalore-based IT firm MindTree has decided to restructure its business into five independent business units under different CEOs as it looks to rapidly expand each of these segments. Effective April 1, the proposed restructuring will see the CEOs report to the group CEO, a company official said.
The five units are IT services, product engineering services which include research and development (R&D) and outsource product development (OPD), testing, infrastructure management and technical support (IMTS), and a new area called knowledge services. Currently, MindTree has two business units — IT services contributing 79% in revenues and R&D 21%.
“The (restructuring) will position us better as it allows us to compete with both larger and smaller niche players. We want to be seen as a provider of summation of services,” said MindTree chief operating officer NS Parthasarathy.
He has been appointed CEO of the testing and IMTS units. Other CEOs are S Janakiraman (product engineering services), Scott Staples (knowledge services) and Anjan Lahiri (IT services).
All of them will report to Krishnakumar Natarajan who will take over as group CEO and MD. Mr Natarajan is now CEO of MindTree. Ashok Soota, chairman and MD, will be executive chairman.
The acquisition of Aztecsoft in May 2008 helped the firm strengthen its testing and OPD services. With 2,000 employees in the testing segment, the current annual growth of this business is 30%.
“Testing and IMTS are fast-growing segments, which is also why we are looking at acquisitions in the infrastructure management space to help position us better,” said Mr Parthasarathy.
The product engineering services will allow MindTree to offer services from “chip to cloud”. The company had its own R&D practice which provides IP hardware to companies. It expects the contribution of this segment to double to 40% of its revenue.
However, the management is yet to decide on how it would report the revenues of these business units in the profit and loss account without duplication.
Thursday, March 19, 2009
IT market
Product software firms on acquisition spree in India
Indian product software development companies, specializing in electronic consumer goods like mobile handsets, audio-video devices and washing machines that are marketed by global firms, are on an acquisition spree, reported DNA daily.
The companies are buying up the captive outsourcing outfits of MNCs and other players who set up shop in India to benefit from its low-cost advantage.
Industry sources say that there have been at least 10-15 instances of such acquisitions in Bangalore alone, apart from several scores more in Pune and Hyderabad over the past few months.
Interestingly, most of these acquisitions have involved no cash outgo from the acquirer, while there is a commitment for outsourcing at least 50 percent of the current work over considerable period of time to the new company.
Over the past six months, MindTree alone has carried out 4-5 such deals, while another Bangalore-based outsourced product development company Symphony Services, has three such deals struck during the same period.
"The market has been brutal on these captives and most of these acquisitions happened during January-February. We expect another round in March-April," S Janakiraman, president and CEO, R&D Services, MindTree said.
"Many companies that have set up captives are finding it hard to manage such sub-scale operations thanks to the slowdown and are looking for opportunities to transfer them to companies like ours with three-year outsourcing contracts," said Amitava Roy, president, Symphony Services.
Another trend emerging from the current slowdown is that pricing models are undergoing a change with more product software outsourcing deals involving royalty payments on the IP generated by the Indian product outsourcing companies.
"The royalty model is taking off. While earlier it was not even considered, we are seeing that at least 5 percent of the current deals are based on royalty plus pricing basis," Janakiraman added stating there have been five such deals in the recent past while 6-8 are in the pipeline.
The companies are buying up the captive outsourcing outfits of MNCs and other players who set up shop in India to benefit from its low-cost advantage.
Industry sources say that there have been at least 10-15 instances of such acquisitions in Bangalore alone, apart from several scores more in Pune and Hyderabad over the past few months.
Interestingly, most of these acquisitions have involved no cash outgo from the acquirer, while there is a commitment for outsourcing at least 50 percent of the current work over considerable period of time to the new company.
Over the past six months, MindTree alone has carried out 4-5 such deals, while another Bangalore-based outsourced product development company Symphony Services, has three such deals struck during the same period.
"The market has been brutal on these captives and most of these acquisitions happened during January-February. We expect another round in March-April," S Janakiraman, president and CEO, R&D Services, MindTree said.
"Many companies that have set up captives are finding it hard to manage such sub-scale operations thanks to the slowdown and are looking for opportunities to transfer them to companies like ours with three-year outsourcing contracts," said Amitava Roy, president, Symphony Services.
Another trend emerging from the current slowdown is that pricing models are undergoing a change with more product software outsourcing deals involving royalty payments on the IP generated by the Indian product outsourcing companies.
"The royalty model is taking off. While earlier it was not even considered, we are seeing that at least 5 percent of the current deals are based on royalty plus pricing basis," Janakiraman added stating there have been five such deals in the recent past while 6-8 are in the pipeline.
NRIs
Foreign national students in U.S. prefer to return back
Source: siliconindia
The reduction in hiring foreign national students in U.S. firms would prove detrimental to the American economy, as the country will witness more talented immigrant students return to their home countries. According to a study's findings, very few foreign students would like to stay in the U.S. permanently, which will comprise of only six percent of Indian, 10 percent of Chinese and 15 percent of Europeans.
The key impetus being that they will not be able to find a job, 74 percent of Chinese students and 86 percent of Indian students feel the best days lie ahead in their home country's economy. Earlier, 92 percent for Chinese students and 85 percent for Indian students had a five-year minimum stay in U.S. "Foreign students receive nearly 60 percent of all engineering doctorates and more than half of all mathematics, computer sciences, physics and economics doctorates awarded in the U.S. These foreign nationals end up making jobs, not taking jobs," said Vivek Wadhwa, Duke University professor and Harvard researcher.
The study conducted by Wadhwa titled 'Losing the World's Best and Brightest: America's New Immigrant Entrepreneurs', surveyed 1,224 foreign nationals currently studying in U.S. institutions of higher learning or who had graduated by the end of the 2008 academic school year. "Policymakers are misguided if they believe these talented next-generation entrepreneurs and innovators threaten U.S. jobs.
They in fact offer the promise of more jobs by building successful, high-growth companies, either in their own businesses or those for which they work," said Robert E. Litan, Vice President of Research and Policy at the Kauffman Foundation. The researchers believe continued loss of these talented individuals and their ability to start companies and create patents will reduce U.S. competitiveness. In the near term, entrepreneurs starting new companies will likely provide a much greater boost to the U.S. economy than government bailouts to banks.
The reduction in hiring foreign national students in U.S. firms would prove detrimental to the American economy, as the country will witness more talented immigrant students return to their home countries. According to a study's findings, very few foreign students would like to stay in the U.S. permanently, which will comprise of only six percent of Indian, 10 percent of Chinese and 15 percent of Europeans.
The key impetus being that they will not be able to find a job, 74 percent of Chinese students and 86 percent of Indian students feel the best days lie ahead in their home country's economy. Earlier, 92 percent for Chinese students and 85 percent for Indian students had a five-year minimum stay in U.S. "Foreign students receive nearly 60 percent of all engineering doctorates and more than half of all mathematics, computer sciences, physics and economics doctorates awarded in the U.S. These foreign nationals end up making jobs, not taking jobs," said Vivek Wadhwa, Duke University professor and Harvard researcher.
The study conducted by Wadhwa titled 'Losing the World's Best and Brightest: America's New Immigrant Entrepreneurs', surveyed 1,224 foreign nationals currently studying in U.S. institutions of higher learning or who had graduated by the end of the 2008 academic school year. "Policymakers are misguided if they believe these talented next-generation entrepreneurs and innovators threaten U.S. jobs.
They in fact offer the promise of more jobs by building successful, high-growth companies, either in their own businesses or those for which they work," said Robert E. Litan, Vice President of Research and Policy at the Kauffman Foundation. The researchers believe continued loss of these talented individuals and their ability to start companies and create patents will reduce U.S. competitiveness. In the near term, entrepreneurs starting new companies will likely provide a much greater boost to the U.S. economy than government bailouts to banks.
HP, Satyam
Coke contract and employees move from Satyam to HP
Satyam has lost soft drink maker Coca-Cola’s ERP contract to the world’s second largest technology services provider HP, according to sources close to the development. While reports of the troubled software firm losing clients are not new, what is new this time is that the company has now lost a contract with attachment- employees.
Apart from bagging the ERP contract from Coca-Cola, HP has also issued offer letters to Satyam employees who were working with the client. Some of these employees will be joining HP next month. It is believed that Satyam had at least 100 employees working on the Coca-Cola project in its Chennai offshore development centre. Most of them were experts in the area of SAP consulting and implementation.
When contacted, Coca-Cola did not wish to comment, HP did not respond. A Satyam spokesperson said, “We do not comment on speculative reports and especially matters which are pertaining to our customer relationships.”
But, senior employees working with Satyam and HP confirmed the development and said the contract transfer had happened in the last few weeks. Its been known for quite a few months now that Coca-Cola has been transferring its technology services contract from Satyam to other vendors. It was recently reported that Coke had selected Capgemini to implement finance and accounting functions.
“Satyam has traditionally partnered with bigger technology firms for sub-contracted work to get big customer accounts. It has also done sub-contracting work for Capgemini and HP, so there is some uncertainty about how these projects will get executed,” said an industry official who did not wish to be named.
While the overall size of Coca-Cola’s contract is $100 million for a period of seven years, industry sources said the ERP piece alone would have fetched Satyam $3.5-$4 million annually. Coca-Cola outsourced the ERP or enterprise resource planning function to manage its distribution globally. Among the IT majors in India, Satyam was considered to be the leader in ERP, a vertical from which it used to earn at least half of its revenues.
But, the expertise that it has built for years is not helping the beleaguered keep all its clients intact, after the firm’s founder Ramalinga Raju confessed to falsifying accounts and perpetrating a Rs 7,000 crore fraud in January this year. The company is currently in the process of selling a majority stake that will help the company regain some confidence among its clients and employees.
Apart from bagging the ERP contract from Coca-Cola, HP has also issued offer letters to Satyam employees who were working with the client. Some of these employees will be joining HP next month. It is believed that Satyam had at least 100 employees working on the Coca-Cola project in its Chennai offshore development centre. Most of them were experts in the area of SAP consulting and implementation.
When contacted, Coca-Cola did not wish to comment, HP did not respond. A Satyam spokesperson said, “We do not comment on speculative reports and especially matters which are pertaining to our customer relationships.”
But, senior employees working with Satyam and HP confirmed the development and said the contract transfer had happened in the last few weeks. Its been known for quite a few months now that Coca-Cola has been transferring its technology services contract from Satyam to other vendors. It was recently reported that Coke had selected Capgemini to implement finance and accounting functions.
“Satyam has traditionally partnered with bigger technology firms for sub-contracted work to get big customer accounts. It has also done sub-contracting work for Capgemini and HP, so there is some uncertainty about how these projects will get executed,” said an industry official who did not wish to be named.
While the overall size of Coca-Cola’s contract is $100 million for a period of seven years, industry sources said the ERP piece alone would have fetched Satyam $3.5-$4 million annually. Coca-Cola outsourced the ERP or enterprise resource planning function to manage its distribution globally. Among the IT majors in India, Satyam was considered to be the leader in ERP, a vertical from which it used to earn at least half of its revenues.
But, the expertise that it has built for years is not helping the beleaguered keep all its clients intact, after the firm’s founder Ramalinga Raju confessed to falsifying accounts and perpetrating a Rs 7,000 crore fraud in January this year. The company is currently in the process of selling a majority stake that will help the company regain some confidence among its clients and employees.
IBM
IBM may be market leader after Sun takeover
IBM’S reported move to acquire Sun Microsystems for around $6.5 billion could potentially alter the competition landscape in the storage and server market in India.
Media reports have said that IBM could be looking at acquiring Sun Microsystems to consolidate its position in the high end server segment. If the deal goes through, it could easily catapult IBM into the number one position in both server and storage market, much ahead of its closest competitor HP.
A spokesperson for Sun Microsystems India on the likely deal said, “We do not comment on market speculation.” According to industry observers, IBM could potentially gain over 60% marketshare in the non-X86 Unix flavoured server market in India combining along with Sun’s products. IBM already leads HP in this segment. In the X86 server market, HP is number one player followed by IBM.
Similarly in the external storage market, IBM could gain over 40% marketshare along with Sun, overtaking the market leader EMC. However, there are others who argue that there would be nothing complementary for IBM in acquiring Sun as both of them compete very fiercely in the marketplace. It could also lead to certain cannibalisation of the products in the marketplace, if acquisition goes through.
Industry analysts believe that IBM’s reported plans of acquiring Sun Microsystems has nothing to do with Cisco’s entry into the server space as its major competitor is HP.
IBM could also get some high value clients of Sun Microsystems in India, if the deal goes through, especially in the telecom and government segments. Sun Microsystems has also built a very strong base in its open source software and Java portfolio with a large user base among developers and independent software vendors.
Media reports have said that IBM could be looking at acquiring Sun Microsystems to consolidate its position in the high end server segment. If the deal goes through, it could easily catapult IBM into the number one position in both server and storage market, much ahead of its closest competitor HP.
A spokesperson for Sun Microsystems India on the likely deal said, “We do not comment on market speculation.” According to industry observers, IBM could potentially gain over 60% marketshare in the non-X86 Unix flavoured server market in India combining along with Sun’s products. IBM already leads HP in this segment. In the X86 server market, HP is number one player followed by IBM.
Similarly in the external storage market, IBM could gain over 40% marketshare along with Sun, overtaking the market leader EMC. However, there are others who argue that there would be nothing complementary for IBM in acquiring Sun as both of them compete very fiercely in the marketplace. It could also lead to certain cannibalisation of the products in the marketplace, if acquisition goes through.
Industry analysts believe that IBM’s reported plans of acquiring Sun Microsystems has nothing to do with Cisco’s entry into the server space as its major competitor is HP.
IBM could also get some high value clients of Sun Microsystems in India, if the deal goes through, especially in the telecom and government segments. Sun Microsystems has also built a very strong base in its open source software and Java portfolio with a large user base among developers and independent software vendors.
MindTree-Aztecsoft Deal, Competition for Big 3
An AMR Research report states MindTree's pending acquisition of Aztesoft could make it a stronger alternative to offshore service providers. The report says that with this acquisition MindTree can better compete against biggies like TCS, Infosys, Wipro, etc.
MindTree had announced its intention to buy an equity stake in OPD player - Aztecsoft, in May last year. The acquisition is expected to be completed by April 2009.
According to the January 15, 2009 report, MindTree's Aztecsoft Acquisition: A Closer Look at a Global Services Contender in the Making, author Dana Stiffler said, "The (Aztecsoft) acquisition diversifies MindTree's existing service lines quite nicely. By adding substantial capabilities in outsourced product development and independent testing, MindTree has more potential upside in the future with IT and product engineering prospects."
"MindTree decided to acquire Aztecsoft because it strongly complemented our existing expertise in both IT and R&D Services," Krishnakumar Natrajan, CEO MindTree. "The recent AMR report validates our strategy as this leading research firm recognize; how synergies between the companies strengthen our position as a midsize alternative to the larger offshore service providers."
MindTree had also been linked in a move for tainted Satyam, though the company has since denied it.
MindTree had announced its intention to buy an equity stake in OPD player - Aztecsoft, in May last year. The acquisition is expected to be completed by April 2009.
According to the January 15, 2009 report, MindTree's Aztecsoft Acquisition: A Closer Look at a Global Services Contender in the Making, author Dana Stiffler said, "The (Aztecsoft) acquisition diversifies MindTree's existing service lines quite nicely. By adding substantial capabilities in outsourced product development and independent testing, MindTree has more potential upside in the future with IT and product engineering prospects."
"MindTree decided to acquire Aztecsoft because it strongly complemented our existing expertise in both IT and R&D Services," Krishnakumar Natrajan, CEO MindTree. "The recent AMR report validates our strategy as this leading research firm recognize; how synergies between the companies strengthen our position as a midsize alternative to the larger offshore service providers."
MindTree had also been linked in a move for tainted Satyam, though the company has since denied it.
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