Tuesday, June 2, 2009

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Bankruptcy to have short-term impact on Indian IT vendors

Indian IT majors like Tata Consultancy Services (TCS), Wipro and Satyam Computer Services — which have running multi-million dollar deals with General Motors (GM) which is filing for bankruptcy — are likely to face a short-term impact since any loss of business in these slowing economic conditions is a setback.

For Wipro, GM is a $60-70 million (around Rs 290-335 crore) account annually, while for TCS and Satyam it would be less than $50 million (around Rs 240 crore).

These IT vendors also provide services to Chrysler, whose sale was cleared by the US courts today. Chrysler and GM each annually outsource $200-300 million (around Rs 990-1,480 crore) worth of projects to different vendors. These projects could take a hit of 20-25 per cent going ahead, say analysts. For Wipro, India’s third largest IT services provider, GM is among its top five clients. The Bangalore-based firm has signed a $300 million five-year deal in 2006. This deal was in addition to the work that Wipro was already doing for GM. In 2006, GM was contributing close to $30 million revenue for Wipro on a quarterly basis.

GM is a over $100 million account for India’s largest IT firm TCS. “GM is among the top 10 clients for TCS. For TCS these auto majors would be 2-3 per cent of its revenue,” said an analyst tracking the firm.

But the biggest impact of the business loss would be to Hyderabad-based Satyam Computer Services, which is trying hard to keep its clients from going away. GM is among the top 10 clients for Satyam, recently acquired by Tech Mahindra. Satyam had won a five-year $150 million deals from the auto major in 2006.

“In the interim period, this will mean that some work will be stopped. However, it depends on what work these firms are doing and will it continue even after the company is sold and continues with its operations. In that case it is just a short-time impact. But if this does not happen then its a huge revenue loss, which is important in these times,” said an analyst (who did not wish to be named) tracking these firms.

However, another analyst pointed out that "just as in the case of Lehman’s bankruptcy — where Wipro was declared a critical vendor and had received some part of its receivables — in this case too, some of the IT vendors will be declared critical vendors. We feel that 50-60 per cent of the receivables will come back to these firms.”

Yahoo to finally shut Yahoo 360

Another Yahoo service is closing officially. Yahoo 360, which was supposed to close early last year, is finally shutting its doors on July 13, according to a blog post written on the site.

"Over the past two years there has been a lot of discussion about the closure of Yahoo! 360° and the transition to our new profiles experience that we’ve had in the works. Today, we’re able to firmly say that on July 13, 2009 Yahoo! 360° will be closing down and you’ll be asked to move into your new profile on Yahoo!, by July 12, 2009," goes the blog.

Yahoo 360 was launched in March 2005 as a ocial network/blogging service. However, the service could never really gain popularity. In fact, several analysts cite Yahoo 360's failure as an example of a hot Internet property that Yahoo failed to cash on.

According to ComScore, Yahoo 360 had 13.9 million worldwide unique visitors in April.

In October 2007, when the company first announced that it would close Yahoo 360, it aimed move to a 'universal' Yahoo profile. The company reiterated the plan during its Yahoo Open Strategy (YOS) launch in April 2008.

In September last year, Yahoo also shut its other social-networking site, Yahoo Mash. Late last year company launched its "universal" profile service, Yahoo Profiles, which incorporates basic social-networking functions. However, Yahoo Profiles doesn't match the features of Yahoo 360.

Monday, June 1, 2009

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Govt won't let Satyam to lay off workers: Khursheed

Corporate affairs minister Salman Khursheed on Sunday said the government would not be a mute spectator to the layoff plans in scam-hit Satyam.

The minister hinted at the government's "active involvement" in the company's affairs even after its takeover by Tech Mahindra of Mahindra and Mahindra group.

"Layoffs -- this is something we are not going to turn a blind eye to as we have a relevant presence in decision making," the minister said, adding that his ministry would liaise with the company on this issue.

Taking a firm stand on the reported comment of Tech Mahindra CEO Vineet Nayyar that there were 10,000 surplus people in Satyam, Khursheed said, "We will not allow the company to be taken for a ride. Our opinion and advice are important till things improve."

There were reports in a section of the media that Satyam was planning to lay off about 8,000 staff working in departments like marketing, HR and administration.

Commenting on the possibility of similar frauds in the corporate world and whether Satyam was just the tip of the iceberg, Khursheed said, "I would call it a symptom of something wrong in the system. You need to treat the system, the root... otherwise the symptom may reappear. If I call it a tip, it means I am saying there is an iceberg."

Khursheed said probe ordered by his predecessor P C Gupta would be taken to its logical conclusion. "It will make my task easier," he added.

ESPN cuts about 100 jobs, expects to create others

ESPN has notified about 100 employees in the state that they will be losing their jobs. The layoffs are part of a plan announced by ESPN Chief Executive George Bodenheimer in January, when he told employees the sports television giant would be reviewing its entire operation and also would leave about 200 vacant jobs unfilled.

Company spokesman Josh Krulewitz says ESPN plans to replace the jobs that have been cut with others that "more effectively grow our company, and our head count number, ultimately, will remain consistent with current levels." ESPN, a subsidiary of the Walt Disney Co., employs about 5,400 people worldwide, including about 3,400 at its Bristol campus.
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Wipro `warns’ US on H1-B

Wipro's executive chairman, Azim Premji, has warned that a proposal to restrict hiring holders of H1B visas for skilled workers will choke America of talent coming in and could generate a trade war with countries such as India.

"In my opinion it's a very drastic initiative," he said in an interview, referring to a bill in the US Senate basically preventing firms from hiring H1Bs in the US or bringing in holders of L1 visas for semi-skilled workers.

"It will choke the United States of talent coming in. You will not be able to substitute the absence of this talent with local hires because it's not easily available," Premji said.

"Also, you'll generate a trade war with countries such as India," he said, calling it as a freedom-of-trade issue. "It's precisely what President (Barack) Obama said in the G20 meeting: The United States will not get into a spate of protectionism."


Premji suggested the US must realise that today 60 to 70 percent of the growth of the revenues of large American companies comes from India and China.

"These are the growth markets. It's a simple thing for our government to raise tariffs. It's a simple thing for our government to say no American corporation will get central or state government contracts, or defence contracts," he warned.

Noting that the software and BPO industries for India represent 24 percent of its exports, Premji said: "These are critical industries for emerging countries... There's no way our government can take it lightly."

Asked what would happen if the bill passes, the Wipro chief said Obama "is too sensible to pass it. He's too mature".

Describing global trade in IT as vital "because the economies of all countries are getting more and more the dominance of services, versus manufacturing and agriculture", Premji said: "To risk a cycle of protectionism, it's not worth it."

"What's the total of visas issued in a year? 20,000 to India. What will you achieve? The 20,000 will come down to 12,000. You'll create 8,000 more jobs, theoretically, with the rules. "What's that compared to 9 per cent unemployment on a total labour force of 100 million?" he asked, calling it "a very short term approach".

Asked why IBM and Accenture were employing so many people in India, Premji said: "They like the low labour rates... the quality of the people, the willingness to work hard. They're not getting the people they need in the United States. That's the bottom line."

Saturday, May 30, 2009

TechM may close some Satyam office

Some of Satyam Computer's 105 offices and 30 delivery centres worldwide may soon cease to exist. According to a report in a business daily, the Hyderabad-based company "is evaluating options to downsize operations at its overseas development centres and terminate lease contracts for offices and other properties."

By consolidating its offices and delivery infrastructure Satyam, which was recently acquired by Tech Mahindra, will be able to up capacity utilisation and also reduce overhead costs, says the report.

The review of operations is reportedly a part of Operation Phoenix, Tech Mahindra's plan of resurrecting Satyam, which has seven development centres in China, Germany, Brazil, Egypt and Malaysia.

Incidentally, Satyam's Australia chief Deepak Nangia recently quit in pursuit of greener pastures. The local head of IT company Satyam Computer services here Nangia was quoted saying by The Australian, "I left the company about three weeks ago to pursue other opportunities."

He joined Satyam in 2002 and during his tenure Nangia built Satyam Australia into a 200-million-Aus-dollars company, securing blue-chip clients such as Telstra, NAB and Qantas.