Wal-Mart to issue $1 bn IT contract: Sources

Global retail giant Wal-Mart may be all set to issue an IT contract worth USD 1 billion. CNBC-TV18 learns that it will select upto 10 IT vendors for the contract. CNBC-TV18’s Kritika Saxena reports that the contract, for which the bid will open by July 2010, will span across six to eight years. TCS, Infosys, Wipro and HCL Tech emerge as potential bidders along with IBM and Accenture.

However, Wal-Mart says they do not engage in speculation about IT activities in India.

Here is a verbatim transcript of her comments on CNBC-TV18.

Wal-Mart is all set to issue a large scale IT project. This could be the largest project in the retail space. What we pick up from our sources is that the contract is expected to be valued between USD 800 million to a USD 1 billion. Who are the IT firms?—this is good news for IT companies definitely. It will be too early to talk about the likely contenders but who are the potential bidders?—What we pick up from our sources is that four large-cap Indian IT firms—Infosys, TCS, Wipro and HCL Tech would be looking to bid for this project. Even multi-national firms like IBM and Accenture would be looking to bid for these projects. But these are the potential bidders and it’s way too early to comment for these individual companies, since the bids will be open only by approximately July to August 2010.

If you see the recent activities by British Petroleum and Exxon Mobil in the IT space—they have issued large scale contract of USD 1.5 to USD 1 billion but in the retail space this would be the largest so far.

Wal-Mart and obviously individual IT companies too would be looking to see boost in the revenues after this IT contract. These individual IT companies—the plan is to issue about USD 50-100 million individual contracts as spread across, some would be about USD 250-300 million.

When we contracted Wal-Mart for an official comment on this they said that they have several inquiries about their IT activities in India but they do not comment on individual specifications on this.

Leg-up for Bangalore centre in SocGen plan to up IT offshoring

Societe Generale, the Franceheadquartered global banking giant, will be increasing its information technology (IT) offshoring activity. And, with it will happen a substantial expansion of resources at its captive centre in Bangalore.

Having made a delayed entry into India, Societe Generale established its IT/BPO captive centre in Bangalore in 2000. Called the Societe Generale Global Solution Centre, it currently has around 1,000 people.

Nippi Kochhar, CEO, Societe Generale Global Solution Centre, said, “We will be expanding our human resources to over 3,000 by 2012 and will be doing this very tactically .” The India centre is the only such offshore location for Societe Generale and is involved in three main lines of activity — application development, BPO and infrastructure management services.

According to Mr Kochhar, the future expansion of the India centre would see it delivering more services as well as catering to further business divisions of Societe Generale.

The India centre has largely been focused on the corporate investment banking division of Societe Generale and the future will see it catering to three-four more business divisions.

This changing profile will also result in broadbasing of its services, which, hitherto, has been dominated by application development. Over the next three years, the India centre will have 50% of its activity devoted to BPO with the rest being divided among its other two services . Added to this expansion plan, the India operations of Societe Generale will also be playing a key role in defining the various IT vendor relationships of the bank.

Societe Generale, which has IT outsourcing agreements with players like Wipro, TCS and CapGemini, among others, is expected to witness much more streamlining of these relationships . Mr Kochhar said, “We would like the best operating model depending on the competencies of each player.”

Along with this expansion of India operations, Societe Generale is also looking at two more offshore delivery centres, which are most likely to be located in eastern Europe and North Africa.

Infosys to expand in China, Brazil & Mexico

As the global economy recovers fully, the resilient Indian information technology industry can bounce to double-digit growth again, Infosys Technologies chief executive S Gopalakrishnan has said adding that his own company will expand in Brazil, Mexico and China.

"If we go back to normal conditions after the world economy recovers, a double-digit growth in the range of 10-20 percent is possible for the Indian IT industry," Gopalakrishnan told IANS in an interview here.

In the aftermath of the global financial crisis, the Indian software services sector, led by bellwethers like Tata Consultancy Services, Infosys and Wipro, have to contended with single-digit growth this fiscal, as their global clients put spending on new projects on hold, be they for services or products.

"We have to wait and see what type of recovery takes place because many believe we will not go back to the level of activity seen in 2007. That was an unprecedented period of economic activity, driven by enormous leverage, which in turn created significant risks in the economy," the co-founder of the global software major said.

After the tech, or the dot.com, meltdown in 2002-03, the Indian IT industry staged a major recovery to boom over the next five years, registering 30 percent annual growth till fiscal 2008, but declined sharply to 16-17 percent in fiscal 2009.

The industry's representative body, the National Association of Software and Services Companies (Nasscom), also estimated that the Indian IT-BPO (business process outsourcing) services sector will grow by a mere 4-7 percent this fiscal.

In fiscal 2008-09, the Indian software industry posted revenues of $59 billion, including exports valued at $46 billion and domestic business at $13 billion. Nasscom estimated software exports at $48-50 billion and domestic revenues to grow 15-18 percent this fiscal.

Constrained by regulations to forecast his company's prospects when the world economy recovers and tech spending bounces from mid-2010, Gopalakrishnan said with the worst-ever crisis behind, the Indian software industry would come out strong to seize the opportunities, as it was better prepared to face challenges and compete with peers.

"The momentum our company has seen in the second quarter (July-Sept) will continue to give us better growth in the third and fourth quarters of this fiscal. From a flat growth year-on-year or marginal growth quarter-on-quarter till now, the annual growth has been projected to be on the higher side," he asserted.

But the extreme volatility in the currency market continues to haunt the company's top management as erratic fluctuations in the exchange rates vis-a-vis the US dollar can make or mar its revenue guidance.

"Currency movement will have an impact on our guidance and operations. Depending on how the rupee, dollar or other currencies fare in the second half of this fiscal, we may end up with more revenue or less, as we have assumed the rupee to be at $47 for this quarter," Gopalakrishnan pointed out.

"We are sharpening our focus on research and development, intellectual property-based solutions and new engagement models that offer flexible pricing and greater operational control and efficiency to our global clients," Gopalakrishnan noted.

In line with its global delivery model, the company is investing in building new capacity to expand in regions such as Brazil, Mexico, China and India.

Accenture bags modernisation contract from Postal Dept

Global IT and consultancy firm Accenture on Monday said it has bagged an order from the Postal Department to modernise the post offices across the country.

The financial details of the deal were not known. As per the modernisation contract, Accenture would design an enterprise IT architecture and migrate the Department of Post (DoP) to a more efficient IT system, Accenture said in a statement.

The project is designed to help the DoP, which has been reporting losses to drive revenue and regain market share in different services and products such as bill payment, e-posts, life insurance, money transfer and banking.

The technology upgrade would also benefit citizens via speedier banking and insurance services, track and trace abilities and would help the postal department to compete effectively with the local and international courier firms.

Accenture would also advise DoP on the development of a wide-area network that helps connect all post offices on which various online services can run.

Krishna G V Giri, who leads Accenture's Management Consulting practice (Health and Public Service operating group) in the Asia Pacific region said,"Armed with efficiency at DoP, the government will be better positioned to share various social schemes, such as Mahatma National Rural Employment Guarantee Scheme, with even the most remote citizens."

Mphasis eyes $1 billion in revenues

Mphasis, an HP-EDS owned mid tier services firm plans to achieve around $1 billion in revenues over next few years by growing its business from customers such as AIG, and working more closely with parent for bigger, multi-year outsourcing contracts.

Having reported around Rs 1,105.6 crore in revenues during third quarter ended July 31 this year, Mphasis has been rationalising its costs and working towards building a healthier cash flow.

“We had begun the year with around $10-15 million in cash, however by third quarter, we had cash of almost $100 million,” Ganesh Ayyar, chief executive of Mphasis said in an interview. His company’s first goal is to achieve around $250 million in quarterly revenues, Mr Ayyar added.

One of the first things Mphasis pursued after achieving healthy cash balance was to seek strategic acquisitions such as AIG’s captive back office business AIG Systems Solutions (AIGSS) for gaining more domain expertise in areas of finance and insurance. ”AIG brought expertise in retirement and auto insurance, which we did not have, and helped us become a stronger player in the insurance domain,” he added.

Mphasis derives around 40% of its revenues from the banking and financial services industry (BFSI). The AIGSS acquisition also brought around 800 employees with expertise in insurance business.

However, unlike recent captive transactions such as Citi’s captive unit sale to TCS and Wipro where revenues were ensured, the AIG transaction does not promise any assured revenues for Mphasis.

“There is no exclusivity pact in the contract, we had and have better faith in the customer even without any legal commitment for business,” Mr Ayyar said.

Earlier this year, Mphasis also decided to bring down its operational costs by rationalising bench strength, utilisation rates and real estate.

“We looked at the entire cost management process and had very detailed performance dashboards for everybody-in fact we also requested our entire workforce to save $1 every day,” said Mr Ayyar.

When orders were hard to come by few months ago, many companies such as Mphasis were forced to rationalise their payroll costs and explore many cost saving options. One of the biggest challenges for a software services company is to ensure that new hires and those on bench start contributing to the revenues early.

“We did not cut salaries or undertake any retrenchment,” said Mr Ayyar.

Mphasis shortened the entire cycle of hiring a new recruit to the time the person actually starts contributing to the revenues by as much as 60% in some businesses.

Meanwhile, the company would pursue acquisitions similar to AIGSS) in order to achieve growth. “There are certain areas where we have no choice but to go and buy, but it’s more about the ability to do it than appetite,” he said.

EDS, now an HP company, had acquired 52% stake in Mphasis in June 2006 for nearly $380 million. Mphasis shares closed at Rs 665.75 on BSE on Wednesday.

TCS, Wipro, Infosys vie deals worth $100 mn each in Nordic region

Nordea AB, the biggest regional bank in the Nordic region, along with peers Svenska Handelsbanken and SEB, are among a new set of customers planning to offshore technology work to India, as they aim to bring down operational costs by up to 30% and cope with the slump more effectively.

Indian tech vendors such as TCS, HCL, L&T Infotech, Wipro, Infosys and Cognizant are in discussion with Nordic customers for outsourcing contracts potentially worth around $100 million each over next few years.

Outsourcing advisory firm EquaTerra recently analysed around 370 outsourcing contracts signed by over 200 Nordic customers and concluded that the Indian service providers scored better than European vendors such as TietoEnator and Capgemini when it came to customer satisfaction. EquaTerra analysed almost $4.3 billion worth of outsourcing contracts signed by these customers.

Most Nordic countries, especially Sweden, have high cost structures. This is putting pressure on local customers to seek low-cost resources in locations like India, which will help them tighten belts by up to 30-40 %.

“India remains the dominant offshore destination for Nordics firms. 61% of the respondents are using India to fulfill at least some of their global sourcing needs,” EquaTerra said in a recent report. When contacted by ET, Indian tech vendors declined to comment on any potential outsourcing contract being pursued by them.

TCS, India’s biggest software outsourcing firm, said Nordic customers are indeed beginning to explore more outsourcing options.

“While the overall Nordic IT market is expected to remain flat in 2009, the demand for services outsourcing continues to be firm and we are seeing continued growth,” said AS Lakhminarayanan, vice-president and head(Europe), TCS. “Norway in particular is expected to demonstrate one of the highest IT market growth rates in Europe in 2009, estimated at between 1-2 % annually, while most other markets have remained flat or even declined,” he added.

Customers such as Handelsbanken have been exploring offshoring of IT work for almost a year, and a worsening economic crisis forced them to look at offshoring more seriously.

The bank is now seeking suppliers for maintaining its legacy mainframe systems, and also make them work with newer business software applications. Nordic customers prefer to start an outsourcing engagement with smaller contracts of $10-20 million, but are expected to ramp up after experiencing the promised benefits.

Unlike other European markets such as Germany where labour laws make it difficult for an offshoring contract, countries in the Nordic region are more flexible.

However, they still prefer to exercise caution during early relationships without succumbing to doling out multi-year, mega outsourcing contracts. “If you look at the last 100 deals signed over the past six to eight months, you would find that they range from € 500,000 to € 150 million, which is a broad range. The most significant deal size segment, in terms of frequency, would lie in the range of € 8-20 million,” agreed Mr Lakhminarayanan.

Big opportunities in Indian IT market, operations slow: Report

There is a lot of money to be made in the Indian information technology market, but decisions are slow, and large projects are subject to big delays and complex bidding procedures, says a Springboard Research report.

With US markets continuing to limp, IT services and hardware companies have been eyeing the domestic market with renewed vigour -- total IT market size in India is around $16,840 million (around Rs 82,516 crore), says the report. Of this, the public sector or government expenditure for IT is close to 18 per cent, around Rs 15,220 crore.

Half of all spending is on hardware, followed by IT Services (30 per cent) and software (20 per cent). Within the government sector, education leads with a budget of $356.2 million, followed by defence ($327 million) and taxation ($280 million). Healthcare, transportation, utilities and social services are the other major spenders.

Among the various programmes announced, the government would be spending close to $2.6 billion on the National e-Governance Plan (NeGP), which includes $1.4 billion on common services centres (CSCs), $819 million on the State Wide Area Network (SWAN) and $399 million on State Data Centres (SDC). Moreover, government organisations such as India Post, Indian Railways and other state agencies like LIC will spend around $2 billion on IT this year.

The evidence of these budgets is seen in the recent contracts that some Indian IT vendors have managed to have. Wipro Infotech won a $244 million e-governance project, from the Employees State Insurance Corporation (ESIC). TCS won the ePassport project. Under the CSCs programme, close to 25,195 centres have been set up, with another 10,000 in the pipeline, which have to be operational by the end of March 2009. A total of 100,000 CSCs are to be set-up. By the end of 2008, RFPs had been issued by 25 states for 1,06,275 CSCs and master service agreements signed for 1,02,851 centers in 23 states. However, if money is one side, several operating challenges form the other, says the report. E-Procurement has not meant faster decision-making. Large ICT projects are often delayed due to bureaucratic hassles and complex procedures in finalising tenders.

A case in point is the Indian Army, that started inviting bids for a $1-billion tactical communication system in late 2007, after having delayed it several times since 1998. Another issue is price. Since the Indian market is price-sensitive, many local players offer inexpensive solutions. Government, says the report, needs to evaluate the long-term outcome of IT, instead of simply looking at its own procurement needs.

The system needs overhaul: even after spending such huge amounts, the report said, there are challenges from the end-user point that needs to be solved to make these programmes successful.

So, while the government would be spending $5 billion on NeGP, issues that still need to tackled are lack of personnel with appropriate background and aptitude, inadequate skills of staffers and so forth. Apart from this, there is a need to create interpretability to reduce IT integration costs and inefficiencies, increase business agility, and enable the adoption of new and emerging technologies.

TCS bags multi-million dollar deal

Indian IT major Tata Consultancy Services Ltd (TCS), today announced that it has entered into a a multi-million dollar deal with a Singapore's People's Association, a statutory board under Ministry of Community Development, Youth and Sports, to provide annual Application Management Services for two years.

Under the agreement, TCS would develop and maintain People's Association's business and citizen centric applications including mission critical applications. It involves consolidating its multiple vendor environment allowing for reduced maintenance costs and simplified system administration, said a press release.

This system would enable higher process efficiency and staff productivity across the organization. All these would contribute towards lower costs spent on application maintenance, while improving end user satisfaction and enhancing citizen experience with the agency.

Girija Pande, EVP and head, TCS Asia Pacific, said, "Our expertise in AMS, combined with our ability to deliver certainty of results would provide sustained value to People's Association."

He added that they installed strict quality control procedures and continued to drive more value for their Singaporean clients through increased service quality provided by their team of highly qualified people with local knowledge of culture and processes.

U.S. unveils multi-billion dollar opportunity for Indian IT

U.S. President Barrack Obama's incessant push for a better healthcare sector in U.S. will be the silver-lining for the staggered IT service sector in India, as it unveils a multi-biilion dollar opportunity. Obama has allocated $37 billion of stimulus funding to drive the adoption of EHRs and as per McKinsey estimates the resulting growth in EHRs will require an overall spend of $175 billion.

The EHR rollout will need the Indian IT firms' deep expertise in services such as systems integration, application management and legacy modernization, as the established software vendors lack the manpower to provide the services. Nearly, $50 billion of the spending will be devoted to IT services and training.

The second big opportunity for Indian firms lies in BPO. The reform will see an influx of over 30 million newly covered individuals; insurers will look to outsourcing partners to help them enroll new members and process their call and claim needs. The rising cost pressures will force insurers and hospitals to concentrate only on a few core functions (such as benefit and services design, sales and marketing). The rest of the back-office services like member database management, claims processing and support services - enrolment processing, will be outsourced.

The final opportunity hold big for the players in the data analytics market. These could range from comparative effectiveness research into different treatments or drug combinations to analysis of call, claims and clinical data for customer lifecycle needs and marketing. McKinsey estimates that the overall market for 'real world data' analytics could be worth over $10 billion.

TechM, IBM, TCS in race for $400-mn Sistema deal

Tech Mahindra, IBM and TCS are vying for a $400-million (Rs 1,800 crore) IT outsourcing contract from Sistema Shyam Teleservices (SSTL), said a person familiar with the matter.

Negotiations are on with these companies for a 10-year deal, but the contract will contain a clause that will allow Sistema Shyam to exit after five years, he said, requesting anonymity. Sistema — one of the largest public diversified corporations in Russia and the CIS — has a 74% stake in the JV with the Shyam Group that offers mobile services under the ‘MTS’ brand in India. Sistema Shyam is the only CDMA player, among the new crop of telecom operators.

“A final decision on the deal is expected to be taken by the year-end,” said Rajeev Batra, chief information officer of SSTL. He confirmed that these three IT companies were in the reckoning for the contract, but did not confirm the value of the contract.

The proposed deal will not include the operator’s BPO operations, as the telco has already outsourced its customer care operations to Essar Group’s Aegis BPO.

The winning company will manage SSTL’s IT systems across the 22 telecom circles in the country. SSTL, which is scheduled to launch telephony services in Delhi next month, plans to be a pan-India operator by the third quarter of next year. While a senior Tech Mahindra executive confirmed that the talks with SSTL were on, the TCS spokesperson declined to comment. But, TCS had earlier said it was aggressively chasing deals in telecom, financial services, life sciences and retail.

IT major IBM, too, did comment on being in the race for the SSTL contract. Early this year, SSTL had tied up with IBM for designing and building its green data centres in Chennai and Gurgaon.

SSTL executives said the company was exploring an operating expenditure model for this IT outsourcing contract. This model of outsourcing is considered more cost-efficient for companies since it allows the IT partner to take the telco’s IT assets on its books. While SSTL is yet to award its IT contract, most other new operators have already done so. Etisalat DB recently awarded the contract worth $400 million to Tech Mahindra, while Datacom’s IT infrastructure management has been awarded to IBM for about $200 million.

Unitech Wireless, in which Norway’s Telenor holds a controlling stake, has outsourced its IT infrastructure management to Wipro for about $500 million.

SSTL was among the nine new companies that were given licenses early past year to launch mobile services. So far, the company has launched CDMA-based services in six circles and has about two million customers in its network.

The country has seven pan-India mobile phone operators led by Bharti Airtel, Reliance Communications (RCOM) and Vodafone Essar. A string of new players like Datacom, Loop, S Tel, Unitech Wireless and Swan are also in the process of rolling out nationwide services.

The country has close to 450 million mobile subscribers and a telecom penetration of over 41%.

Wipro, TCS bag major IT services contracts

Two of India's IT bellweather companies Tata Consultancy Services and Wipro bagged contracts from major agencies. Wipro Ltd, India's No. 3 outsourcing company, said on Wednesday it had won a three-year IT services contract from Aquarion Water Company, one of the largest water utilities in the United States.

Tata Consultancy Services (TCS) on the other hand has won India's largest state-wide area network (SWAN) project from the Andhra Pradesh government.

Financial details of the Wipro deal were not disclosed. TCS' five-year project is based on a build, own, operate and transfer (BOOT) model. "This is the fourth SWAN project TCS has bagged in a row," said a company statement here Wednesday.

It is now implementing SWAN projects in Chhattisgarh, Tamil Nadu, and Bihar.

The proposed SWAN project will enable the state government to start and run various e-governance projects and citizen services. The project would be rolled out in 12 months and TCS will then maintain it for five years.

"We are happy to partner with TCS for this project. This is yet another initiative of the state government to take a wide array of services to the common man," said Sameer Sharma, secretary and chairman of Andhra Pradesh Technology Services.

The project envisages connecting state headquarters with 1,088 sub-divisions and 23 district headquarters.

Once the project is commissioned, the network will enable the state to have video-conferencing facility across government offices and enable them to communicate and conference with each other over VoIP (voice over IP) phones, which will reduce the government's phone bills considerably.

Various e-governance applications like RTO, healthcare, education, municipality would also ride on this network backbone, said Sanjay Kumar, managing director of Andhra Pradesh Technology Services.

Infosys, Wipro and HCL in race for low-value US deals

Infosys Technologies, Wipro and HCL Technologies are among the software service providers that are laying foundation for the next round of multi-million dollar orders from the big US corporations, by pitching for low-value, but politically important US state governments’ orders.

Infosys, which counts JP Morgan and Morgan Stanley as clients for its services, bids for Arizona Public Service’s (APS) 400 positions, who work in its information-services department, and another 400 or so contractors to raise the staff strength for undisclosed amount.

Nine other US states, some from where politicians opposed offshoring work, are looking to outsource their healthcare operations worth over $2 billion, said Wipro chief strategy officer KR Lakshminarayana, and the company hopes to get a slice of these.

“The discussions are not about offshore outsourcing, but more about working with newer outsourcing vendors, who can deliver locally and keep the jobs here at lower rates,” said a senior executive at one of the Bangalore-based tech firms exploring this opportunity. Many US states such as Missouri, Virginia and Arizona, which are battling falling revenues amid the worst economic slump in their country since the 1930s, are attempting to reduce costs and at the same time want to increase employment opportunities for their citizens. So, they are including clauses such as recruitment of minimum number of staff from their states.

Indian companies, which were used to contracts of hundreds of million-dollars at one go, are bidding for these low-value orders since their traditional clients are cutting down on technology spending and at the same time provides visibility, which would be helpful in getting big orders when tech spending recovers.

“The marketing muscle that comes from such contracts is huge and working with the US state governments send out a signal of importance to other customers,” said Siddharth Pai, managing director of outsourcing advisory firm TPI’s India unit. “For the Indian IT companies this is not a core business, but it creates a halo effect,” he added.

While the global government IT outsourcing market is estimated to be around $100 billion, experts tracking the sector said the US state governments could outsource projects worth up to $5-6 billion this year. States, which in the past opposed the outsourcing of work to Indian companies by the likes of Microsoft and Citigroup, are now turning to the same Indian companies, as their mission now is in line with that of the companies cut costs.


Rodney Nelsestuen of US-based research firm TowerGroup, said state governments in the US are suffering from a reduction in tax revenue due to high unemployment and lower spending on taxable items by the US consumers. “Significant budget cuts are making it difficult for states to maintain the level of services that residents expect. Outsourcing has become an option that governments are looking at,” he added.

The orders from these state governments are for maintenance of records, accounts, healthcare and other administrative jobs, said a consulting firm engaged with a few governments.

Indian companies are not worried about the fact that they may be at a disadvantage to their US peers such as IBM and Hewlett-Packard, which are more familiar with the functioning of the local governments. “As long as you have the competency and ability to deliver what they want and from where they want, you are as competitive as your local peer,” said Wipro’s Mr Lakshminarayana. Wipro already has a $407-million deal from the state of Missouri for application, maintenance and development (AMD) and BPO work for the state’s healthcare division, which it bagged in December 2007.

“They always ask us how many local jobs will we create and that sometimes is an important factor,” he added. TCS, Wipro, Infosys and Cognizant are among a few vendors, who have already hired local citizens. TCS has hired 120 people for its centre in Cincinnati.

“The level of success that India-based outsourcers will have in the future rests on their ability to add local talent, their ability to be viewed as global service companies and not just India-centric, and how quickly they assimilate government requirements – something India-based companies should be good at given their outsourcing history on a global and multi-industry scale,” said Mr Nelsestuen.

Vodafone to move 450 jobs to India, Tasmania

Mobile services provider Vodafone Hutchison has announced offshoring a total of 450 call centre jobs from Melbourne to India and Tasmania.

The decision comes three months after Vodafone Australia Ltd and Hutchison 3G Australia formed a 50:50 joint venture.

A spokesman for Vodafone Hutchison Australia, who earlier flagged a total of 380 job cuts, said the company would transfer an unspecified number of positions to a call centre in Mumbai and about 100 jobs to Kingston, Tasmania.

Service Stream, the company that was running Vodafone contract confirmed the telecom operator's plans to end the contract employing 450 in customer service and support roles starting in October to February, in a move that will shift the positions to Vodafone offices in India and Tasmania.

Service Stream acting managing director Michael Doery said the company would try to find new roles for the affected employees, but was unlikely to accommodate them.

"We're trying to do the right thing for our staff but not give them false expectations," he was quoted as saying in 'The Age'.

Wipro wins 3-year contract from Japan's ANA

Wipro has won a three year outsourcing contract from All Nippon Airways (ANA), the first airline in the world to procure the Boeing 787 Dreamliner. The financial details of the deal have not been disclosed, but Wipro will deliver materials management system to ANA that will help manage the parts life cycle, reports Economic Times.

The system will strengthen regulatory compliance, predict parts demand better and help manage inventory levels. The new Materials Management system will be built in a scalable, flexible platform. ANA, with its fleet of 209 aircraft, is embarking on transforming its legacy materials management system to support the new fleet, in line with the expansion of its business at Tokyo's Haneda Airport with its upcoming fourth runway in 2010.

ANA will be able to increase its cost competitiveness, improve the quality of its aircraft part maintenance business and improve asset management with the new system. The complete program will be managed by Wipro, which will deliver services such as application development, program management and vendor management thereby enabling ANA to gain a sustainable competitive advantage.

Takanori Yukishige, Senior Vice President, ANA Information Technology Services said, "We are starting a new journey and this program will set a benchmark for our future way of doing business. We look forward to further leveraging our partnership with Wipro to gain competitive advantage."

Morgan Stanley may exit back-operations in India

U.S. bank Morgan Stanley is exploring the opportunities to exit its back-office operations in India. The bank, which was bailed out by the U.S. government, is looking at its options to sell the back-office unit that does IT development as well as finance and accounting-related work, reports the Economic Times.

Knowledge Process Outsourcing (KPO), equity research, complex financial modeling and portfolio analysis are among the work done here.

According to an investment banker, the potential value of the transaction could be $150-$200 million, in which the KPO operations have a share of $50 million. These operations employ around 2,000 people, of which 500 are KPO employees. Most of the operations are based out of Mumbai and a small part out of Pune.

The value of the deal will also depend on the amount of business the bank will sell. "The annual revenue run rate for Morgan Stanley's captive operations is $70-$80 million. So, the committed business could be around $500 million for five years," said a person with knowledge of the development.

Large Indian IT firms are the expected buyers, some of which already do development work for the bank. These include Infosys, Wipro and KPO firm like eClerx, which works for investment banks, travel and retail industry.

The need to convert fixed costs to variable costs by moving work done at the captive unit to third party vendors is among the factors which drive the sale of many captive units. When the work is outsourced to third party vendors, there is greater flexibility to increase or decrease work without having to hire a fixed number of employees.

Tata Consultancy CEO says demand pipeline good

Tata Consultancy Services Ltd (TCS.BO), India's top IT services firm by sales, is seeing more stability stability and the demand pipeline is good, its chief executive said on Monday.

"Essentially, the drastic downturn is behind us and we have entered a new phase where we are seeing stability on the ground and it is not in a downward spiral for sure," S. Ramadorai, who retires from his office next month and will become vice chairman, told reporters.

After posting a scorching pace of growth for years, India's export-driven outsourcing sector has been battling a slowdown as top global customers were hit by the financial crisis and economic downturn.

Ramadorai said the order pipeline was good but there could still be some occasional shocks.

Hopes for a pickup in outsourcing demand have increased after leading companies such as TCS and Infosys Technologies (INFY.BO) beat street estimates in their April-June earnings and on signs of stability in the global economy..

TCS, which provides services such as consulting, system integration and manages call centres, was one of a number of outsourcing firms that won five-year IT contracts from oil and gas major BP (BP.L) last month.

"There may be couple of similar deals, which we will be working on," Ramadorai said, adding the deals would include providing technology infrastructure or call centre services.

He had earlier said the BP deal would likely add to revenue from the next quarter and contribute $30 million to $100 million on an annualised basis over the next three to five years.

Shares in Tata Consultancy, whose clients include Citigroup (C.N), General Electric (GE.N), Lloyds TSB (LLOY.L), and Singapore Airlines (SIAL.SI), were up 2.9 percent at 547 rupees by 0906 GMT, outperforming the broader Mumbai market .BSESN that was up 1.7 percent.

Banking, financial services, retail and utility were showing promises in terms of new outsourcing deals, Ramadorai said, but sectors such as manufacturing and telecoms would continue to show sluggishness in the near future.

Tata Consultancy gets more than 40 percent of its revenue from banking and financial services clients and Ramadorai said the company could win some deals from the integration of global banks in the aftermath of the financial turmoil.

IT majors chase $6.5-bn Belgian outsourcing deals

Belgian Grand Prix is not the only race where Indian hopes are riding high. A worsening economic crisis is forcing companies such as AXA, Dexia Bank, Belgacom, drugmaker UCB and car insurer Allianz in Belgium explore IT offshoring and back-office projects, making it almost $6.5-billion opportunity for Indian outsourcing vendors including TCS, Infosys and Wipro apart from MNC rivals.

According to Quantum Step, an outsourcing advisory firm, customers in Belgium will spend around $1.8 billion on infrastructure management outsourcing, almost $2.6 billion on application development and maintenance and nearly $2 billion on BPO this year.

“We have recently started discussions with some Indian suppliers for pure offshoring of our ERP maintenance — it would be fair to assume that until last year, we were not prepared for any such initiative,” said an official at one
of the biggest Belgian enterprises.

While many Indian offshoring firms have been attempting to hire more local European sales professionals and project consultants, it appears that now customers only want to deal with Indian offshore experts. “Many outsourcing dialogues these days are being spearheaded by Indian offshore delivery managers, unlike in the past when some local expert would help us gain entry into an account — the CIOs are specifically asking for Indian suppliers,” said a top executive at one of the Indian IT firms pursuing outsourcing contracts in continental Europe. Officials at the Belgian firms did not respond to an e-mail query sent by ET.

When contacted by ET on Tuesday, TCS said the company’s early investments in the Belgian market are now fetching dividends. “Belgium represents one of the more mature markets for us within Continental Europe. After 15 years of operations in the country, we hold a significant share of the market and are now a prime IT partner to some of the largest BEL20 companies,” said AS Lakshminarayanan, vice-president and head — Europe, TCS.

“Our strategy to invest in localised delivery centres in Europe, particularly the ones in Eindhoven and Luxembourg, fuses well with our Global Network Delivery Model,” he added. TCS already has around 700 professionals working for Belgian customers, with around 200 onsite. InBev, AXA and Belgacom are among TCS’ top customers in Belgium.

Experts such as Sridhar Vedala of outsourcing advisory firm Quantum Step say that the key European markets opening up for offshoring include BeNeLux, Nordics, Germany and France. “Most of the European companies are more or less first time outsourcers. Some big multinationals had offshored previously such as ABN Amro, Ikea, Nokia and Philips.

However, this did not trickle down to regional customers as many of them felt that there was cultural mismatch. Also, to a large extent, Indian providers also did not focus on this market,” he told ET in an interview.

As reported by ET recently, BASF AG, the world’s biggest chemical company, along with Euroclear-Europe’s largest settlement firm, and Anheuser-Busch InBev — the world’s biggest brewer are among companies looking at offshore outsourcing for the first time, as they seek to lower their operational costs and cope more effectively with an unprecedented slump in demand for their products and services.

Indian IT firms queue up for criminal-tracking network project

27 firms will bid for the Rs 2,000-crore deal
Around 27 Indian IT firms, including majors like Tata Consultancy Services (TCS), Infosys Technologies and Wipro Ltd, are understood to have submitted their expressions of interest (EoIs) to develop a technology platform for the Centre’s Crime and Criminal Tracking Networks and Systems (CCTNS) project.

In June this year, the Rs 2,000-crore CCTNS project received approval from the Cabinet Committee on Economic Affairs, following which the National Crime Records Bureau (NCRB), which will implement the project, floated the EoIs.

The IT company that wins the bid will get to develop the core technology platform and software that will work as a standard for all Indian states to implement the project at the state level.

Other than creating a platform for sharing crime and criminal information (in the form of a web-based criminal record database) across the country, the CCTNS is expected to streamline investigation and prosecution processes; strengthen the intelligence-gathering machinery and improve the public delivery system. This will also facilitate the collection, storage, retrieval, analysis, transfer and sharing of data and information among police stations, district and state headquarters and the controlling agencies at the central level.

The CCTNS is a mission mode project (MMP) under the national e-Governance plan. The core application software (CAS) will have to be developed so that it will operate regardless of low- or unreliable-bandwidth scenarios.

“The selected parties can pursue multiple opportunities at the state level. The prime aim of the project is to create an architecture using an application programming interface (API), so that the systems to be launched by each state would speak to each other,” explained the Indian head of a software firm that has submitted an EoI for the project.

Before the CCTNS project was proposed, various state governments including those of Gujarat, Andhra Pradesh and Karnataka were either creating a web-enabled interface of the crime and criminal records or in the process of doing that.

In early 2008, for instance, the Gujarat government had signed an agreement with TCS to develop a technology platform that was aimed at enabling every police officer to have access to police records and background information at any given point of time.

India’s third-largest IT services provider, Wipro, which has developed an integrated police information system, is pursuing opportunities in Karnataka.

“Wipro sees a huge role for information technology to combat high crime rates more effectively. Our technology will bring in a lot of efficiency and agility in the functioning between various units of the police department through real-time information sharing,” said Ranbir Singh, general manager, government and defence, Wipro Infotech.

The government, however, has now made it clear that the states that have already deployed the technology to integrate the police records with the CCTNS and have to comply to the standards set by the National Crime Records Bureau (NCRB) at the central level.
Courtesy: Business-Standard

TechM, Wipro, IBM vie for $400-m Loop Tele deal

LOOP Telecom, where the Essar Group has a stake, has shortlisted Tech Mahindra, Wipro and IBM for an IT outsourcing contract worth around $400 million. The contract is believed to be spread across a period of 10 years and will not include Loop Mobile’s operations, said two industry officials familiar with the deal. Loop Mobile provides cellular services in Mumbai, while operations in the rest of the country is under Loop Telecom.

The outsourcing contract is for the telco’s system integration and maintenance of IT systems across 22 cellular circles. This deal does not include BPO services since most of the back-end operations are done by Essar Group’s Aegis BPO. Loop Telecom has recently launched its services, selectively in Tamil Nadu, Orissa, Kerala and Karnataka.

A Wipro spokesperson said the company was in talks with a few telcos and would not comment on specific engagements, while Tech Mahindra and IBM declined comment on the deal.

A Loop Telecom spokesperson said, “We are constantly exploring ways to enhance our business model, launch plans and operational decisions and regularly engage in dialogue with vendors to help us build a compelling proposition. Nothing has been finalised in terms of partners or the contract amount. An announcement on our IT contract will be made as and when it gets firmed up.”

Loop Telecom is believed to be exploring an operating expenditure (opex) model, under which the shortlisted players can take Loop Telecom’s IT assets on its books. “They could either rent or lease the assets back to the client,” said a person familiar with the deal. This model of outsourcing is considered more cost-effective for companies. The telecom company has already outsourced its network infrastructure to China’s ZTE and Huawei Technologies.

Loop Mobile, earlier known as BPL Mobile, has a subscriber base of 2.4 million in the Mumbai circle, for which it already has an in-house team of IT professionals.

“The request for proposal (RFP) did not mention providing IT services to Loop Mobile, but to other 22 circles. While the company has had a soft launch in four circles, it will scale it up after finalising on the IT vendor,” said
another official familiar with the contract.

The domestic market has been the focus of many IT service providers after a decline in exports from the US and Europe, apart from a host of new companies launching mobile services in India. These new entrants have kept the order book running for IT companies. Earlier, Wipro had bagged a full IT outsourcing project from Unitech Wireless worth approximately Rs 2,500 crore over a nine-year period.

Big multinationals dumping excess vendor baggage

A slew of big multinationals, including the world’s largest telecom operator, Verizon, and capital equipment maker Applied Materials, are going the British Petroleum (BP) way of pruning the number of technology vendors to cut costs as they look for ways to come out of the worst recession in years.

Verizon, Chevron, Applied Materials, Best Buy, Cardinal Health, Home Depot and many other companies that do business with at least 40 IT vendors are set to prune their vendor list drastically, say consultants and analysts.

Early this week, BP cut the number of its vendors from 40 to five, in a move that will help it save $500 million. As many as 60 Fortune 100 companies are expected to follow suit, an analyst said. “The next 12 months will see a fair number of deals triggered by vendor consolidation,” said Partha Iyengar, research director at research and advisory firm Gartner India.

Applied Materials, one of the largest suppliers of semiconductor and display manufacturing equipment, has identified opportunities for vendor consolidation in data centre co-location and telecom services, the $9-billion firm’s group vice-president and CIO Ron Kifer said. The US firm’s large vendors include IBM, TCS and Wipro.

TCS says it’s in discussion with at least three customers looking to consolidate vendors. “These are Fortune 500 companies in the retail and banking & financial services space,” said S Ramadorai, the CEO of the country’s largest software services company.

A Fortune 500 bank is evaluating options to reduce its infrastructure management and data centre partners from 10 to two, while one of the world’s top five retailers is looking at reducing its technology vendors from around 80 to 25-30, a person aware of the development told ET, but declined to give details.

A Fortune 50 drugmaker, which presently has about 100 vendors doing tasks like data mining, drug distribution and supply chain management, wants to reduce its vendor list by at least 60%, another person said, requesting anonymity.

The move will help these firms get into more strategic relationships with vendors, get better pricing by increasing volume of work to technology suppliers, reduce governance overheads and cut costs by 12-15%.

According to Chandramouli CS, director, advisory services, of technology consultancy Zinnov Management Consulting, a $10-billion plus company will have multiple vendors at offshore, onshore and near-shore locations. As the number of vendors increase, compliance and management is a huge task and costs escalate. “Restructuring initiatives like vendor consolidation makes them more agile,” he said.

Also, too many relationships reduce buying power and increases risks. For instance, banks, which have to ensure there is no data theft, will reduce risks when they cut the number of vendors managing customer information. Similarly, for companies engaged in healthcare, having only a handful of vendors makes it easier to manage relationships and tackle leaks, if any, in the system promptly.

Companies doing R&D remotely also try to limit the number of third-party vendors to protect intellectual property and any infringements of patents. For instance, Microsoft, which files for a few hundred patents every year, just has one global vendor, CPA Global, to do the patent filing.

“Clients who think they have too many vendors are consolidating. It helps to reduce risks and manage costs better,’’ said V Balakrishnan, CFO of India’s second-largest IT exporter Infosys Technologies.

The development spells big gains for large IT services players. R Chandrasekaran, president and MD for global delivery at software firm Cognizant, said deep domain expertise, broader range of services and expanded geographic footprint help large companies to score in vendor consolidation moves.

But life will become much more difficult for smaller companies. “The smaller players aren’t able to match the pricing offered by the big vendors. It’s tough for the small services companies,” said Avinash Vashishta, CEO of Bangalore-based advisory firm Tholons.

Already hit by the global recession, small vendors may now become easy acquisition targets for the bigger ones. To survive, the obvious lesson for them is to develop expertise in niche fields. As being lean in tough times becomes the norm, it will be the fat boys of offshoring who will gain.