Nasscom sees lower Indian IT exports

The country’s software and services sector is likely to see single-digit growth in 2009-10, a new low for the $60-billion industry that grew 16.3% last year despite the global economic downturn.

Software industry body Nasscom, in its revised exports growth estimates to be announced in Chennai on Wednesday, is likely to scale down exports growth target to single digits for 2009-10, said people familiar with the development. This is the third such revision by Nasscom in the past 12 months.

The only silver lining for the sector, which saw demand shrinking in its largest markets, is high domestic demand, although it’s not enough to offset the fall in exports. Earlier in February, Nasscom had reduced IT exports growth target to 16% from its forecast of 22-24% made in mid-2008.

The industry has been consistently clocking above 30% growth for most parts of this decade. While Nasscom was unavailable for comments ahead of the formal announcement, industry watchers say decline in technology spending by global majors, pricing pressure and an overall bleak economic outlook have resulted in a lower growth outlook.

India’s largest software exporters TCS and Infosys have predicted tough business environment this year. “We need to watch the ground as we expect shocks along the way ... Recovery is not something that’s going to be very soon,” said S Ramadorai, chief executive officer of TCS, after announcing his company’s better-than-expected numbers for the first quarter.

Infosys also expects pricing pressure to hit profit. “The pricing environment continues to be challenging. There are ongoing negotiations with clients,” its chief operating officer SD Shibulal said in the company’s guidance for this year.

The grim outlook is corroborated by recent industry outlooks by Gartner and Technology Partners International (TPI). The TPI Index, brought out last week by global sourcing advisory firm TPI, measures outsourcing contracts of over $25 million or more.

TPI said the banking sector, traditionally a heavy adopter of outsourcing services, has slowed its activity significantly in the wake of last year’s financial crisis. Oil & gas, food & drink and consumer durables, to name a few, also slumped in 2009, leading a reduced demand for technology services.

Compared with the first six months of 2008, which saw record levels of sourcing activity, the market in the first half of 2009 awarded 11% fewer contracts with 22% lower TCV (total contract value) and 28% lower ACV (annualised contract value, which is TCV divided by duration of contract). The actual number of contracts dropped to 135, a fall of 7.5% from the first quarter to second quarter this year.

Driving the decline was the absence of mega deals in the US and Europe and lower spending globally on business process outsourcing. “The balance of 2009 is likely to remain challenging and we will see lower topline growth. We do not expect total contract awards and TCV to match 2008 levels,” said Sid Pai, partner & managing director, TPI India.

Consultancy firm Gartner said the total global IT services market will decline by 5.6% from $805.9 billion in 2008 to $761 billion in 2009. In fact, while the market will improve in 2010 to $784 billion, it will take longer to touch the levels achieved in 2008.

“While the global economic downturn shows signs of easing, this year IT budgets are still being cut and consumers will need a lot more persuading before they can feel confident enough to loosen their purse strings,” said Richard Gordon, research vice-president and head of global forecasting at Gartner.

Seems like no green shoots for the tech guys as yet. They will have to work hard to get business and move up the value chain quickly to maintain margins and growth momentum in the current environment.

Recession? TCS, Infosys, Wipro, HCL bag large outsourcing deals

Even in a recession hit market where clients are cutting outsourcing budgets, Indian firms such as TCS, Infy, Wipro, HCL and Tata Communications have won large outsourcing deals this year placing them among the top 10 global service providers - on contract value terms.

Even though the total contract value of awarded outsourcing deals fell by 22% to $40.2 billion in the first six months of this year, Indian tech firms continued to compete neck and neck with the global biggies such as IBM, Accenture, HP/EDS, CSC, shows data from TPI. TPI is the largest sourcing data and advisory firm and measures commercial outsourcing contracts valued at $25 million or more.

Indian firms dominated the information technology outsourcing (ITO) segment ($33.2 billion) split into application, development & maintenance (ADM) and infrastructure segments.

Among the desi firms, the top deal winners were Cognizant, Infosys, HCL, TCS and Wipro featuring in the ADM section. HCL and Wipro were again listed among the top 10 infrastructure deal winners, TPI said. “Retail, diversified financials, transport, and network telecom services provided strength to the ITO market. TCS was the top vendor to win deals in three of these markets, while Infosys appeared as one of the top vendors in the Americas and the APAC region,” HSBC IT analyst Yogesh Aggarwal said.

Tata Com - only Indian firm among network service bigwigs such as AT&T, BT, Ericsson and Nokia Siemens - grabbed a place amongst top 10 club in a segment where deals worth $13.4 billion were awarded till June.

While the broader BPO market remained weak, experts believe Indian vendors relied on client mining, rather than winning new mega-accounts. Infy, that employs 16,700 people in its BPO division, was among the top 10 BPO service providers in the H1 of 2009, wherein globally contracts worth $7 billion were awarded to the likes of Capita, Perot Systems, Xerox, RR Donnelley and Johnson Controls.
Source: TheEconomicTimes

Active client base of IT firms shrinks

Top Indian IT firms saw their active client base erode in the April-June period, on the back of project rampdowns and vendor consolidations.

In the case of Infosys, the number of active clients came down to 569, down sequentially by 10. Wipro’s active client base fell to 830 from 863 and that of TCS was down by 52 to 933. According to Infosys COO, S D Shibulal, the company added 27 new clients in the first quarter, even though the total client base came down. “Some clients will not figure in the list, if the business carried out with them is below a certain threshold limit,” he said.

During the quarter, project rampdowns saw contribution by Infosys’ top client by revenue, BT, come down below the $300 million mark. Top five clients accounted for 16.3 per cent of total revenues, dipping sequentially from 17.2 per cent. “In some quarters, revenue contribution from top 10 will be higher than in other quarters. This is not a secular trend, but is more situational. We are very focused on getting new clients and will continue this focus. There might be some additional work we have to do since the business environment is challenging,” said Shibulal.

For Wipro, the top five customers accounted for 11.4 per cent, up from 10.8 per cent in previous quarter. The number of new customers went up from 20 to 26, but down 31 from the first quarter of the previous financial year.
Wipro CFO Suresh Senapaty said that the company had not lost any customers, but some of them had fallen below the threshold of $150,000 per quarter in revenue run-rate and hence were not counted. Joint CEO Suresh Vaswani said that because of the focus being given to customers, many of them are becoming high value clients and are moving up into higher bands or giving larger revenue.

Jens Butler from analyst firm Ovum in his bulletin said this about TCS: “Maybe of bigger concern is the fact that only 26 new clients (and only 0.7 per cent of new revenue contributions, down from 6.9 per cent) have been added during the quarter (with contributions of less than $5 million), alongside a fall in its active client count to 933 from 985. This may be due to a focus on client retention in turbulent times, or possibly underinvestment in sales resources, or TCS’ unwillingness to enter into pricing wars. The likelihood is a combination of all three.”

Rajeev Mehta, IT analyst at India Infoline, said that too much should not be read into top IT firms losing out on active clients. “The recessionary pressures are still on, and this kind of thing could happen. Also, revenues from some top clients drop during a quarter and lose their ‘active client’ tag,” he said. “This will pass.”
Source: FinancialChronicle

Global IT contracts dip 22% in First Half

Even in a recession-hit market where clients are cutting outsourcing budgets, Indian firms such as TCS, Infy, Wipro, HCL and Tata Communications have won large outsourcing deals this year placing them among the top 10 global service providers — on contract value terms.

Even though the total contract value of awarded outsourcing deals fell by 22% to $40.2 billion in the first six months of this year, Indian tech firms continued to compete neck and neck with the global biggies such as IBM, Accenture, HP/EDS, CSC, shows data from TPI. TPI is the largest sourcing data and advisory firm and measures commercial outsourcing contracts valued at $25 million or more.

Indian firms dominated the information technology outsourcing (ITO) segment ($33.2 billion) split into application, development & maintenance (ADM) and infrastructure segments.

Among the desi firms, the top deal winners were Cognizant, Infosys, HCL, TCS and Wipro featuring in the ADM section. HCL and Wipro were again listed among the top 10 infrastructure deal winners, TPI said. “Retail, diversified financials, transport, and network telecom services provided strength to the ITO market. TCS was the top vendor to win deals in three of these markets, while Infosys appeared as one of the top vendors in the Americas and the APAC region,” HSBC IT analyst Yogesh Aggarwal said.

Tata Com — only Indian firm among network service bigwigs such as AT&T, BT, Ericsson and Nokia Siemens — grabbed a place amongst top 10 club in a segment where deals worth $13.4 billion were awarded till June.

While the broader BPO market remained weak, experts believe Indian vendors relied on client mining, rather than winning new mega-accounts. Infy, that employs 16,700 people in its BPO division, was among the top 10 BPO service providers in the H1 of 2009, wherein globally contracts worth $7 billion were awarded to the likes of Capita, Perot Systems, Xerox, RR Donnelley and Johnson Controls.

Recession-hit Bangalore techies settle for low-paying jobs

Till a few months ago, IT professional TV George was earning Rs70,000 per month, plus perks. But after losing his high-paying job, and being unemployed for three months, George, 31, has started giving tuitions in mathematics and physics to aspiring engineering students in his neighbourhood.

"Now, I am earning Rs15,000 per month. It's been hard. I got married only a few months before losing my job. So, when I lost my job, I was in a difficult position. Thankfully, I had some savings. With the savings, I am paying my rent and for a few other necessities," George, who was employed with a top US IT company, said.

"After losing my job, I tried my best to get a new job. But I remained unlucky. So to help run my home, I decided to give coaching classes to aspiring engineering students."

George is not alone. Recession has hit the IT sector in Bangalore, with scores of techies losing their jobs. Some have been forced to take up low-paying jobs as they wait to bounce back when the recession ends.

Dipankar Dutta, 27, working with an Indian IT company as software engineer, lost his job almost eight months ago.

Today he has a job, but as a content writer in a tech firm.

"Thankfully, writing has been my forte. So, I landed this job of a content writer. Otherwise I would have been in a soup. Since I cannot afford to stay in Bangalore without a job, I compromised and settled for the new job with a much lower pay package," said Dutta.

Scores of IT and ITES professionals in Bangalore have lost their jobs in recent times, an effect of the global economic meltdown. But there is no precise count of the numbers.

According to the latest employment and business outlook report by Bangalore-based staffing firm Teamlease, at 23%, the attrition rate in this city is higher than in any other city in India.

The report was based on interviews with HR heads, CEOs and senior executives of 495 companies in Bangalore, Chennai, Hyderabad, Kolkata and Pune.

"The city accounted for the highest attrition rate. IT accounts for over 80% of the city's total labour pool. The attrition rate was 23% in the last quarter, against the previous quarter's 16%. Much of the attrition could be involuntary attrition (or layoffs)," Teamlease general manager Surabhi Mathur-Gandhi said.

India's Silicon Valley has seen thousands of people getting pink slips in recent months. And many more are under the threat of losing their jobs.

"It's painful to lose your job, in today's expensive world. Those who have lost their jobs are desperate now, thus they are settling for low paying jobs," Karthik Shekhar, general secretary of UNITES-Professionals, an unrecognised union of IT/Call Centre/BPO employees, said.

"Every day we meet young men and women who have lost their IT jobs recently. All they want is a job. But getting a job in the IT sector is very difficult. So, they have no option but to settle for jobs outside their fields and that too with low paying packages," Shekhar added.

"It's encouraging that today's youths are ready to move ahead in their lives. Instead of waiting for the economy to revive, IT professionals have started exploring other fields and this is a positive sign," said BN Gangadhar, professor of psychiatry at the National Institute of Mental Health and Neuro Sciences (Nimhans), Bangalore.

Mohammed Khan, a trained software engineer, told IANS: "Initially it was difficult, but I am happy with my choice. After losing my job with an IT firm, now I am working as a sales executive. I am hoping the economy will recover soon and all the techies who have lost their jobs will get new jobs in their field."
Source: TheTimesofIndia

Worst may not be over yet, says TCS chief

Chief executive officer S Ramadorai has spent 13 years at the helm of Tata Consultancy Services (TCS). In this time, he has turned the company into the largest IT services provider in the country. As he prepares to bid adieu to the organisation in a couple of months, he spoke to Sharang Limaye about the present economic crisis and his post-retirement role. Excerpts:

Are ‘Green Shoots’ sprouting?
To some extent, it is true. We must see how it plays out. There are some signs of improvement. But we should not get carried away by these. One should be prepared for some more volatility. The volatility has not disappeared. There will still be some shocks along the way.

But is the worst over?
In terms of some parameters, the worst may not be over. For example, when you look at unemployment, it looks like more bad times are in store. We are still seeing increasing unemployment. When people see the banks performing well, they think there has been some recovery. But it remains to be seen whether it’s a one-off thing.

Do you see pricing pressure easing?
There is some extent of easing of pricing pressure. But, there may be specific sectors with pricing problems. Telecom, for one, will certainly experience some pressure. So also will manufacturing. Hi-tech may also find the going tough in terms of pricing. But this will be due to sector-specific issues.

Domestic market contribution to your turnover is less than 10 per cent. Will we see more focus on India?
We are anyway focusing on the domestic market. But we have to see how much Indian companies are ready to spend on information technology. Right now, the IT budgets are nowhere near what Western economies do. If the growth is not faster, then the contribution of the Indian business as a percentage would still be minimal.

What could be done to increase the size of the domestic market?
I have always said that the government must spend a lot. It’s the right time for it to work on digitisation of data at both the state and central levels. Consolidation of information in areas such as taxation, healthcare and education should be of high priority. This expenditure will show in the GDP growth and also lead to improvement of services.

What about the contribution of the domestic private sector?
If the Indian private sector wants to be globally competitive, technology adoption and deployment is a must. Also, in sectors like microfinance, IT can help in greater financial inclusion.

What’s the outlook for TCS from a human resource point of view?
There is recruitment at entry level jobs for the year 2009-10 based on the offers made in 2008-09. For the year 2010-11, recruitment will take place at the time of students’ graduation, unlike in the past where we did three or four quarter earlier. Experienced professionals will be hired on a need basis.

How do you see the European market doing this year?
Currently, Europe is facing bigger problems than the US. Countries like Germany, Italy, UK, Spain and Portugal have been under a lot of stress. To me, Europe is a very important market, but it will recover slower than the US.

Does TCS have an inorganic growth strategy?
We have a Mergers & Acquisitions (M&A) group for this purpose. But haven’t planned any acquisition strategy as such. The M&A group will continuously look at opportunities for synergies. If there is anything that makes sense from a growth perspective, we will look at it. But there is nothing in the pipeline as of now.

Is there a move to concentrate more on the retail vertical as compared to telecom and BFSI?
There are opportunities for growth in the retail sector. Hence, it is very important for us. Having said that, the IT spends in the BFSI sector are still the largest. We would like to have presence in multiple domains and geographies. Our new focus areas include healthcare, lifesciences, energy, utilities etc.

What are your plans post-retirement?
I will continue to be on the board of TCS. I am also on the board of other Tata companies as well as some non-group companies. I would continue mentoring people in TCS. I would also be involved in some brand-building exercises. I might have lesser time on my hands after retiring.
Source: FinancialChronicle

Pharma, mfg, telecom sectors see highest salary hikes for FY10

Pharmaceuticals, manufacturing and telecom sectors are witnessing the highest increase of up to 11 per cent in salaries for FY 2009-10, while IT and financial services got the least hikes.

With the economic downturn impacting the earnings of companies, they were restructuring their salary structures and focusing more on performance and also cutting down on the increments for the current fiscal, experts said.

As per a mid-year survey on 'Performance & Reward Trends' by Hewitt Associates, pharma sector saw the highest salary hike of 11.1 per cent for FY 2009-10, followed by manufacturing (10.8 per cent), telecom (9.5 per cent) and FMCG (9.3 per cent).

However, retail sector has been impacted by the downturn and the salary hikes for the current fiscal might not be as expected by the industry, Thiruvengadam said.

"Firms have been found to implement metrics to determine return on investment on human resources. Investment in proprietary knowledge and technological upgrade is continuing, albeit slower than during boom times.

"Smart firms have turned inward, consolidating operations, rationalising requirements and optimising resources to ride the slowdown," Deloitte Senior Director (Management Consultancy Services) P Thiruvengadam said.

"In the wake of the economic downturn and the current situation that the Indian economy is witnessing the IT, ITeS sectors will be impacted," Thiruvengadam added.

The Hewitt survey revealed companies across industries were strongly differentiating rewards on basis of performance but majority of them were not considering any layoffs or severe salary cuts in the current fiscal.

The sectors to witness least increase in pay packages for the current fiscal are IT (2.8 per cent), ITeS (4.4 per cent) and Financial Services space (5.2 per cent), the survey stated.

"In IT & ITeS sector, overall salary increases have been kept under control and most companies have reported a stable or marginally reduced pay cost structure in relation to total costs. It reflects the response of a growth economy managing a short to medium term slowdown, while keeping an eye on long term growth," Thiruvengadam added.

Interestingly, layoffs have been generally more prevalent in sectors which hired numbers in the last few years like in the IT, ITeS, and retail sector recently, he added.

The Deloitte survey 'Engaging employees in recessionary times' found that there was an overall decrease in attrition rates. Around 23 per cent of firms surveyed reported attrition figures of less than five per cent and 44 per cent of companies reported figures between five and 10 per cent.

"During these unprecedented times when firms across the world considered options such as mass layoffs and salary cuts, India Inc also considered same measures but with maturity," Hewitt's Performance and Rewards Consulting practice leader in India Sandeep Chaudhary said.

Campus Recruitments: IT cos freeze recruitments before final semester

The days of goofing off in the last year of college after getting job placements in the penultimate academic year are over for students.

The IT industry, the biggest recruiter in colleges, has decided to visit campuses only in the final semester leaving students with no choice but to study hard even in their last year.

Most IT companies have so far been making offers at least a year or so before graduation, prompting students to take it easy in their final year. But not any more.

“All our member companies have unanimously taken this decision. The change is not only for this year, it is permanent,” said Som Mittal, president of software industry body Nasscom. The decision taken by Nasscom is unlikely to be reversed even if demand picks up. In fact, the trend may even catch up with companies outside the IT industry.

Nasscom has sent a communication to industry associations, Confederation of Indian Industry (CII) and Federation of Indian Chambers of Commerce and Industry (FICCI), which have in turn circulated it among their members.

The IT industry hired 2,26,614 people in 2008-09, and an even bigger number 3,89,000 in the previous year. In the last few quarters of 2008-09 and in the current year, the slowdown has caused the industry to recruit less and also extend joining dates for freshers. The uncertainity in demand has made it hard for IT firms to forecast how many employees they would need to meet their future requirements.

Some students who have graduated in 2008 and have been made job offers are yet to join companies as uncertain demand has made it hard for companies to predict the number of employees they will need in the coming year.

“WE felt it would be better if we go to campuses in the eighth semester when we would be in a better position to understand what the demand would be,” Ajoy Mukherjee, Global Head - Human Resources, Tata Consultancy Services (TCS), said.

TCS, which interacts annually with the heads of some of the top management and engineering colleges, said the colleges were agreeable to it.

“That’s the kind of feedback we were getting from the institutes also. They felt students tend to relax once they have got a job and focus less on studies. Trainee offers were being done a year in advance. For example, the students we made offers to last year will be joining us this year,” added Mr Mukherjee.

“It is better for the companies and for the students,” said Infosys Technologies board member and director-human resources, Mohandas Pai. He said Infosys had communicated its decision to all the 500-600 colleges it visits . “I cannot comment on how many colleges we will exactly visit. All I can say is that the colleges are happy,” he said.

According to Mr Mittal, companies were hiring almost three years ahead of demand as they were visiting campuses in the fifth semester (around the third year) of engineering.

After the students graduate, it takes approximately another year before they become productive because they have to undergo training before being assigned any client projects.

The tough get going

Source: BusinessStandard.com
India’s information technology leaders have managed to beat analyst and market expectations by turning in a credible performance in the quarter ended June, in challenging times that show no clear signs of getting any easier.

While TCS and Infosys hold back from saying that light is visible at the end of the tunnel, Wipro chairman Azim Premji has struck half a note of optimism by declaring that he sees the “first signs of stability in the business as ramp downs start to taper off and volumes start to stabilise.”

What this stability means is that while things were in some kind of a free fall, with technology chiefs in client companies not knowing what budget would be available for the year, now both the industry and clients know where they stand. But there is no upside, as new projects are nowhere in sight. This is reflected in Infosys cutting both its current quarter and full year guidance, and Wipro issuing a virtually flat guidance for the current quarter.

In a situation where global IT spending is projected to go down in the current year by 6-11 per cent, Wipro’s IT services revenue has gone down for the third successive quarter and Infosys’s for the second, while TCS’s revenue has gone up by less than 1 per cent in the last two quarters. This is the result of an across-the-board fall in prices, with no sign of recovery in sight. N Chandrasekaran, who is set to take over from S Ramadorai at the head of TCS, has flatly declared that “we will be lucky if we are able to contain prices at the current levels.” The leading IT firms have sought to counter this in a number of ways. They have raised utilisation (the percentage of staff who are billed) and sought to deliver greater volumes — offering more for less. Plus, they have brought more work home. This has lowered both costs and revenue (on-shore billing rates are higher) while managing to protect margins for the most part. Infosys’s net margin at 28 per cent is virtually where it has always been and TCS’s net margin is down by no more than a percentage point to 18. Both TCS and Infosys have reduced their headcount in the last quarter and the latter passed over increments last year.

One plus point for India’s leading IT services firms has been the absence of any serious political fallout on their business in the client countries, despite historically high levels of unemployment. There has been no impact on outsourcing and offshoring and, if anything, the developed economies will rely more, not less, on Indian IT capabilities in order to improve efficiencies and lower costs. Indian vendors are aware that the easy times are over and are de-risking their business by reducing their reliance on the North American market. Another plus for them is the slow emergence of the domestic market, with government spending through the rollout of e-governance leading the way. This market deserves far more attention than it has got so far.

A third of Europeans fear job loss: Survey

A third of European workers are "very concerned" that they could lose their jobs as the economy experiences the worst recession since the Second World War, according to a European Commission survey published today.

Some 32 per cent of people with jobs said they feared losing work. More were worried about their partner and nearly half feared that their children would lose their jobs.

European unemployment rates are running at record levels and economists believe many more jobs will yet disappear as companies cut costs to adjust to lower demand and weaker exports.

The EU executive forecasts that some 8.5 million jobs will go this year and next year.

Younger workers are suffering more with unemployment running at nearly one in five.

EU spokeswoman Katharina von Schnurbein said many Europeans believe the worst of the recession is still to come. Only 28 per cent think the downturn has already peaked.

"People in labour markets that are harder hit are slightly more realistic or less optimistic," she said.

Spaniards were most worried about losing their job or about relatives losing theirs.

India's Outsourcers using the Slump to Get Bigger: BusinessWeek

In a bid to become global, Bangalore's info tech companies are preparing for the next upturn by rethinking strategy and hiring more workers

Take a walk through the sprawling Infosys Technologies (INFY) campus on the far edge of Bangalore, and you'd never think the outsourcing industry is in a funk. At all hours, buses disgorge hundreds of software engineers too young to buy a beer, the sidewalks are filled with twentysomethings carrying backpacks bulging with laptops, and the 24-hour cafés are jammed.

Yet there's no shortage of bad news in Bangalore. The value of new outsourcing contracts fell 22% globally in the first half, to about $19 billion—the lowest level since 2001—and the second half looks grim, too, according to TPI, an advisory firm in Houston that tracks deals. That means many of India's 2,000 smaller info tech companies may shut down, while the industry's giants expect sales barely to budge this year. "We have to prepare ourselves for unknowns," says Infosys CEO Kris Gopalkrishnan.

Some companies, though, see the hard times as an opportunity to boost productivity and prepare for the next big uptick in the $800 billion global IT business. Top players such as Tata Consultancy Services, Infosys, Wipro (WIT), and HCL Technologies remain profitable and are loaded with cash; Infosys has $2.2 billion, and the others have $1 billion-plus.

So even as the industry suffered, the five biggest companies added a total of some 80,000 employees in the 12 months through March—a third less than the previous year but still sizable. And the outsourcers are all cozying up to customers, reinventing how they price and sell their services, and investing millions in training and research to help them take on more complex jobs. "I believe the industry will emerge much stronger," predicts Wipro Chairman Azim Premji. "We certainly will as a company."
Source: BusinessWeek

Microsoft Q4 net profit falls 17% at $3.045 bn

Microsoft Corp posted a steeper-than-expected 17 percent drop in quarterly revenue and said its business continued to be hurt by the weak global PC and server markets, sending its shares down 8 percent and hurting broader stock futures.

The world's largest software maker, whose operating systems power the vast majority of the world's personal computers, offered little hope for a turnaround in technology until next year, despite recent optimism from others in the sector.

"We still see conditions being challenging for the balance of this calendar year," Chief Financial Officer Christopher Liddell said in a telephone interview.

"At least sequentially, we are seeing a little bit of growth. While things are not necessarily getting better, they may have have bottomed out," said Liddell.

Microsoft reported fiscal fourth quarter net profit of $3.045 billion, or 34 cents per share, compared with $4.297 billion, or 46 cents per share, in the year-ago quarter.

Profit excluding items was 38 cents per share for the quarter ended June 30, beating analysts' average forecast of 36 cents per share according to Reuters Estimates.

Sales fell 17 percent to $13.1 billion, missing analysts' average estimate of $14.48 billion. Annual sales of the company's Windows operating system -- its first and most important business -- fell for the first time on record.

"They were really light on revenue. I hope they'll highlight that on the call, give more clarity. I would hope in the call they're going to tell us where the dollars are," said Kim Caughey, senior analyst at Fort Pitt Capital Group.

The company is preparing to bring out the latest version of its operating system, Windows 7, on Oct. 22. Liddell said that release would not, on its own, spark a recovery in PC sales.

Microsoft's shares fell 8 percent to $23.44 in extended trading, after closing up 3 percent at $25.56 on Nasdaq, contributing to losses on stock futures across the board.

UK offshored most IT jobs to India

In their attempt to cut costs amid the global downturn, two in every three UK-based firms have off-shored a portion of their IT functions in the last six months, with a large portion of it coming to India, a survey says.

According to a survey by an UK-based IT recruitment firm IT Job Board, 64 per cent of the companies surveyed have offshored a portion of their IT functions in the last six months.

About 34 per cent of the IT professionals said more than half of their IT department had already been shifted overseas and 79 per cent respondents said the work had been sent to India.

Exactly half of those surveyed believed their companies would offshore work and 75 per cent felt the work would go to India.

In terms of the roles being affected, 79 per cent thought software developer jobs were being outsourced, 71 per cent stated programmer roles, and 67 per cent advised IT support jobs were being impacted.

About 40 per cent believed the issue with offshoring was lack of business knowledge and 83 per cent felt it was having a negative impact on the quality of their IT.

US banking, finance customers stabilising: TCS

Along with some stabilisation in the banking and finance sector, India’s largest IT services provider Tata Consultancy Services (TCS) is seeing green shoots in the retail and other sectors in the US market as well.

The US contributes to over 55 per cent of the company’s total revenue and the BFSI (banking, financial services, insurance) segment contributes to over 43 per cent.

“In the US, each vertical is playing out differently. Manufacturing still seems to be soft. Last week, we saw another bankruptcy. Telecom and hi-tech remains a concern. But in the areas of banking and finance, we believe things have stabilised. In the past six months, there was a lot of transition happening and new teams were coming in. Now all the new teams are there and we see much more stability,” Surya Kant, President, TCS - North America, told Business Standard.

Some customers of TCS have done mergers and acquisitions (M&A) in the recent past. In some cases, such clients are talking about what they want to do, especially where consolidation has already taken place. These are positive signals, notes Kant, but adds that “discretionary spend is still under pressure”.

But more than the US, TCS is seeing pressure in the UK region, with one of its top telecom clients (BT) under pressure and revenue from this client dropping successively. “In this particular client’s case, I can only say that it has a certain budget and is trying to use less of it. Moreover, in both Germany and the UK, this will be an election year. Hence, even government deals might be difficult,” cautioned A S Lakshminarayanan (Lakshmi), Vice President and Head, Europe TCS.

Lakshmi added that recent conversations with customers from Europe and the UK have revolved around efficiency and reducing costs. “And it is not always about offshoring. There are a number of other levers we can use to help customers gain that,” he said. Lakshmi added that TCS has been able to break into new clients and has signed a couple of deals in sectors like utilities, travel and hospitality, logistics and pharma.

In its US operations, TCS will be ramping up its Cincinnati centre’s headcount to 1,000 people in the next three years. “The Cincinnati centre is our comitment to the North America market. We are not only hiring from the state of Ohio but across the US. The centre will handle work like business analytics, front desk, work that can be done in the same time zone and work that needs to be done quickly, like proof-of-concept or pilots,” said Kant.

How Indian IT is fighting recession

The Indian IT industry managed to limit the impact of global recession last fiscal and maintain the growth momentum, albeit lower than that in the boom times, says tech publisher Dataquest.

"Export firms did better in recession-hit developed markets than those whose business is limited to the Indian market," Dataquest editor Prasanto K Roy said.

Though the business of top 20 firms led by Indian IT bellwethers TCS, Infosys and Wipro, and multinationals such as HP and IBM, grew by an average 19 per cent, seven of these posted single-digit revenue growth.

"Overall, the top 20 Indian software and hardware firms reported a combined revenue of Rs 183,621 crore (Rs 1.84 trillion/$39.52 billion) in 2009, compared to Rs 149,250 crore (Rs.1.49 trillion/$32.12 billion) in 2008," Roy said, citing findings of a survey.

Among the seven, four are multinational subsidiaries -- Microsoft India, which grew a mere one per cent year-on-year to Rs 32.98 billion (Rs 3,298 crore); HP India up two per cent to Rs 157.63 billion (Rs15,763 crore), Oracle three per cent to Rs 59.62 billion (Rs 5,962 crore) and Cisco by four per cent to Rs 60.84 billion (Rs 6,084 crore).

"One of the reasons for export-driven firms maintaining the growth is because of increasing IT outsourcing in a downturn to keep costs flexible. In the domestic market too, global firms such as IBM and Wipro fared very well," Roy averred.

Among the top 20 firms, eight firms grew fastest despite slowdown and negative sentiment in the market.

These include Mphasis, with revenues increasing 69 per cent to Rs 31.73 billion (Rs 3,173 crore); HCL Infosystems, up 60 per cent to Rs 80.89 billion (Rs 8,089 crore) and Cognizant Technologies, up 49 per cent to Rs 94.10 billion (Rs 9,410 crore).

The IT bellwethers also posted healthy growth rates. TCS was up 22 per cent to Rs 25,895 crore; Infosys, up 31 per cent to Rs 20,392 crore, and Wipro up 41 per cent to Rs 23,882 crore.

Multinationals such as SAP India grew 33 per cent to Rs 4,320 crore, Dell India by 32 per cent to Rs 4,266 crore, IBM India by 19 per cent to Rs 12,048 crore and Accenture by 16 per cent to Rs 4,400 crore.

With a decline of 18 per cent in its growth, hardware firm Lenovo failed to make it to the top 20 club. Korean major Samsung also saw growth falling 40 per cent to Rs 1,200 crore from Rs 2,014 crore.

Export revenues do not include that of business process outsourcing (BPO) services.

Scam-tainted Satyam Computer Services has been left out of the top 20, as its financial performance came under cloud following the Rs 78-billion (Rs 7,800-crore) accounting fraud by founder-chairman B Ramalinga Raju.

The Dataquest survey findings are lower than the projections made by the IT industry's representative body -- National Association of Software and Services Companies (Nasscom) -- for 2009-10.

With the industry's annual growth rate dipping to 16-17 per cent from about 30 per cent in 2004-2008, the aggregate revenues was estimated to be $60 billion, including export revenue of $47 billion.

In view of the prevailing uncertainty, Nasscom has taken a two-year view to factor in the volatile environment and estimated that the IT industry would grow at 15 per cent to achieve export revenue of $60-62 billion by 2010-11.
Source: IndiaTimes.com

Strong hiring sentiment returning to India: Naukri.com

Indicating a strong hiring sentiment coming back to the market, a survey on Thursday said the hiring activity went up by 8.1 per cent on a national level in June, compared to the previous month.

"It is the highest upward movement since July 2008", according to Naukri JobSpeak, the monthly job index released by Naukri.com.

Hiring activity saw a significant push in banking and finance and IT, it said, adding, Mumbai picked up hiring activity after several months of stagnancy. Of the top 13 cities, 12 recorded an uptrend in hiring activity.

Hiring activity in Mumbai picked up by 13 per cent last month as compared to May after falling for several months in succession. Chennai and Pune saw a pick up in hiring activity by 19 per cent and 15 per cent, respectively.
Banking and financial services saw an increase by 22 per cent. A surge in hiring activity pushed up the indices for most of the industries.

Real estate and retail saw an increase in hiring by almost 25 per cent, with both the industries pulling out of the low hiring mode. Telecom saw a comeback with hiring activity picking up 17 per cent.

After several months of a downtrend, hiring activity in IT-Software improved by ten per cent, while IT-Hardware and BPO and ITeS remained stable. FMCG and consumer durables saw a drop in hiring activity by eight per cent and 14 per cent, respectively, the survey added.

Lloyds cuts 1,200 more jobs, over 8,000 this year

* Jobs to go at group operations and insurance units
* Bank's post-merger workforce was 140,000 staff

Part-nationalised Lloyds Banking Group said it is cutting 1,200 jobs in its group operations and insurance business, taking its layoffs to over 8,000 since it bought rival HBOS in January.

Lloyds, 43-percent owned by the UK government, on Thursday announced a net reduction in staff of around 650 permanent roles by the end of March 2010.

The bank will create 180 new permanent roles in group operations, and also cut 370 contract and agency staff.

Corporate India optimistic, only 6 per cent firms cut pay

Amid the economic down-turn impacting companies worldwide, India Inc rema-ins cautiously optimistic with just 16 per cent firms freezing salaries and as low as 6 per cent reducing pays for 2009-10, a survey by HR consultancy Hewitt Associates says.

According to a mid-year survey on Performance & Reward Trends by Hewitt Associates, companies acr-oss industries are strongly differentiating rewards on the basis of performance but majority of them are not considering any layoffs or severe salary cuts in the present financial year.

“With only five per cent of the organisations consi-dering layoffs, minimal salary reduction at 6 per cent and salary freeze at 16 per cent, India Inc looks cautiously optimistic,” He-witt’s Performance and Rewards Consulting pract-ice leader in India Sandeep Chaudhary said.

The survey revealed that 16 per cent of companies surveyed have a salary freeze and they were mainly organisations in the finan-cial services, IT and ITeS sector.

Moreover, only 6 per cent of the firms have cut salaries and just 5 per cent were considering layoffs for FY10.
“During these unprece-dented times when firms across the world conside-red options such as mass layoffs and salary cuts, India Inc also considered the same measures, but with maturity,” Chaudhary added.
“It reflects the response of a growth economy man-aging a short to medium term slowdown, while keeping an eye on long term growth,” he added.

Interestingly, about 30 per cent of the organisa-tions have deferred their salary revision cycle. They have been deferred from April to July or October, the survey stated.

The survey said the firms were laying stringent focus on performance and productivity with as much as 69.2 per cent employees getting a rating of ‘met expectations’ or ‘below’.

“There is a stricter identification of top and bottom performers. In almost every sector, emplo-yees who were rated as ‘far exceeds expectations’, ha-ve received a salary incre-ase almost two times higher than that provided to employees who only ‘met expectations’,” the survey added.

The general trend which has emerged is that several firms are considering a salary increase only for their top performers for the year 2009-2010.

The survey was conduct-ed across 137 firms (foreign-owned, locally-owned, and joint-venture private sector) and 9 primary industries during the period of May-June 2009.

“The survey was carried out at this time as most companies set their apprai-sal and salary related polic-ies at the start of the financial year in April,” Chaudhary added.

The survey pointed out that 61.9 per cent of respondents have reported that their salary increase budget is different from the previous forecast and all employee levels have been impacted by the reduction in salary increase budgets.

Intel Q2 results signals end to bad days for IT

The darkest time in the personal computer industry’s history may have ended. In the last few months, hardware makers like Intel, Hewlett-Packard and Dell have suffered as one-fifth to one-quarter of their computer sales have vanished. For the first time ever, Microsoft, the world’s largest PC software company, experienced a drop in sales of its Windows software and carried out large-scale layoffs.

As a result, analysts predicted that computer sales would decline at a rate four times greater than during the dot-com bust, the previous low-water mark. But now there are signs that companies tied to the PC industry may stop setting unwelcome records.

On Tuesday, Intel, based in Santa Clara, California, reported sales of $8 billion for the its second quarter, which ended June 30. While that was a far cry from the $9.5 billion it posted in the same period last year, it beat analysts’ expectations by $700 million.

And for the first time since the recession hit, Intel felt comfortable enough to provide a forecast for its present quarter, saying it expected revenue of $8.1 billion to $8.9 billion. Analysts polled by Thomson Reuters had forecast earlier that Intel would post revenue of $7.8 billion this quarter.

‘‘Our second-quarter results were clearly better than we expected,’’ said Paul S Otellini, Intel’s chief executive, during a conference call with analysts.

In April, Otellini declared that he thought the PC slump had reached bottom, and the company’s recent financial results appear to confirm this.

As the world’s largest chipmaker, Intel helps set the pace for the computing industry. For that reason, analysts keep a close eye on the company’s take on the overall market. Increases in the sales of Intel’s chips tend to translate into higher computer sales for HP, Dell and others down the road.

Intel has warned that businesses remain cautious about buying new PCs given the still-limping global economy. Consumers have been the ones who are proving more willing to buy new computers, particularly laptops and their diminutive low-cost cousins, netbooks.

‘‘We saw strengthening through June,’’ said Stacy J Smith, the chief financial officer at Intel, during an interview. Intel expects the rising demand to carry over into the second half of this year.

Smith added that sales in Asia had picked up, particularly in China, and that sales in the United States were solid. Over all, however, the immediate fiscal conditions remain sobering for Intel.

During its second quarter, Intel’s net income fell to $1 billion from the $1.6 billion it reported during the same period last year. Intel earned 18 cents a share, down from 28 cents, beating analyst estimates by 10 cents.
Those figures exclude charges tied to a $1.45 billion fine levied against Intel by the European Commission for anti-competitive practices in the PC market. With the fine included, Intel posted a loss of $398 million, or 7 cents a share.

Still, Intel reported higher-than-expected gross margins and a quarter-to-quarter rise in sales of chips, lifted by healthier sales of laptop chips.

Recession proves good for Indian outsourcing firms

In a year when outsourcing of application development and maintenance projects has slowed down, top customers such as Bank of America, JPMorgan and Citibank continue to send more back office projects to India, as they seek to lower their cost of operations by up to 40%.

According to Nasscom, India’s back office outsourcing industry will grow at 18.4% this year to reach $14.8 billion. Outsourcing of IT services will clock a lower growth at around 13.5% this year, and could even decline to single digit growth if the situation does not improve.

“The Indian BPO industry is likely to maintain double digit growth rate as most of the work done by them is ‘keeping the lights on’ or non-discretionary ,” said Everest Group principal & country head Gaurav Gupta.

The current recession is forcing companies from other verticals such as media, entertainment, healthcare, energy and utilities to consider outsourcing of back office work.

“BPO business is largely annuity in nature where the contracts are for a longer term making it slightly more immune from economic recession,” said Intelenet EVP Sandeep Aggarwal says. “A CFO is constantly looking at gaining control on the cost structure,” said Gartner senior research analyst Arup Roy.

According to a Gartner study released in April, 2009, Indian BPO providers have proved to be stiff competition to western BPO providers, accounting for 5% of market revenue generated among the top 150 providers in 2008.

Gartner expects this increase in revenue to be maintained, with the BPO market share of Indian vendors expected to nearly double by 2010.Meanwhile, Infosys BPO CEO Amitabh Chaudhry said that the BPO growth story is primarily driven by captive outsourcing.

Captives have not stopped outsourcing, they have in fact increased their pie,” he said.
Source: EconomicTimes