US govt seeks $5 mn for H-1B visa fraud

The US government has reportedly filed a new expanded indictment against an IT services company, Visions System, for fraudulently using H-1B visas.

According to a report in Computerworld, the US government alleges that the New Jersey-based IT services company paid H-1B workers based on Iowa's lower prevailing wage rates through the creation of shell firms in that state, and not the prevailing wage rates of the higher paying locations where they worked.

According to the report, if federal prosecutors win their case against Visions System Group Inc, they will ask the court to approve $4.9 million in forfeited assets, an amount "representing the total amount of gross proceeds obtained as a result of offenses," the government said.

However, this amount is a reduction from the $7.4 million the US sought from Visions Systems in its initial indictment, filed earlier this year. The reduction was not explained in court documents.

Visions Systems and its executives named in the indictment are fighting the charges in US District Court in Iowa. The attorney representing Vision Systems disputes the government's charge. The news report quotes the company's attorney, Mark Weinhardt, saying that the workers were paid at or above the prevailing wage rates of the places that they were working.

"Vision Systems Group's business was to bring highly trained computer specialists to the United States to serve a need that was unmet or underserved by our native population. We don't think bringing people from abroad to meet that need is or should be a crime," Visions Systems attorney reportedly said.

Indian IT firms exempted from labour laws

With the IT firms being affected the most during slowdown and facing tough situation to come out of that phase, the government has rendered a helping hand by exempting IT/ITES and software establishments from the provisions of Industrial Employment (Standing Orders) Act 1946 (Central Act 20 of 1946) for two years.

This Act applies to every industrial establishment wherein one hundred or more workmen are employed or were employed on any day of the preceding twelve months. This law is strict on classifying workers, their working hours and shifts, the wages payable, besides other archaic rules on leave and attendance.

Following the announcement, Mohandas Pai, Head of HR in Infosys Technologies told the Economic Times, "We have antiquated labour regulations, which do not fit the requirement of the knowledge-based industry. This reform is necessary. We do not want inspector raj here, what we want is more such reforms across industries."
Related: IT companies free of labour laws for 2 years

Yahoo India shuts social network 'SpotM'

Yahoo India will shut down SpotM, the social network it launched less than a year ago in India. The social network which never exited private beta and was meant for the 16-24 age bracket, will not be in service from September 1.

SpotM was not able to keep up in the race with other social networking sites which dominate the market in India. Google's Orkut leads the race with 16 million unique visitors in July, according to comScore statistics. Facebook touched 7.5 million unique visits in July according to comScore statistics. Facebook is even available in several Indian languages like Hindi, Bengali, Punjabi, Telugu, Tamil and Malayalam.

SpotM was expected to gain success due to popularity of social networks in India and with addition of a few differentiating features. It has features which would allow users to make friends with other users and make them private in case they do not want to disclose their relationship. SMS integration would allow users to correspond through SMS without revealing their phone numbers.

Yahoo is believed to be concentrating more on recently launched Yahoo Meme.

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.

Shoppers Stop’s top 150 take 15% pay cut

The K Raheja Corp-controlled department store chain Shoppers Stop has cut its management ranks as is restructures operations to cut costs and swing back to profitability.

Not only have the top 150 employees of the company taken a pay cut of 15 per cent, but BS Nagesh, the vice-chairman, has cut the top management ranks to make the organisation leaner to cope with decline in same store sales.

“We have operated a two-dip structure with a back-up available for the top management up to four levels as part of our exercise of identifying and groom talent. We also had a corporate layer of heads above the respective vertical’s CEOs whose focus was to drive synergies across our formats even as we were driving top line growth. We have now dismantled this dual structure corporate layer,” said Nagesh.

Angel Broking, in a recent research report, said the company cut staff costs by not replacing 300 floor-level staff, who had left the company earlier. As a result, in the quarter ended June its consolidated employee costs fell by 24 per cent to Rs 18.43 crore. The company also cut costs by shrinking its office space by 20 per cent and cutting its corporate office expenses by 40 per cent, Viraj Nadkarni of Angel wrote in his research report.

“We have eliminated the position of business head in charge of property acquisition as we found that most developers wanted to deal directly with the managing director or the Rahejas when it came to agreeing deals,” said Nagesh. As a result now, Vivek Mathur, who is head of e-commerce, is also in charge of the corporate planning function while C B Navalkar, the gro-up chief financial officer, also doubles up as the chief executive office of Crossword Bookstores.

The restructuring initiatives have nevertheless allowed the company to register a Rs 7.63 crore profit before interest and tax in the quarter ended June 2009 as compared to a loss of Rs 20.25 crore in the year ago period.
Shoppers Stop is also on the lookout for another CEO for Hypercity Retail after its expatriate South African head Andrew Levermore left after finishing two contract terms in India.

TCS may follow multiple power-sharing structure

For TCS, India’s largest software services provider by sales, deciding who will fit into CEO S Ramadorai’s shoes after he retires in October was quite easy. It had to be crown prince N Chandrasekaran, who is COO now. But, finding the person to fit into Mr Chandrasekaran’s shoes is proving more difficult.

So much so, that TCS is actually looking at two or more people for the role. Top executives such as Ravi Viswanathan, NG Subramaniam, AS Lakshminarayanan and Abid Ali Neemuchwala are believed to be in the race. “There is an organisation transition to a new CEO currently underway at TCS. Therefore, it is too premature to comment on any restructuring or other organisational initiatives,” said a TCS spokesperson, in response to a mail from ET NOW.

However, multiple employees in senior positions and ex-employees in the know said that a multiple power-sharing formula was being discussed within the organisation, and it has only intensified in the last month or so, as TCS prepares to welcome on board its new CEO next month. They spoke on condition of anonymity.

There are three main reasons why TCS will most probably opt for this structure. TCS is now a $6-billion entity with a headcount of 1.4 lakh. So, huge management bandwidth will be required to carry out functions across different verticals, geographies and service lines. Secondly, Mr Chandrasekaran had too many people reporting into him, which may not be the case going forward. COO duties will be divided up among multiple executives. Thirdly, IT companies are increasingly trying to split duties among various levels in the company.