Source: infotech.indiatimes.com

NEW YORK/SAN FRANCISCO: Hewlett-Packard Co is in talks to buy technology outsourcing company Electronic Data Systems Corp for $12 billion to $13 billion in a deal which would vault it to a close second to IBM in technology services.

The acquisition would be HP’s biggest since its $19 billion acquisition of Compaq in 2002. Shares of EDS rose nearly 28 per cent, taking its market value to about $12 billion.

HP shares fell nearly 5 per cent amid some scepticism that slow-growing EDS, still considered in turnaround mode, would provide more than a one-time boost, and might not be worth a premium of as much as 37 per cent.

A source briefed on the matter told Reuters about the talks and that the plan was to announce a deal by the close of Tuesday. The Wall Street Journal first reported the discussions, and later HP and EDS both said they were in talks about a business combination but gave no details.

“While Hewlett-Packard has over time built up its own outsourcing practice, this clearly is a move by Mark Hurd to challenge IBM in the services area,” said David Garrity, director of research at Dinosaur Securities, referring to HP’s chief executive.

A bigger HP could compete better against International Business Machines Corp in going after large clients and help it keep costs in line, analysts said. If HP completes the acquisition, it would be by far the largest under CEO Hurd.

“It would put Hewlett-Packard in the sweet spot of an IT spending trend. It would definitely improve their position against IBM,” said CRT Capital Group analyst Ashok Kumar.

Scepticism about target

HP has long considered an acquisition to beef up its tech services business, a sector that offers relatively stable income and high margins even in an economic downturn.

Worldwide computer services revenue rose 10.5 per cent to $748 billion in 2007, according to data released on Monday by market research firm Gartner Inc.

IBM continued to be the leader, with 7.2 per cent share. EDS weighed in at No. 2, with 3.0 per cent of the market, while HP was No. 5, with 2.2 per cent market share.

Together HP and EDS would have roughly $39.4 billion in services revenue, compared with IBM’s $54.1 billion last year.

Source: www.ndtvprofit.com

Mid-sized IT services and BPO companies are vulnerable to the adverse impact of US slowdown due to exchange rate volatility, slower deal closures, inflation and low billing rates than their bigger counterparts, a study said on Monday.

“The mid-size IT services companies are more likely to face the combined pressure of exchange rate risk, lower billing rates, domestic inflation and slower deal closures,” the study by the CyberMedia publication for the outsourcing industry said.

The large vendors with multi-shore delivery capabilities like TCS, Wipro, Infosys, Satyam and HCL Technologies would be better equipped to exploit new opportunities in the slowdown period, it added.
However, the study said slowdown in US economy will have moderate impact on the global IT services and BPO industry.

US slowdown to impact revneues in the short term

The economic slowdown in the US would impact profitability and revenues in the short term, the study said.

The industry is gearing up with a two-pronged approach of re-aligning existing service areas and increasing focus on non-US geographies to shield itself from impact of a slowdown.

Nearly 75 per cent of the service providers who were surveyed said that by adopting this approach, their companies could marginalise the net impact on revenue growth and profitability, it added.

Nearly half of the service providers, primarily representing BPO, infrastructure management and application maintenance areas, indicated that the slowdown has not impacted the deals pipeline in the current quarter.

On the contrary, many of these companies are seeing a stronger deals pipeline and accelerated sign-ups.
However, companies representing the new application development and offshore engagements reported delays, down-sizing or re-negotiation of contracts.

Planned projects

Nearly two-thirds of the buyers of outsourcing said that their companies would go ahead with the planned projects.

On cutting down the IT spending, nearly 36 per cent responded in the negative. However, 36.4 per cent of the respondents admitted that their companies may prioritise the outsourcing of IT projects in the short term.

Almost one-half of the respondents identified cuts in the contract IT staff, full-time internal hires and IT consulting as the likely areas to get impacted the most in the short-term.

The BPO-related services are least likely to be affected by slowdown.

Within BPO, 47.2 per cent of the respondents said that spend on sectors like finance, procurement and customer care will go as per plan. In the claims, mortgage, travel related BPOs, 44.1 per cent of the respondents felt that their clients would continue their BPO projects.
BPO companies like Genpact, WNS Global Services, EXL Services and Cambridge are among the Companies that are more likely to offer better value to clients during this period, the Global Services study noted.

Source: infotech.indiatimes.com

MUMBAI: In the wake of BPO employee Prakash Jadhav’s alleged involvement in a multi-crore credit card fraud, BPOs and ITeS companies are once again in the limelight for data security practices.

With the rising number of such cases coming to light, outsourcing companies in the country have now resorted to conduct infinity screening — background screening more than once for the employees — as a measure to strengthen security.

Jadhav, a Mumbai-based BPO employee was caught on Friday by the local police for alleged credit-card scam.

The focus has also shifted to transport personnel who are increasingly being subjected to regular background checks.

While some companies are content with mere address verifications, a few others are playing Sherlock Holmes conducting sting operations on the cabbies to ensure safety of their associates.

Infinity screening process entails conducting background screening more than once during the year. Background screening typically happens when the employee joins the organisation.

According to First Advantage managing director (West Asia) Ashish Dehade Indian companies are the only ones practising infinity screening.

“It helps in checking criminal records as these are dynamic in nature. Previous employment and education records remain static,” Dehade says. First Advantage is one of the largest employment screening and verification company.

It is difficult though to base this concept on random sampling as it affects companies’ resources. Gurgaon-based background verification company, AuthBridge Research Services’ CEO Ajay Trehan says that background checks conducted more than once have a rationale behind them.

“These tests are held when an employee is put on another project which is more sensitive or when he is sent abroad for an assignment,” says Trehan.

There have been cases of acquisitions where employees of acquired companies are made to undergo background screening. “In one case 10,000 employees of an acquired company underwent background screening,” he adds.

Background screening is a recent concept in India undertaken at the insistence of clients. Screen Facts co-founder Kalpesh Desai says risk mapping followed by perpetual checks would be the ideal.

“High risk areas should be mapped and details of the employees working in these departments should be verified from time to time. As of now, the number of companies doing this is negligible,” adds Desai.

Further, forethought needs to be given to this process as it has a huge financial impact. WNS corporate HR chief people officer Aniruddha Limaye says that under normal circumstances it is not feasible to conduct background screening for a random sample periodically.

“It takes anywhere between Rs 1,000-2 ,000 per person to conduct a background check,” adds Limaye.

And checks are not limited to employees anymore. WNS, a third party BPO with over 17,000 employees conducts fingerprint tests for its drivers apart from its employees in association with district forensic departments.

It also conducts behavioural tests for the company’s transport staff. “The drivers are basically aggressive. The training aims at educating them with the driving norms. We tell them to adhere to the speed limit and not be pressurised by employees,” says Manoj Sharan, chief administrative officer, WNS.

These work shops are held during weekends. The drivers are selected on the basis of feedback received by the employees. There are close to 2,000 drivers at WNS. While WNS has been conducing address verification in the past, license checking and finger printing etc have been institutionalised in the last one year.

Like WNS, the BSE-listed Firstsource too has started taking fingerprints of its security personnel and driving staff. They also conduct random alcohol tests on the drivers.

BANGALORE: India’s export-driven software services companies are shifting focus to emerging economies, such as the Middle East and Africa, where technology spending is growing twice as fast as in developed countries.

As the United States, which contributes more than half these companies’ sales, lurches towards recession in the wake of the subprime crisis, companies such as Satyam Computer Services Ltd, Infosys Technologies Ltd and Wipro are looking farther afield, as well as to their home market, to take up the slack.

Spending on information technology in Asia-Pacific, Latin America, the Middle East, Africa and Eastern Europe is on course to hit $1.1 trillion this year, up from $964 billion in 2007, according to research and advisory firm Gartner.

Spending in 2011 will reach $1.3 trillion, posting compounded annual growth of around 8.5 per cent, compared with 4.3 per cent growth in mature markets, the Gartner report added.

Many Indian companies, which forged close ties with the United States having rewritten the programming code that helped overcome the millennium ‘Y2K’ issue, have already started diversifying their customers.

Satyam, India’s fourth-largest software exporter, is negotiating a score of deals worth $10-$30 million in Asia-Pacific, the Middle East and Africa, its director Virender Aggarwal said.

“The deals we are seeing in emerging markets now are just the beginning,” said Tejas Doshi, analyst at broker Sushil Finance.

LESS IN US

India’s software and back-office outsourcing industry is on course to ring up sales of $64 billion in the fiscal year just ended, up from $48.1 billion, the National Association of Software and Service Companies says.

Exports are around $41 billion of that total, up from $32 billion a year ago when the United States accounted for around 60 percent of those sales.

“I see the US accounting for 50 per cent of the sector’s exports in three years, down from 60 per cent now,” said Avinash Vashistha, chief executive of outsourcing consultancy Tholons.

Led by Tata Consultancy Services and Infosys, India had focused on the US partly because it was the easy option.

“They have been trying to get the low hanging fruit,” Sushil Finance’s Doshi said.

But a weakening US economy and a rupee that gained more than 12 per cent against the dollar last year have forced Indian software services companies to broaden their horizons.

They face tough competition from global majors such as IBM, Accenture and Microsoft for outsourcing contracts from fast-growth markets such as China and India.

Source: www.informationweek.com

Travel and transportation is becoming an increasingly important vertical for TCS, accounting for 4% of the company’s $5.7 billion in total revenues last year.

British airline Virgin Atlantic has extended its technology outsourcing contract with India’s Tata Consultancy Services.

Under the deal, TCS will continue to manage Virgin’s network and computing infrastructure and application development needs through 2011. TCS will also provide 24-hour help desk services for the airline and manage its relationships with third party IT vendors.

“Today, airlines need to effectively exploit IT more than ever to be successful in a very competitive marketplace,” said Virgin IT director Mike Cope, in a statement.

Financial terms of the deal were not disclosed.

Airlines typically outsource certain tech and customer services operations to lower cost countries like in India to save money. However, with the price of jet fuel skyrocketing along with other petroleum-based fuels, the savings only go so far.

A number of airlines, including Midwest, have in recent weeks announced service cuts in response. Others, such as American Airlines and Delta Air Lines, are raising fuel surcharges on tickets.

Travel and transportation is becoming an increasingly important vertical for TCS, accounting for 4% of the company’s $5.7 billion in total revenues in its most recent fiscal year. The company last year launched a dedicated Travel & Hospitality Innovation Lab in India to develop software and services aimed at companies in those industries.

In tackling the aviation market, TCS is going head-to-head with Dallas-based Electronic Data Systems (NYSE: EDS), the world’s largest provider of outsourcing services to the airline industry. On Thursday, EDS and Microsoft announced an agreement under which EDS will use Microsoft technology to build computing networks that use service oriented architectures for its airline customers.