Source: www.business-standard.com

Outsourcing / off-shoring has proved to be big business for India’s IT industry, especially its Big Four as Wipro, Satyam join TCS, Infosys in beating moolah blues.

Brushing aside fears that wage inflation, rupee appreciation and a perceived US slowdown would clamp the growth of Indian software firms, the total turnover of India’s top four IT service providers i.e. Tata Consultancy Services (TCS), Infosys Technologies, Wipro Ltd., and Satyam Computer Services has crossed the $10-billion mark for financial year 2007.

With the announcement of Wipro and Satyam’s financial year 2007-08 revenues of $3.13-billion (IT business amounting to only around Rs. 13,578-crore) and $1.46-billion (consolidated amounting to Rs. 6,668-crore) respectively, the total income of these four IT giants stands at around $12-billion (Rs. 52,825-crore), a slightly over 46% jump over last year’s figure of Rs. 37,682-crore.

This means that even after factoring in rupee appreciation and wage inflation, total income of these Indian Tigers, by 2009 could surpass the $20-billion mark, assuming an annual growth rate of 30%.

Even the aggregate net profits of the firms increasing by 43.5%, touched Rs. 12,432-crore (around $3-billion) in fiscal 2007.

However, their net profit margins (as a percentage of the revenue) have risen marginally by 0.54%, averaging 23.53% in fiscal 2007 against 22.99% in financial year 2006-07.

Satyam, which underperformed the other three firms, registered 30% growth in sales and 22.2% in profit in 2006-07.

However, the rising rupee (recording a 6% year-on-year increase) and wage inflation (the four companies added 67,352-employees in fiscal 2007 to take their total figure to 265,193 – a 34% increase) could play spoil sport.

“While the guidance of these companies is robust, the rupee could affect the operating margins by 150-basis points, while wage inflation could pluck around 300-basis points from the margins,” says Krupal Maniar, Research Analyst, Emkay.

For instance, the employee-related costs of the four firms went up 46.12% touching Rs. 28,827-crore, increasing 222-basis points to account for 54.54% of their total revenues.

The employee cost as a percentage of Wipro’s revenue was 49.7%, while it accounted for 63.8% of Satyam’s revenues.

Harit Shah, analyst, Angel Broking, corroborates: “We see the rupee volatility as a major factor in the forward growth of these companies. They will have to have structured currency management to maintain these growth rates.”

These fears notwithstanding, the analysts note that better pricing, improvement in employee utilisation figures, a move towards more off-shoring, and breaking into geographies other than the US could help the IT firms stem the adverse effects.

Indian IT firms have begun to take note of a changing scenario, even as they formulate an aggressive strategy to meet the challenge. Having gained steam, they are not about to let go what they have battled so hard for.

Source:www.bloomberg.com

200-year-old American publisher is completing the circle of knowledge.

Peter Booth Wiley, chairman of the Hoboken, New Jersey-based John Wiley & Sons Inc., has academics in India developing a new series of customized, electronic books that may one day become remedial text in U.S. universities.

Outsourcing isn’t new to the global publishing industry

In 1976, long before Bangalore became the world’s outsourcing capital, Harold Macmillan, the former British prime minister, used the southern Indian city to offer Macmillan Publishers Ltd.’s typesetting services to others.

However, it’s only now that the content — especially in culturally neutral fields like science and technology — is going global, reflecting the new economic reality.

It isn’t that U.S. or U.K. professors’ royalties are under threat. As long as demographics in India and China remain favorable and quick economic growth keeps boosting returns on higher education in these two nations, the textbook market in Asia will continue to expand rapidly, driving global growth.

Books used in postgraduate research and teaching will be dominated by content created in the developed world, thanks to its entrenched leadership position in technological innovation.

At the undergraduate level, however, hard distinctions between producing and consuming economies will disappear.

In India’s case, because the medium for scientific education is English, a chunk of what’s being produced for the home market is also readily exportable.

This wasn’t always so.

From Importer to Exporter

Back in the 1950s and the 1960s, the flow of scientific knowledge between the West and India was strictly unidirectional.

Popular American books such as “College Chemistry” by Nobel laureate Linus Pauling were republished in India — at one- fifth of their original price — under a U.S. aid program called PL 480.

British titles came to India under the English Language Book Society program. The ELBS books, which cost a third of the original, had “Low-Priced Edition” emblazoned across the cover.

Prentice Hall’s incredibly cheap Eastern Economy Edition in those days was nothing more than black-and-white photographic reproduction of American titles.

Of course, at the height of the Cold War, the Soviet Union, too, was a big force in the cheap textbook game as it sought out friends in the Third World. And apart from everything else, Soviet books were printed on amazingly good-quality paper.

Building Blocks

The efficacy of foreign aid to developing countries is a debatable subject today. But there isn’t a doubt that cheap Western textbooks — not to mention the first IBM computer that arrived in an Indian university in a bullock cart — triggered a transformation of the economy.

“When a generation of engineers was educated in India, it was educated on our books,” Wiley said in an interview in Singapore. “And you see now what that generation has done.”

India’s prowess in computer-software services and generic drug discovery is well-documented. Earlier this month, the journal Nature Biotechnology reported that India will also be a large player in research and manufacturing of biotech medicines.

None of this would have been possible without investments in higher education.

Knowledge Gaps Narrow

The narrowing of India’s education deficit — to a point where knowledge can begin to flow both in and out — can be seen from the sales pattern of academic publishers.

India today represents Wiley’s fastest-growing market, expanding at an annual 25 percent pace. That compares with a two- year average growth rate of 4 percent in Wiley’s U.S. sales, according to my Bloomberg. India is also emerging as a key center for developing educational content.

“It’s no longer just the West educating the rest,” Wiley said. “It’s all of us educating each of us together. The knowledge revolution is fascinating to me because it is multicentric and global.”

Oxford University Press, which has been publishing textbooks in India since 1912, is already playing a role in taking Indian- based academic authors overseas.

Homegrown Indian companies, such as New Delhi-based Narosa Publishing House, are also working with professors at the Indian Institutes of Technology and other top local universities to create scientific content for a global audience.

Two-Way Flow

Wiley’s new series of textbooks will be delivered electronically — as PDF files. They will be tested initially at second-rung engineering universities in India before being taken to China. If the experiment succeeds, the U.S. market may be the next destination, Wiley said.

Each of these books, tailored to meet very specific learning requirements, could potentially replace bulky standard textbooks. The final cost to the student would be less than $10.

Textbooks and supplies cost as much as $900, or 26 percent of the tuition and fees at a four-year public institution in the U.S., according to data reported in a July 2005 study by the U.S. Government Accountability Office.

If low-income students in the U.S. are one day able to benefit from Indian-created books, just as generations of Indians have from American content, it will be a victory for globalization. The circle of knowledge will be complete.

Source: www.business-standard.com

One wonders what the Tiger of Mysore, India’s first freedom fighter i.e. Tipu Sultan would have to say if he were around to find out that the Tier II city of Mysore is to have its first MNC, when the IT department of a US retail chain, Target, opens shop on a 21-acre site at Koorgahalli, next door to Infosys Technologies.

According to M. N. Vidyashankar, IT, BT and S&T Secretary of Karnataka government, Target will invest Rs. 65-crore within the first two years and hire 1,500-employees, while upping the employee headcount to 3,000 and raise its investment to Rs. 300-crore in the first five years,.

Target, which has a presence in 80-countries, has already had land allotted to it in KIADB’s new industrial area. Meeting Deputy Commissioner Selva Kumar, earlier in the day, Vidyashankar requested him to take possession of the land and hand it over to the company without delay, while informing reporters: “With Target setting up shop in Mysore, I am sure others will follow.”

And, in order to meet IT industry requirement for faster travel between the state capital and Mysore, Chief Minister H.D. Kumaraswamy has written to Railway Minister Lalu Prasad Yadav requesting him to introduce a non-stop AC chair car between the two cities.

Confirming the fact, the IT secretary said: “We will take up the proposal to the logical end when we visit Delhi next week,” adding one train could leave Bangalore in the morning and the other in the reverse direction in the evening.

What would Tipu Sultan have to say to all this, Tipu Sultan who fought so bravely, so long and hard, fought to the finish, spilling his blood to give colour to the dusty brown of his native land, all to expel the cursed firangis, the intolerable British from his sacred motherland. A freedom fighter par excellence, he was a formidable foe the British had never confronted before. Refusing to compromise the main principles of his life, Tipoo refused to submit himself to the supremacy of any foreign power. His plan of action to free India from colonial shackles forms an illustrious chapter in Indian history, even as he used every means, energy, strength and resources for freeing his land and his people from the yoke of the British Raj. His maxim was: “It was far better to live like a lion for a day than to live like a jackal for a hundred years.”

Will he turn in his grave at this invasion from the West? Even, if he does, who will pay heed, as India Inc. in order to control the talent crunch sets up institutes, even as the West off-shores / outsources just about everything and anything they can. The lure of the dollar proves to be far stronger than faded echoes from the past.

As sectors like infrastructure, real estate, microfinance, animation and organised retail witness phenomenal growth, training institutes or job-specific courses to impart skills required for these businesses. This, even as BPOs, in order to control the high attrition rate, have come out with a novel idea to retain talent by offering employees opportunities for higher education , apart from offering the enhancing strength of the in-house trainings, with many BPO firms considering similar kind of alliances with educational institutions e.g. tying up with US-based Chartered Institute of Management Accountants (for offering courses to the employees) to Insosys BPO tying up Karnataka University, and Genpact’s agreement with Association of Certified Chartered Accountants.

No doubt, the lure of ‘paisa vasool’ will reduce the attrition rate, as BPO associates whose salary structure is relatively bad compared to other sunrise professions, will be provided with the scope of higher education, while working.

But, what are we to do about putting the spectre of Tipu Sultan to rest? Perhaps, the fact that his country is prospering from the trend of off-shoring / outsourcing, the fact that slowly the country is getting back on to its feet after being knocked under for a six by the departing British will allay his fears, put to rest his doubts at having firangis, walking on the sacred earth of Mother India, once again! Better luck this time, no British Raj or for that matter US Raj! But, with the US Navy hankering for a berth in Indian ports, will the doubts of Tipu Sultan and those who are in tandem with his thoughts and his emotions, be allayed!

If, the US Navy wants a presence in Indian waters, then no, we cannot push the angry spectre of Tipu Sultan in the background. We need to be alert and alive to the devious cunning of the West, if we don’t want another Afghanistan or Iraq or Philippines! Say no, to the presence of US forces, either on our shores, or in our waters, or in our skies, even as we rake in the big money dollars from US off-shored / outsourced projects!

Take a leaf out history’s book; learn a lesson from the past, all the control must be in Indian hands, even while we provide the West with our skills and our talent, albeit for a price!

Source:www.TaipeiTimes.com

India’s rupee is showing new muscle as it scales nine-year highs against the US dollar, alarming exporters who sell most of their goods to the US.
India’s Federation of Indian Export Organizations says the appreciation of the rupee has “severely eroded the profitability of exporters.”

The partially convertible rupee has risen by around 11 percent against the US dollar since last July, helped by inflows from investors eager to invest in India’s booming economy.

“Its appreciation reflects the underlying strength of the Indian economy and, of course, [broad-based] dollar weakness,” said Deepak Lalwani, director at London-based Astaire Securities.

But until lately, dealers say, the central bank had been intervening by selling rupees to make sure the Indian currency does not rise too quickly, and to keep a lid on export prices.

Now though, market players say, the Reserve Bank of India (RBI) has eased off from intervention as it seeks to wrestle down inflation in Asia’s fourth-largest economy, which is growing by around 9 percent.

“The bank has its eye firmly on [capping] inflation,” said DK Joshi, principal economist at Indian credit rating agency CRISIL.

Letting the rupee rise has made imports less expensive, cushioning the impact of strong fuel prices for India, which relies heavily on imported oil which is priced in US dollars.

By not selling rupees to buy US dollars, the bank also has not added to rampant money supply growth which has been helping fuel inflation.

After dipping briefly this month, Indian inflation crossed six percent again last Friday to hit 6.09 percent, despite a slew of monetary tightening measures.

Inflation is now more than half a point above the central Reserve Bank’s ceiling of 5.5 percent.

Economists expect the rupee’s firmness to continue at least as long as inflation remains above target.

“We expect the rupee to benefit from both rising interest rates and the shift in policy focus of the RBI solely toward inflation control,” said Goldman Sachs in a research note.

The rupee’s strength is a novel experience for Indians more accustomed to a currency that a few years ago only seemed to lose ground.

“Until about three or four years ago, on average you would factor in about a 5 percent annual deprecation,” Lalwani said.

The rupee finished the day on Friday at 41.99 to the US dollar. It has notched up most of its gains since the beginning of last month, when figures show the RBI was intervening less in the market.

In 2002, one US dollar bought over 49 rupees. Now economists are eyeing a 12-month target of around 41 rupees to the greenback.

The rupee has been gathering strength as the world started talking about India as an emerging economic powerhouse.

Now India is sitting on more than US$200 billion in foreign reserves.

The sum is a far cry from 16 years ago, when reserves were down to just US$975 million, and India had to pledge part of its gold reserves as collateral and promise to free up its economy to access funds from world lending bodies to avoid default.

Foreign direct investment nearly tripled in the past financial year to US$16 billion from US$5.5 billion a year earlier, and that isn’t counting the billions of dollars which flowed into the share market.

But the rupee’s rise is hurting exporters.

“We will have a discussion with the exporters to find a way out of it,” Commerce Minister Kamal Nath said last week, warning that the stronger currency could have “a serious impact” on the country’s balance of payments.

Despite the stronger currency, the government forecast a 28 percent rise in merchandise exports to US$160 billion in the financial year that ends next March, and said the target would have been higher if the rupee had been weaker.

The red-hot outsourcing business, which earns most of its profits in US dollars, has especially been feeling the pinch after getting used to fat earnings margins. The sector now is having to look at new ways to be competitive to offset the rupee’s gains.

While the four top IT service providers, whose annual turnover crossed the US$10 billion mark this financial year, have been upbeat about prospects, analysts say rupee gains could reduce margins by about 150 basis points.

Source:www.bbc.co.uk

Bangalore-based Wipro saw net profit rise 44% to 8.61bn rupees (£103m; $205m) in the first quarter, from 5.97b rupees a year earlier.

Wipro rival Satyam Computer saw profits up 39% to 3.58bn rupees for the period.

Many European and US firms are moving back-office and software development to India, where skilled labour is cheaper.

Another factor attracting UK and US companies to India is the large number of English-speaking workers.

No concerns

Wipro offers IT, software, and call centre services to foreign clients, which includes Cisco and Nortel.

Both Wipro and Satyam said they expected strong growth in months ahead, and their earnings topped market expectations.

“There is nothing in terms of the environment in Europe, Japan or the US which is a cause of concern,” Wipro chairman Azim Premji told a conference.

He added that there were no signs that the US economy was going to slow down.