Source: www.livemint.com
IT firms cross-sell additional services to beat slowdown blues

Bangalore: Client mining, or cross-selling more services to existing customers, is helping Indian software services vendors such as Tata Consultancy Services Ltd (TCS), Infosys Technologies Ltd and Wipro Ltd earn more revenues even as mega deals evaporate from the outsourcing landscape and competition intensifies from global firms.

TCS has tripled its number of customers giving $100 million (Rs394 crore) in annualized revenues over the past 12 months, while Infosys and HCL Technologies Ltd have more than doubled them, even though they haven’t won as many large deals.

TCS currently has seven large clients from whom it earns more than $100 million annually from two such clients a year ago, while Infosys has five such accounts that generate more than $100 million in revenues. The largest customer for Infosys provides more than $200 million in revenues, accounting for 9.5% of total company revenue.

“Repeat business due to effective client mining provides stability and predictability in revenues, which is extremely important for the vendors,” says Harit Shah, equity analyst at Angel Broking Ltd, a Mumbai-based brokerage firm. For Indian vendors, repeat business traditionally accounts for more than 95% of their revenues.

“The outsourcing deals landscape is redefined today as there are no more multi-billion, multi-year deals as clients are breaking up those deals and giving them to best of breed vendors,” says V. Balakrishnan, chief financial officer, Infosys Technologies.

Even the $100-200 million deals are not many. “There are a lot of $30-50 million deals spread over two-three years, which is the sweet spot for Indian companies, and everyone is winning there,” Balakrishnan said.

Infosys typically enters into a relationship with clients selling a service and over a period, manages to cross-sell more services and grow with them. “When you add a client, you have to make sure that it gives at least $1 million in revenue over first 12-18 months, otherwise we drop them,” says Balakrishnan.

The challenge he goes on to add, is to grow $1 million client to $5 million and $5 million into a $10 million client. The effort, adds Balakrishnan, is to broad-base the client base to “improve the pyramid”.

For Indian information technology (IT) vendors, the current exposure to the IT budgets of large Fortune 500 firms is very small. “With the concept of offshoring already proven, there is scope to get a larger share of the client’s IT wallet by offering the expanded portfolio of services,” Shah said.

Wipro Technologies, the global IT arm of software-to-soap maker Wipro Ltd, reported its first client accounting for a run rate of $100 million in the December quarter.
The company has sharpened its focus on client mining and has classified customers as Mega accounts that have potential to yield $100 million, and Gama accounts that have potential to give $50 million and is investing in building them further.

“We have identified about 10-odd Mega accounts and 25-odd Gama accounts and are focusing on them,” says Rajesh Ramaiah, corporate treasurer at Wipro, adding that the company’s strategy fits well in terms of client mining.

Avinash Vashistha, chief executive officer of Tholons, an offshore advisory and consulting firm, says companies such as TCS and Infosys are aiming at getting more return from their selling, general and administrative budgets.
Indian IT vendors plan to do this by leveraging existing relationships and mining the accounts deeper and broader.

“Offering services such as application development and maintenance, infrastructure managed services, business process outsourcing and customer care enable the tier I firms to get more from existing clients, while the mid-tier firms find it difficult to offer integrated services,” adds Vashistha.

Client mining helps reduce the sales and marketing expenses for existing clients resulting in improved operating margins, says Balakrishnan.

However, Shah argues that contribution from large clients to margins itself was debatable as there could be pressure on billing rates since customers tend to demand volume discount from the vendors.

As a possible slowdown looms large, vendors will look to mining existing clients more. Vashistha says this is because they can realize more for every dollar spent on sales and marketing.

Further, it will help them to maintain the profits in spite of a slower rate of growth in revenue. This is because for existing customers, the sales lead time is lower and the vendor has a better knowledge of available budgets through their strong relationship, he adds.

Source: www.financialexpress.com

New Delhi, Feb 3 From almost a non-existent market five years ago, India today has become the hub for outsourcing TV commercials with one-third market share. That’s because the US and the countries in western Europe find India the cheapest among low-cost destinations.

The cost of outsourcing a commercial to India is 20-25% less than what it costs at its closest competitor Malaysia. The savings on cost for line production in low-cost countries are 12-38%, with India providing 31% savings. Outsourcing end-to-end production can help save 44-77%, with savings in India pegged at 68%.

Availability of directors and crew members at low fees, and relatively cheap rental of equipment in India make the country the least expensive amongst all low-cost destinations. Most line production (70%) and end-to-end production (20%) are outsourced to India because of its unique culture, says US-based KPO The Smart Cube. For instance, Metlife Insurance shot a commercial in India, targeted at NRIs in the US. It required an Indian wedding as the theme and Nomad Films of Mumbai was hired for producing the film. But account outsourcing of an entire commercial, from ideation to production, is in a nascent stage. “Account outsourcing has more to do with the creative talent. There is a lack of trust in Indian professionals managing cultural issues of foreign countries, but that perception is changing gradually,” says Sameer Walia, MD, The Smart Cube.