Source: www.heraldtribune.com

Toni Whitt : General Atlantic LLC, the company that has taken a 9.5 percent stake in local human resources outsourcing company Gevity, also is a majority stakeholder in San Francisco-based TriNet Group, a similar company on an aggressive growth campaign.

TriNet has acquired several other professional employer organizations across the country, signing an agreement last month to acquire LMC Resources Inc. in Denver. In 2006-07, TriNet took over two human resources companies in California.

Now, with the same private equity investor involved in both companies, speculation is running high that a Gevity-TriNet merger could be in the offing.

The combination of Gevity and TriNet might represent the largest PEO in the country. TriNet’s clients have about 35,000 employees, while Gevity’s have about 107,000. PEOs provide payroll administration, benefits administration and workers’ compensation insurance to client companies and their workers.

Gevity, which has 850 employees, already is among the largest PEOs, said Milan P. Yager, executive vice president of the National Association of Professional Employer Organizations. TriNet is in the top 20, possibly near the top 10, he said.

A merger “would make it one of the biggest PEOs in the world,” Yager said. “If you put the two of them together, it would clearly make them a significant player. It would be a big deal.”

Gevity’s shares, which trade on the Nasdaq, posted a 12.5 percent gain Wednesday as word of the General Atlantic stock purchases became known. The shares were selling for $7.32 at the close of regular trading Thursday, down 8 cents, or about 1 percent.

While Gevity has been involved in a reorganization over the past year, TriNet, with 435 employees, has continued its growth. Since 2002, the company has acquired a total of six human resources groups, mostly on the West Coast. At the same time, it has opened offices in Chicago, Boston and the Washington, D.C., area. TriNet will open offices in Houston and New Jersey in coming weeks.

Burton M. Goldfield, TriNet’s president and chief executive officer, said the company is “absolutely” looking to expand its business in the Southeast. Goldfield, who joined TriNet two weeks ago, said he already has been to Florida to get a look at the market and to meet with one of the company’s directors.

TriNet’s founder and chairman Martin Babinec said: “There is a vast and accelerating market opportunity in front of us, and Burton is the right person to lead TriNet into our next 20 years.”

Patrick Lee, director of investor and media relations for Gevity, said that General Atlantic’s interest in his company is a positive sign.

“We’re being viewed as a valuable investment in the market,” Lee said, adding that it was premature to comment “on any kind of merger or anything of that nature.”

Last summer, Gevity laid off 50 employees and began changing the focus of its mission. In the first quarter, the company reported a loss of $1.6 million, or 7 cents per share, driven largely by that exit from a line of business to focus on human resources outsourcing. The loss compared with a profit of $2.5 million, or 10 cents per share, in the same period a year ago.

The company also moved to appoint a new management team. In October, Gevity’s board appointed Michael Lavington as chairman and CEO designate. Lavington, a British citizen, is still waiting for his work authorization. He has been a director of Gevity since September 2006.

Both the management and business philosophy changes have been “perceived very positively and viewed very positively throughout the organization and among our stakeholders,” Lee said.

Gevity already has a presence in California, but TriNet is the dominant company there, Lee said.

The Lakewood Ranch company, founded as Staff Leasing, started in Bradenton, something of the Silicon Valley of the PEO industry.

TriNet formed later in San Francisco, catering to small technology and biotech companies that were growing quickly and needed support. Its growth has been consistent — 30 percent a year on average.

“Gevity has always been a dominant player historically, even when they were Staff Leasing,” said Yager, the PEO association official.

“In recent years they have undergone a couple of reorganizations to gain greater profitability. TriNet has been on a more consistent path.”

General Atlantic’s investment has helped fuel that growth, Goldfield said.”General Atlantic has been a great partner to TriNet prior to my arrival and continues to be a great partner,” Goldfield said. “My vision is about a base of customers throughout the country and beyond.”

Source:computerworld.com.sg

India’s tech companies, interested in capitalizing on their success in drawing IT outsourcing business from U.S. and other Western companies, are examining what they need to do to capture a broader range of the engineering services business.

The National Association of Software and Service Companies in Delhi, India’s leading IT trade group, commissioned a study by Booz Allen Hamilton, the McLean, Va.-based consulting firm, to examine the country’s potential to gain a larger share of the offshore engineering services business, going beyond software engineering to a swath of industries, including automotive, aerospace, utilities, construction and industrial.

The Booz Allen report is almost breathless in describing India’s potential to provide engineering services, but it also details two problems the country has to address to make it happen: the quality of its infrastructure, including ports, roads, airports and telecom, and the quality of its education.

“A new window of opportunity is opening now for India,” wrote Booz Allen, of the engineering services market.

Worldwide, about US$750 billion is spent on engineering services, the report said, and the figure is expected to reach $1 trillion by 2020. Of the amount now spent on engineering services, only $10 billion to $15 billion is done by offshore vendors, with India getting about 12% of that offshored work, according to the report.

Today, about 35,000 engineers in India work in engineering services, but by 2020, the country may need as many as 250,000 to reach its potential as an engineering services provider, the report said.

Vikas Sehgal, a partner at Booz Allen in Chicago, said the need for offshore engineering services in India will be driven by demand for people with these skills. In Europe, and in Germany and France, in particular, aging workers and attrition are creating a gap in available engineering skills, he said. This is happening at the same time that companies need more engineers to build products, even as productivity tools improve, he said.

For instance, Sehgal said it takes more engineering time today then it did a decade go to build a car because of increasing complexity and electronics, pointing out there are “more electronics in a toy car today than a reasonably good car had in the 1990s.”

Although India and China, for that matter, are often said to be outproducing the U.S. in engineering talent, the up-close picture produces a different set of results. The Booz Allen report points out that “although India has almost 1,400 engineering schools, only a handful of schools are recognized as providing a world-class education.” Moreover, “interviews with vendors suggest that recruiters consider candidates from only a fraction of these schools.”

Although India was producing 220,000 engineers with bachelor degrees in 2005-06 compared with 129,000 in the same year in the U.S., a recent study in the Journal of Engineering Education found it is not an apples-to-apples comparison when the quality of the graduates are considered.

Similar to the point raised by Booz Allen, the journal notes that despite the higher numbers of engineering graduates in India, “many large companies complain of difficulty in finding qualified graduates.”

Although the number of Indian engineering graduates is on the rise, “many large companies complain of difficulty in finding qualified graduates.” (The study, which appeared in the January issue of the journal is Getting the Numbers Right: International Engineering Education in the United States, China and India , was written by Duke University faculty members, Gary Gereffi, Vivek Wadhwa, Ben Rissing and Ryan Ong).

The journal Foreign Affairs , in its May/June issue, published an essay adapted from The Post-American World , a book by Newsweek International editor Fareed Zakaria, that looks for similarities in Britain’s decline as a world power with the problems facing the U.S. today. It also looks at engineering education.

“The best and brightest in China and India — those who, for example, excel at India’s famous engineering academies, the Indian Institutes of Technology (5,000 out of 300,000 applicants make it past the entrance exams) — would do well in any educational system. But once you get beyond such elite institutions — which graduate under 10,000 students a year — the quality of higher education in China and India remains extremely poor, which is why so many students leave those countries to get trained abroad,” writes Zakaria.

The threat to the U.S. comes from its own educational priorities, Sehgal said. If students reject engineering and math as career paths, the U.S. won’t have enough engineers and its future will be less bright, he said. As far as India’s need to improve its own educational system, while schools in India don’t have enough laboratories, tools and other things needed today, the demand for these skills is there, and engineering remains a very desirable career path, he said.

“People want to be engineers” in India, said Sehgal, adding that he believes the country’s quality issues will be fixed over time.