Source: www.tradingmarkets.com

MUMBAI, India– India holds a relatively strong position in the global Engineering Services Outsourcing (ESO) market, with a potential of US $40 billion by 2015. India’s strengths lie in the automotive, aerospace and hi-tech telecom sectors accompanied by a large talent pool and experience in this field. The growth in engineering services signifies the need for global companies to expand their R&D centers beyond their home countries.

Another attractive factor for these global manufacturers is low labor cost along with quality, one of the main reasons that makes India a major outsourcing destination.

Indian engineering service providers are technically proficient and have a fervent eye for detail ensuring that service levels remain better than competing countries. Most of the Indian engineering services providers are at par with competition and offer an array of services, which include computer aided design (CAD), computer aided manufacturing (CAM), computer aided engineering (CAE) while vertical specific engineering services companies provide product life cycle management solutions, reengineering and design change management, too.

To target the maximum potential from engineering service providers and automotive manufacturers, there is a need to address key issues like quality manpower, low cost services and put India on the global market as an engineering service provider. Frost & Sullivan is organizing a two-day high-powered MindXchange to address these issues through its summit “Opportunities in the Automotive Engineering Services Outsourcing Market” to be held on the 11th and 12th August, 2008 at the Leela, Goa.

The summit seeks to understand and discuss the growth needs of companies in the engineering services outsourcing as well as the automotive industry by fostering common understanding of business needs and opportunities that could lead to business partnerships. This forum endeavors to nurture strategic business decisions by bringing together key decision makers and thought leaders from the domestic and international automotive industry and engineering services companies.

Eminent speakers such as, Dr. Arun Jaura, Mahindra & Mahindra; Tarak Balaji, Delphi; Vivek Narayanan, Pierburg; S. D. Pradhan, Argentum Motors; and senior representatives from Satyam Ventures, BMW and many more are expected to be present at the summit.

Satyam Ventures is the event partner and Auto Monitor, Autocar Professional, Dataquest and The Machinist are the media partners for the event.

Source: www.business-standard.com

Mid-size IT firms in the country, which are bearing the brunt of a US slowdown, sub-prime crisis and currency fluctuations, are finding succour on the home turf. While the number of IT services deals is increasing in the domestic market, the sizes too are getting bigger and the margins are increasing.

Moreover, with research and advisory firm Gartner’s prediction of IT services market growing at a compound annual growth rate (CAGR) of 20.4 per cent for the next five years, the scenario will only get more lucrative for these firms.

IT services deals now range between Rs 40 crore and Rs 80 crore on an average from less than Rs 10 crore earlier. BPO deals too, which earlier averaged at Rs 60 lakh and Rs 80 lakh, now range between Rs 6 crore and Rs 8 crore on an average, according to Gartner.

Arup Roy, senior research analyst, Gartner, says while telecom, government, manufacturing and BFSI sectors have traditionally been the big-spenders, verticals like retail and utility are also catching up.

Industry players say $25-50 million (around Rs 100- 200 crore) deals are becoming the norm. S Venkatramani, head, India operations, Tata Consultancy Services (TCS), says, “We are beginning to see deals getting larger on a regular basis and in some cases comparable to the West as well.”

TCS won a $40 million ( Rs 100 crore) transformational deal with New India Assurance and the company reportedly has bagged the e-passport project by the Union government worth over Rs 1,000 crore.

Wipro Infotech is another case in point. Wipro bagged a deal from Pantaloon Retail worth around Rs 200 crore. It also signed a Rs 2,400 crore outsourcing deal with Aircel.

Says Anand Sankaran, chief executive, Wipro Infotech, “Three years ago, a $500-million deal in the domestic market would have been difficult, but now with the growth in business, firms are ready to go in for end-to-end outsourcing.”

The margins in the domestic market are also getting bigger. A few years ago, margins in the domestic market would be in the range of 8-10 per cent. Currently, the margins vary between 15 and 20 per cent, says Roy. For TCS, it has been a 100 per cent growth in the margins and are at par with the APAC level.

It’s the same story at Wipro. The domestic market is also maturing in terms of the work being outsourced. Says Venkatramani, “Majority of the work that TCS has been doing in the domestic market is transformational in nature. One of the reason is that domestic firms have no legacy systems. That means the work we do start right from the consulting stage to process re-engineering and then solution identification.”

Despite being a multinational, IT giant, IBM, scored on the home turf with cumulative IT outsourcing deals of nearly $2.5 billion — most of them in the telecom sector.

However, Nipun Mehrotra, vice-president and general manager, Global Technology Services, IBM India/South Asia, said that other than the large deals, the number of small-sized deals too has grown to the tune of nearly 100 per cent.

“We are seeing good success in even getting mid-sized customers to buy infrastructure services that best addresses their business needs and which can scale up as they grow,” he said. In 2007, IBMs unique client base grew by 100 per cent over the previous year.

The company said that it has been winning deals of less than Rs 20 lakh, between Rs 20 lakh and Rs 8 crore and above Rs 8-10 crore, and posting high double digit growths across each of these categories of deals.

The mid-cap story is no different. For firms like 3i Infotech, and Firstsource their decision to be in the country’s market ahead of their peers has paid well. India contributes about 4 per cent to Firstsource’ revenue in FY07 but by the end of FY08 the company increased this share to about 11 per cent.

On the other hand, 3i Infotech not only managed to beat the currency fluctuation with its early focus on the domestic market but also maintained a CAGR of 60 per cent for the last four years. India contributes about 35 per cent to the company’s revenue.

Source: economictimes.indiatimes.com

MUMBAI: Financial services major Citigroup, which is under pressure from mounting credit-related losses in the US, is believed to be re-structuring its India back-office operations, valued at around $1 billion, in a bid to cut costs and monetise some of these assets.

The bank is learnt to have embarked on a larger exercise involving the sale and outsourcing of most of its back-office assets under the new management led by CEO Vikram Pandit.

Sources said the captive BPO, Citigroup Global Services, as well as its technology and infrastructure outsourcing arm, Citos, are on the block and the bank could be close to finalising the deal with multinational technology vendor IBM Global Services, which is the lead contender for the assets.

European consulting and IT services major Capgemini and a large Indian IT services firm, reported to be Tata Consultancy Services (TCS), are the other two contenders.

The deal, if concluded, is expected to be close to $800 million. Citigroup Global Services is believed to have been put on sale last year but no transaction materialised. Both IBM and Citigroup refused to comment on the development.

“IBM doesn’t comment on speculation. There has been no such announcement by IBM,” a company spokesperson said. A Citigroup spokesperson responded to an email from ET saying, “At Citi, we do not comment on market speculation/rumours. Hence, we will not comment on the following query.”

The contours of the deal structure are still unclear but could include a significant outsourcing contract for the successful bidder. While Citigroup is learnt to have revived talk of the BPO sale sometime ago and was exploring different deal structures, what comes as a surprise is the sale of Citos.

Source: sify.com

Offshoring in BFSI (banking, financial services and insurance) is not about to be blown away by the sub-prime crisis and the global economic slowdown.

If at all, this vertical, which constitutes 40% of the total ITITES exports from India, is only set to grow.

The reason, experts and analysts say, is the current very low penetration of Indian companies in this vertical - a miniscule 8%.

“We have only scratched the surface until now. At present, we are serving only large and tier I clients. A huge opportunity will open up once we start tapping the Tier II and III clients and enter new markets,” says Tata Consulting Services (TCS) financial services solutions president N Ganapathy Subramaniam.

TCS is the largest Indian service provider in this segment and earns over 43% of its revenues from this vertical. BFSI revenues of Infosys, Wirpo and Satyam are 36%, 24% and 23% of their total revenues.

JP Morgan’s Manoj Singla, Bhavin Shah, Mythilli Balakrishnan and Nishit Jasani also vouch for the future income expansion from BFSI.

“We believe that more than 50% of services from BFSI can be offshored and hence there is significant potential for Indian IT companies to get more work in the banking sector,” the analysts say.

As per IDC, BFSI accounts for 25% of all global IT spending. In this, the share of India is only 8% in revenue terms while it is 20% in terms of volume.

Nasscom chairman Ganesh Natarajan says the real opportunity in the BFSI segment lies in domain-oriented services like wealth management, investment banking, insurance and others, which are growing at 40% annually.

“The traditional bread and butter of the Indian companies like application development and maintenance (ADM) is growing only at 10%,” says Natarajan.

Subramaniam says within the IT budget of BFSI clients, the offshoring pie was growing. “What we are seeing is that banking and financial services clients are outsourcing more of their IT needs and deploying less and less work to their inhouse IT division,” he says.

TCS expects to grow its BFSI revenues at 30-35% over the next five years.

Source: www.moneycontrol.com

Chennai - “If you have cash, you are king,” may be a general adage for businesses. But when Mr Partha De Sarkar says it with a triumphant smile, it rings truer now, in the context of a global slowdown. Mr Sarkar, CEO of HTMT Global Solutions, part of the Hinduja Group and an outsourcing solutions provider, is keen to make an acquisition in the current environment when the average company’s prospects seem to be flagging and valuations are at an ebb.

In the city to launch HTMT’s second centre, Mr Sarkar told a press gathering that HTMT would acquire a BPO (business process outsourcing) company in Europe by the end of this fiscal.

It has earmarked around $110 million for the acquisition, which will mark its foray into the continent.

“We have short-listed four companies. We prefer to acquire a company in the UK, because of language affinities. We are interested in a company with revenues of about $50 million,” he said. “With a drop in valuations of companies, this is the right time to make an acquisition,” he said.

Till a few months ago, valuations used to be 9-10 times the operating profit (EBIDTA – earnings before interest, depreciation, tax and amortisation), but it is now 7-8 times. Mergers and acquisitions, in general, have dropped and there is a credit crunch with banks not too keen to fund such activity, he said.

As at March 2008, the company had about Rs 440 crore as cash reserves. For the year ended in that month, it reported revenues of Rs 673 crore.

Mr Sarkar ruled out acquiring BPO operations owned by customers such as big banks or telecom companies, due to over-valuation.

He said, “A captive BPO with revenues of around $150 million is sometimes valued at around $1 billion. Owners of captive units seem to be ambitious,” he said.