Source: sify.com

New delhi: India’s flagship outsourcing industry expects some pain from the latest global financial turmoil but insists it could emerge a winner with companies shifting more work to the country.

The sector, an economic mainstay that generates $40 billion in annual export revenues, traditionally views bad times as offering potential as Western companies cut costs by moving work to cheaper destinations offshore.

Industry body Nasscom believes the trend will be the same this time, though it could take longer.”There will be a short- to medium-term impact, which we define as three to four quarters,” the Nasscom Chief, Som Mittal, said.

Some of the pain from the bankruptcy of Wall Street giant Lehman Brothers, the sale of Merrill Lynch and the US government’s bailout of insurance giant AIG — all ravaged by credit woes — is already being felt.

IT companies are cutting hiring plans and share prices of India’s IT companies are under pressure. But there is some positive fallout as Indian legal process outsourcing firms doing bankruptcy work report a rise in business.

Companies are seeking to outsource to India, where legal work costs a tenth of what US lawyers charge, said Sirisha Gummaregula, chief operating officer of legal support firm Quislex.

Over time, the financial crisis should lead to much stiffer controls that “will all be IT- and systems-driven,” said Mittal.

This should lead to more business for India’s “tech titans” like Infosys, Wipro and Tata Consultancy Services whose skilled, English-speaking, low-cost work force planted the nation on the global business map, Mittal said.

“We have a fairly deep understanding of our customers’ operations now. This would be the time to help partner them,” he told reporters.

Still, the latest financial crisis has come at a bad time for the sector.

The US-led credit crunch, rising pay costs and currency fluctuations had already hit profits, along with competition from outsourcing rivals like Malaysia, the Philippines, Vietnam and Mexico.

Earlier this year, Nasscom forecast the sector’s revenues would grow by 21-24 per cent to $50 billion in the year to March 2009 — strong but not the scorching 30-per cent-plus growth seen earlier in the decade.

Mittal said the forecast could be “tempered down” from that level by a “minor few percentage points — if at all.”Over the next few months, analysts do not expect Indian IT firms to sign any big contracts in the so-called BFSI sector — banking, financial services and insurance — that represents nearly 50 per cent of their income.

“There’ll be a period of stocktaking by Western companies where they put their houses in order and where there’ll be no really significant decisions,” said Partha Iyengar, research head at global consultancy Gartner.

Even before the latest turmoil, the sector was already seeking to diversify to offset reliance on the US, which takes 60 per cent of its exports, seeking out new business in Europe, the Middle East and Asia.

The sector has also been aggressively bidding for contracts with the burgeoning Indian corporate sector, earlier dismissed as too small.

“It’s a great support in these times having an Indian economy growing by 7.5 to 8 per cent,” said Mittal.

The sector has also been cutting dependence on the financial arena by getting into such areas as retailing, transport, health care and manufacturing.

“There’ll be robust growth surely coming through — the industry has diversified. There are lots of un-penetrated areas,” Mittal said.

Source: www.business-standard.com

Symphony Technology Group (STG), the US-based strategic holding company founded by an Indian, plans to invest $900 million (around Rs 4,230 crore) to expand its group firms over the next three to four years.

“Most of the $900 million will be spent on acquisitions. The current economic environment does not change our strategy, which is to invest in companies in the US, Europe and India,” Romesh Wadhwani, chairman, STG, told Business Standard. Wadhwani had earlier said that his acquisition targets are from software and services, financial services, retail, consumer goods and telecom verticals.

The over $2-billion company wants to achieve a revenue target of $5 billion by 2010-11, and believes the acquisition route to be just right to achieve this target. Wadhwani feels that despite the current slowdown it is an achievable target. “I am still hopeful that STG can be a $5- billion revenue firm in 2010 or 2011, but we have a lot of work ahead of us to get there,” he said. “I am hopeful that the economic recession in the US will affect Symphony less than the traditional IT services players since its customers are less affected by the recession,” he added.

The group so far has nine companies including Bangalore-based Symphony Services and Symphony Marketing Solutions. Of these, nine firms, many have significant offshore presence in India.

STG had raised $1 billion in December last year, of which $500 million was contributed by Wadhwani, while around $300 million came from the Government of Singapore and $100 million each from two US universities.

Of the $1 billion raised, the company has spent $100 million for the acquisition of US-based Netik and Sweden-headquartered Teleca.

Wadhwani also said that he hopes to list Symphony Services by 2009 as long as its maintains its growth rate and keeps improving its profitability.

Source: www.ciol.com

BANGALORE, INDIA: Zinnov Management Consulting, one of the leading management consultancy firm in India has released the findings of an in-depth study on the ‘Indian Pharmaceutical Offshoring Landscape’. The study provides a detailed analysis of the Indian pharmaceutical offshoring industry which is slated to become a $2.5 billion opportunity by2012. One of the key factors driving the Indian Pharma Factoids.

India’s rich talent pool of nearly 13.5 million science graduates growing at the rate of 36% plays a major role in the growth of outsourcing of drug development processes:

• Pharmaceutical Translation market has also seen growth due to frequent clinical trials conducted in India by pharmaceutical companies; demand of around 160,000 translators likely by 2010

• Basic production cost in India is up to 50% lower than in the US; FDA approved plants can be constructed in India at 30 – 50% lower costs than the established markets.

• Clinical Data Management & Bio-Statistics is a growing market in India driven largely by the robust IT talent

• Pharma Contract Manufacturing in India was $590 million in the year 2007 and is expected to grow at a CAGR of 15%

Offshoringwave is increasing R&D costs, which in-turn is compelling Pharmaceutical organizationsin the US and EU to look fornew low cost R&D destinations such as India and China.

Accordingto the study, the Indian pharma sector is also growing robustly and is expected to move from being domestic led to exports driven by 2010. A transitionis also being observed in the growth of pharmaceutical markets from the topseven established pharmaceutical markets to emerging markets like India, China, Brazil, Mexico, South Korea and Russia – which will grow at 12-13 % in 2008, andbecome a USD 85-90 billion market, captures the study.

Talking about the study, Pari Natarajan, CEO, Zinnov Management Consulting,says, “Influx of outsourced work from global pharmaceutical companies has giventhe necessary impetus for the creation of pharma Special Economic Zones (SEZ),which would be one of the key drivers of outsourced pharmaceutical services growthin the coming future”.

“Indianpharmaceutical companies need to penetrate further in generics market inregulated countries and also increase their investment in R&D to move togain expertise in higher value chain processes. Today, pharmaceutical is one ofthe most happening industries globally, and India has the potential to becomeone of the key global pharmaceutical players and also become the backbone ofoffshored services in Pharmaceuticals”, he added.

The success of pharmaceutical offshoring / outsourcing is aided by therich pharma talent pool and the spread of pharma-educational institutes. The Governmenthas also provided tax incentives to the pharmaceutical industry and has takennecessary steps to enact tough laws on data security and IP related issues to mitigate certain offshoring challenges. Development of Pharma Special Economic Zones SEZs is a key step by the Government to enable the growth of pharmaindustry, finds the study.

“Zinnov has deep understanding ofthe drug development chain and over the years, has played a key role in helping many pharma companies analyze the pharmaceutical market at both India and Global level. Clinical trials today dominate the development offshoringmarket landscape followed by clinical data management. Marketing and sales is another key component of pharmaceutical drug development value chain and iscurrently a $100 million market, which is expected to grow at a CAGR of 36% till 2012,” said Rishikesh Mandilwar, Director, Zinnov Management Consulting Pvt Ltd.

Source: www.business-standard.com

With India’s two leading IT outsourcing companies, Infosys and HCL Technologies, vying to acquire the UK-based consulting firm Axon, SAP implementation is back in focus. HCL last week launched an all-cash offer for SAP implementation consultancy Axon. The offer trumped an earlier bid by Infosys. The all-cash offer at 650 pence a share was 8.3 per cent more than the 600-pence offer by Infosys, which promised a further announcement ‘in due course’.

Analysts predict that application software is the fastest growing area. So while 40 per cent of revenues comes from the banking, financial services and insurance (BFSI) sector, over 30 per cent of revenues comes from verticals like manufacturing, retail, construction and utilities (includes oil and gas), airlines and transportation, among others, which are large users of SAP applications.

SAP is important since the implementation integrates the database that an enterprise has, which is otherwise in different silos and provides a single window view.

SAP allows integration of applications like financial accounting, controlling, production planning, sales and distribution among others. Once these are automated, firms can then go on to the next level of automation.

The demand for SAP implementation and consultation is ever increasing due to upgrades, growing businesses and other SAP- related delivery services, say analysts. If an Indian player has access to a the customer base of one of the largest SAP implementer in the world, it can then bring in the offshoring services and provide major cost reduction for firms in US and Europe.

“For the next three to four years SAP will be a hot property in terms of application implementation. Reasons being, firms are ramping up their SAP applications and are looking at it as a business transformation tool,” says Sudin Apte, senior analyst, Forrester India. He points out that currently 60-70 per cent of work that Indian IT firms do are implementation and support of SAP from remote locations. But clients are now asking for business transformation tools and consulting.

The other reason is the growing demand for application software. Although a relatively smaller category compared to IT services and BPO, software is rapidly gaining mindshare amongst the users. Application software is the largest segment of this market worldwide, accounting for over 47 per cent, says Nasscom Strategic Review 2008. SAP implementation will be a part of the overall application software segment.

Nasscom pegs the application software market at a $118-billion opportunity globally in 2007 and is expected to be $154 billion by 2011. SAP as an application adoption is rapidly growing in India as well. According to Frost and Sullivan SAP has 42.5 per cent market share of the total enterprise application software in India and has a market share of 36.5 per cent in enterprise resource planning (ERP).

“SAP’s decade long lead in the enterprise software space and its formidable partner ecosystem has created a wider turf that will continue to grow in the future,” says Alok Shende, principal analyst, Accendia Consulting.

Another case in point is the growth of SAP in India. The firm with 75,000 customers globally and having presence in 120 countries, has seen its India revenues grow by 68 per cent year-on-year and new license revenue grew by 100 per cent. SAP India has a customer base of 3,024 by the end of December 2007.

Source: in.ibtimes.com

Software services firm NIIT Technologies Ltd said it has signed a 3-year multi-million pound deal with British Airways for support and testing of the airline’s business critical applications across various business areas.

The contract is one of the largest ever deals to be signed by NIIT Technologies within the UK airlines industry and follows a 12-year old relationship between the two companies.

“NIIT Technologies has built on its reputation in the airline sector for providing efficiencies and savings through outsourcing by continuing to demonstrate expertise, experience and commitment towards their client’s success. The organization aids clients become more competitive by supplying a premium service,” the tech major said in a statement.

The deal comes at a time when the airline industry, hit by rising fuel prices, dwindling sales and credit crunch, are looking at all possible options to cut down on costs. British Airways has also undertaken a cost cutting exercise with their global partners to reduce costs and maintain competitiveness.

“We are extremely pleased to continue our long term partnership with NIIT Technologies. They have proven to be a flexible reliable partner evolving with our business and the technology trends within the airline industry,” said Mike Doyle, manager (IT applications support), British Airways.

“We are proud that BA has continued to repose their faith and commitment in NIIT Technologies. NIIT is committed to working in partnership with BA towards their success and has demonstrated that for over 12 years,” said Ravi Pandey, UK head, NIIT Technologies.

“Our focus through specialization in the travel and transport industry has differentiated the company. This has lead to a growing base of satisfied clients like BA. The recent No.1 ranking in the Black Book of Outsourcing 2008 in the Travel Industry survey confirms NIIT as a global leader in this sector. We aim to deliver world class service for all our clients,” Pandey said.

Recently, the firm said it is trying to push up revenues from its travel, financial services and retail sectors to over 90 percent from the present 80 percent.

According to NIIT Technologies CEO Arvind Thakur, due to the slowdown in the banking, financial services and insurance (BFSI) segment, the firm is focusing on growth in travel and retail segments.

On Tuesday, NIIT Technologies had won a contract from Cathay Pacific Airways for the development of a warehouse operating system for its new cargo terminal at Hong Kong International Airport.

“We are sharply focused on the travel and transport segment and these wins have positioned us well and given us good visibility,” Thakur said, adding it would add to the revenues from this segment.

Presently, BFSI segment accounts for about 42 percent of NIIT Technologies’ revenues while the travel and transport segment contributes to 28 percent of its revenues.