Source: www.businessweek.com

The computer giant’s five-year contract with Vodafone Essar will expand its already huge presence in the country. Will local shops fight back?

On Dec. 10, IBM (IBM) bagged a five-year contract from India’s third-largest wireless operator, Vodafone (VOD) Essar. The deal includes maintaining billing, data centers, and financial systems for Vodafone in India. Vodafone became India’s third largest cellular operator when it acquired Hutchison Whampoa’s 67% stake in Hutchison Essar in February, 2007.

Vodafone is an existing IBM client across the world—especially in the Czech Republic, Spain, Italy, Greece, New Zealand, and Australia—and Vodafone uses IBM for all its customer-related IT requirements.

But for IBM, this contract is a big, big deal. Vodafone is IBM’s third large telecom hookup in India. In March, it won a 10-year, $800 million contract to integrate and transform business processes and IT infrastructure for Idea Cellular, India’s fifth-largest cellular operator. In 2004, IBM won a 10-year IT outsourcing deal from Bharti Airtel, India’s largest telecom player. The contract was then valued at about $750 million and has grown to about $1.2 billion.

Hiring more workers

IBM’s rise in India has been breathtaking. Since 2004 the company has ramped up its business, with research labs and global delivery centers. In 2007, IBM won deals for application and business transformation services and infrastructure management in India’s rapidly growing sectors such as telecom, real estate (DLF), aviation (Delhi International Airport), health care (Apollo Hospitals), and a microfinance technology service provider. It has 73,000 employees in the country and plans to invest $6 billion over the next three years to set up infrastructure, hire more employees, and boost education and training.

This year alone, IBM’s India revenues will be up 30%, to $1 billion. “India is the fastest-growing market for IBM, and we want to maintain our lead,” says Shankar Annaswamy, managing director for IBM India and South Asia.

All of IBM’s telecom deals have been won over established Indian players such as Tata Consultancy Services (TCS), Infosys (INFY), Wipro (WIT), Satyam and HCL. Dabur, one of India’s large sellers of health-care and ayurvedic products, outsourced its IT infrastructure to Accenture (ACN) in a 10-year contract. Accenture will also consult on the company’s business plans and build and run IT systems for supply chain and sales.

Looking for Outside Expertise

The reason Indian companies are choosing non-Indian service suppliers is simple: In the new growth sectors, particularly telecom and retail, Indian players lack expertise. “It’s all about the skill sets that global players have,” says Ravi Trivedy, executive director of KPMG Advisory Services. Another wrinkle: Some industries, such as cellular, are actually more advanced in India than in the West. Indian telcos say local tech companies are ill-equipped to handle their sophisticated, rapidly transforming IT application, maintenance, and development needs.

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Source: www.business-standard.com

Vodafone Essar has signed an IT outsourcing agreement with IBM India.

Under the five-year agreement, IBM India will assume responsibility for the management of all Vodafone Essar’s IT operations with the exception of network service platforms.

IBM India will also manage internal IT services for Vodafone Essar like data centre operations and the help desk while supporting key areas like security and change programmes.

Vodafone Essar will continue to retain full strategic control of its IT requirements. To ensure greater flexibility for Vodafone Essar, the deal has been constructed on a risk-sharing basis, under the control of service level agreements.

“This agreement further demonstrates our continued focus on scalability and cost control - key criteria for success in the Indian mobile market. In IBM we have chosen a global partner committed to the industry and with a proven track record in the region,” said Asim Ghosh, managing director, Vodafone Essar.

Vivek Gupta, director and country manager, communication sector, IBM India, said: “India is home to the fastest growing telecom market in Asia, and with that comes significant challenges including effectively managing growth and improving profitability. IBM is delighted to share its extensive telecommunications industry insight and global IT outsourcing experience to help Vodafone Essar continue to deliver quality services to its rapidly growing customer base.”

Source: www.thehindubusinessline.com

India is shining. And shiny things catch attention. Indian multinationals are peeling their eyes away from the allure of North American and European markets to the sub-continent.

Even as global giants such as IBM, HP and Accenture boast of their Indian deals and pump in investments into the country, industry experts tut-tut that Indian IT multinationals have missed the bus, or, at the very least, been set back by a few years when it comes to the domestic market.

Indian IT services firms are being widely acknowledged for their performance on global ground, being hailed as `outperformers’ and `formidable competition’. Gartner’s report on TCS, Infosys, Wipro, Cognizant, Satyam and HCL Technologies revealed that they accounted for 1.9 per cent of the total IT services market in 2006, up from 0.5 per cent in 2001. But Infosys’ India business dropped in the last quarter to 1 per cent. Wipro Infotech, the India, Middle East and Asia-Pacific IT business unit of Wipro Ltd, claims that the domestic market contributes to 90 per cent of its revenues. The unit’s contribution to Wipro Ltd in the half year of fiscal 2007 stood at 18.7 per cent. India contributed to 9.4 per cent of TCS’ $4.3 billion in fiscal year 2007, and is now hovering between 8 and 9 per cent.

The Bharti-IBM deal was the first marquee deal that made everyone in the industry do a double take. FMCG major Dabur going with Accenture and Bank of India with Hewlett-Packard confirmed the fact that global MNCs were ruling the domestic market roost. The Bangalore-based food business Britannia chose HP and the Government of Karnataka awarded its e-governance project to the company.

For IBM in India, the growth is stupendous. “Compared to Brazil growing at 19 per cent and China at 14, our India division is leading the pack with 42 per cent growth in the January to June period,” says Sandip Patel, Partner, IBM Global Business Service. “We made a conscious decision to pursue India as a market and have invested in making our centres here a microcosm of our global organisation,” says Patel. After Idea Cellular, CEBT, Delhi International airport and Karur Vysya Bank, the IT behemoth is now creating a health superhighway with the Apollo group. “The project is under way, in keeping with market research,” he says. Healthcare will be the fastest growth subvertical in the public sector, according to analyst firm Springboard Research. The highway will connect 150 hospitals. “It is a very India-relevant project as our health system is still evolving,” he shares. Integrated solutions for microfinance and retail markets are also on the anvil. “Our future is a very healthy pipeline of deals. We will double our growth by 2010,” he says.

HP has 30 deals of various sizes in India and its business is growing fast, says Marshal Correia, Director, Outsourcing Services, HP India. The five-year contracts with Andhra Bank and UCO Bank and the collaboration with Infosys for the United Bank of India deal are the jewels in its portfolio. The $100.5-billion enterprise is investing heavily in its global delivery centre, and in tools, processes and people.

WIPRO, INFY AND TCS

The second largest software maker Infosys has formed a separate business unit to focus on India and tap the growing domestic market. “We have been exploring India for the last couple of years and we thought that we need to bring in a renewed focus to India and that is the reason why we have created an independent business unit,” said the chief executive, Kris Gopalakrishnan, at a press conference recently. The company is yet to announce the head of the unit. The company expects the India business to become significant - contribute over 5 per cent - in the next five years.

TCS, which has won seven deals since the beginning of this fiscal (April, 2007) says India has been and will continue to be a key market for it. “We have seen sustained demand for our service offerings in the domestic market in the past,” says a spokesperson. From HDFC Bank to Reserve Bank of India’s Public Debt Office to the largest core banking solution implementation in India for State Bank of India, TCS has a sound portfolio of domestic clients. It recently bagged a $140-million deal from Bharat Sanchar Nagam Ltd (BSNL). This multi-year engagement involves setting up of complex data networks across the vast BSNL footprint in North and West of India and includes deployment of Operational Support Systems (OSS) and Business Support Systems (BSS) components such as customer relationship management, billing, mediation and directory enquiry, among others. Wipro Infotech has won 10 outsourcing contracts in India over the last two years. Two top ones were HDFC Bank and Dena Bank, both decade-long projects worth approximately $80 million and $60 million, respectively. A third similar-sized deal was not disclosed. Colgate Palmolive, Sanmar and Optimix are other deals bagged. Wipro will provision IT infrastructure for HDFC Bank and handle total outsourcing of Dena’s core banking operations over a 10-year period. Other clients include BSNL, ITC, Indian Oil and UB Group.

“Given the IT market investments and growth rates, India is clearly identified as a priority market for us. We clocked about $650 million last year in India in gross sales. We are growing twice the market and we have strong senior management talent dedicated to the domestic market,” says Suresh Vaswani, President of Wipro Infotech. He takes pride in that despite the presence of global counterparts, “we were adjudged by independent market research as the fastest growing domestic IT solutions provider in 2006-07.”

According to a recent media report, the company holds strong in the infrastructure space and is the largest Network Integrator in India. “We are the largest system integrators in India for pretty much most of the global technology innovators, e.g. Cisco, Nortel, Microsoft, SAP, Sun. Our ability is in combining the best of both worlds - knowledge and experience gained from global IT deployments as well as deep knowledge of the Indian environment gained through 27 years of focus on this geography.” TCS claims its project management capabilities, large and complex mission-critical projects execution capability and global experience give it the success. Indian customers, like their global counterparts, are extremely demanding, shares TCS. The Indian giants are on a spree, and the current leaders of the domestic services market are cautious. “Our competition - Infosys, Wipro and Accenture - have had a limited focus on Indian market. But this has changed recently and we are watchful,” says Patel of IBM.

WHY INDIA? WHY NOW?

The country’s scorching economic growth, with 8-9 per cent gross domestic product (GDP) and sudden rise in investments in almost all sectors of the economy - from telecommunications, oil and gas and defence to the booming financial services, retail and real-estate verticals - are drawing attention. Businesses are leveraging IT for transforming and differentiating themselves through efficient operations, superior customer service and ability to launch new products and services quickly. This has made India a key attraction.

Indian enterprises are investing in significant business transformation initiatives to achieve global competitiveness, and IT is proving to be a key lever for the same. “A few years ago, only multinationals in India were our clients. But now the number of Indian clients is on the rise,” says Marshal of HP. Infosys says, “We want to definitely grow the Indian market, of course it is a natural hedge for the appreciating rupee. India and China are large economies that are growing fast and we want to make sure that we have a play in them. As a global company, we must. Last, many of our multinational global clients are entering India in a significant way and we want to support them in India.” The company expects financial services, telecom and manufacturing to be the drivers of growth of the domestic market. “Retail could also give explosive growth,” according to Gopalakrishnan.

The total domestic spending on outsourced IT services across service lines that include IT Consulting, System Integration, Application Development, end-to-end Outsourcing, Maintenance and Support, and IT Education and Training is expected to reach Rs 23,800 crore by 2009, according to analyst firm IDC. Partha Iyengar, vice-president, analyst and regional research director of Gartner, says the low priority of domestic clients to Indian MNCs has been a major concern area for the domestic industry over the past few years. “It’s heartening to see that the view of India as a domestic opportunity has recently changed. This bodes well not only for India but also for the longer term prognosis for service providers. Infy’s staunch anti-domestic stance has now changed. Leading service providers will be able to compete more aggressively now. The challenge will remain - initial public posturing is fine, but we will need to watch if the best resources are being put to work here or will India be a training ground for opportunities elsewhere,” he says.

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Source: www.hindustantimes.com

After serving customers outside India, outsourcing companies are now looking inwards. The burgeoning domestic market, which is throwing up opportunities in retailing, telecom, banking and financial services, is being eyed by Indian outsourcing companies like Aegis, Intelenet, Firstsource and 3i infotech.

Aegis BPO, an Essar Group company that has interests in steel, telecom and retail, has acquired TeleTech Services, a joint venture between TeleTech Europe and Bharti Ventures, for $13 million.

Similarly, Intelenet had acquired Spanco, a domestic outsourcing company a couple of years back. Firstsource, formerly known as ICICI Onesource, in which the ICICI group has a 24.98 per cent stake, has opened five centers in Tier III cities to serve Indian customers.

Aegis BPO ranks among the top 10 outsourcing players in India and has revenues of $188 million. This acquisition means that Aegis BPO gets to service customers of Bharti Airtel, India’s largest mobile company. Further, Aegis gets 2,200 employees working with TeleTech and that takes its total employees who service Indian customers to 8,700.

The acquisition of TeleTech will be funded through internal resources and the company is planning more acquisitions. “We are eyeing sectors like telecom, healthcare, banking and financial services. Going ahead, this will offer us huge opportunities,” Aparup Sengupta, MD & CEO of Aegis BPO, told Hindustan Times.

Source: www.business-standard.com

Reliance Industries Ltd’s,’ recently re-launched brand ‘Vimal’ will manufacture majority of its garments from its own fabrics but when it comes to cotton range the company will outsource the products from textile majors specialising in cotton products.

The company’s first exclusive showroom, after the re-launch of brand Vimal, was launched in Ahmedabad and 23 exclusive stores will come up in Mumbai, Bangalore, Chennai and Kochi.

The company is also planning to tap an unexplored market of automative furnishings for passenger cars.

Talking to Business Standard, Anand Parekh, President, Textile Business, RIL, said, “We will have cotton range in Vimal brand but the company is not planning to go for backward integration so we will be outsourcing the cotton fabrics from companies like Arvind and Aarvee who specialise in cotton fabrics. Anyway the cotton segment, though growing in demand, will only consist two or three per cent of our total business through Vimal.”

The company is also looking at launching automative furnishings in the near future to tap the almost untapped organised market.

“There are 1.1 million passenger cars being added in India and we want to tap that market as it is hardly tapped by the organised sector. We will also look at exporting the fabric to the US market as the automative furnishing market is also growing there.”

Vimal brand was re-launched on October 20th with new logo and a whole new range of garments.

Talking about the market situation, Parekh said, “The textiles market in India is at present estimated at Rs. 100,000 crore. The market is projected to reach Rs 190,600 crore by 2010. The major growth is coming from the urban market. Out of the total market the urban share is 59 per cent and the rest 41 per cent business comes from the rural market.”

“Around Rs 37,000 crore is the menswear market in India and of that Rs 12,000 market is of branded garments. The new Vimal will be promoted as a brand for peppy and young. We are paying special focus on the designs, he added, and for that we are planning to rope in best designers from across the globe. Vimal’s men’s range has shirts, trousers, suits and jackets. These products are divided in three sub- brands; Vimal Red, Vimal White and Vimal Black. Vimal Black is inspired by the concepts of Italy’s famous designer Maurizio Bonas who is also the president of ‘Made in Italy’ committee.”

Talking about the exports market he said, “Our exports of textiles is almost 21 to 22 per cent of India’s total exports of textiles. We are confident that our export growth rate will be more than the industry’s export growth. Our plans include of exporting more value added or finished products. Instead of exporting fabrics we will focus on exporting shirts, trousers and suits just like major global garment manufacturers including Levi’s.”