Offshoring and Outsourcing News – Feb 4th, 2008

http://offshoreindianews.blogspot.com

Indian animation industry may touch $950 mn by 2009

SOURCE: Business Standard
DATE: Feb 5th, 2008The animation market in India is still small relative to the world market and as Jaideep points out part of the reason facing the industry are similar to issues faced by any deep specialized skill work required in India. Lack of resources, infrastructure, IP protection being some of those. A point which Jaideep makes is interesting is that a number of existing BPO service providers have ventured into the animation outsourcing space. This legacy could also be potentially hindering the growth of the animation outsourcing markets. However there are a relatively large number of smaller players in the space who provide specialized services.

The challenge with animation space is that it is a fairly capital intensive, talent intensive business and requires a long gestation period for talent training and service delivery plus creativity. With some of the larger corporate houses getting into the Indian movie industry, it is a positive trend with capital now being available for animation ventures. This is a scale business and for companies to grow and sustain in this business they need deep pockets.

According to NASSCOM report on Animation and Gaming industry, the global animation market (demand perspective) which was estimated at USD 59 billion in 2006, is estimated to reach USD 80 billion by 2010; Global market for animated content and related services (developer’s perspective) is estimated at USD 25-26 billion and is forecast to cross USD 34 billion by 2010.

This is an interesting link to milestones across animation industry over time (not outsourcing)
http://www.artof3d.com/timelines.htm

Some recent articles on Animation outsourcing to India:

Nipuna, Satyam BPO clinches a Euro 7 million dollar animation deal (Jan, 2008)
India emerges as global hub for animator (Jan, 2008)
Dreamwork to get work done in Bangalore (Dec, 2007)
IDG Ventures India invests in 3D Solid Compression, a bangalore based company (Dec, 2007)
We aim to be dreamworks of India: Gautam Seengal CDI (Dec, 2007)
Chandigarh firm plans animation studio (Dec, 2007)
Animation industry hit by talent crunch (Nov, 2007)
British varsity to train India multimedia student(Nov, 2007)
CDI does $19.8 million dollar deal to do animation sci fi (Nov, 2007)
Gaming and Animation no longer a cost arbitrage story (Nov, 2007)
Changing face of animation (Nov, 2007)
Asia shops juggle US animation jobs (Sept, 2007)ARTICLE
With global players like Walt Disney, Imax, Warner Bros signing contracts with Indian animation companies for outsourcing and co-production, it is expected that the animation industry in India can touch $950 million by 2009 and is expected to grow at a fast pace over the next five years.

However, outside the Industry there is scepticism about the pace of growth because of the challenges like piracy, lack of intellectual property (IP) protection rights, acute lack of resources and investments the Industry is facing.

In an interaction with Business Standard, KPMG Advisory Services (P) Ltd Director Jaiddep Ghosh said, “Although India is the largest media consuming market in the world, only 1 per cent of the US market size which is estimated at $10 billion, so far the animation is concerned, it is currently pegged at $600 million.”

Commenting upon the industry market size, he said, “The Indian market size is extremely fragmented with the top players accounting for 10-15 per cent of the industry turnover. Further, most of the players are direct or indirect off-shoots of the Indian BPO boom. This legacy and low indigenous demand forced most of the players to adopt the outsourcing business model.”

Prominent players include Toonz Animation, Crest Communication, Maya Entertainment, UTV Toons, Zee, etc. Also, Pritish Nandy Communication has plans for five full-length 3-D animated bollywood films and has signed a $25-million deal with Florida-based animation company Motion Pixel Corporation. Crest Animations has entered into a three-movie co-production agreement with Lions Gate, a major movie studio. Also, animation studio DQ Entertainment has made a pact with US-based Electronic Arts to work on PC games.With these developments, it seems that things will change dramatically in the near future. Further, Walt Disney, Imax, Warner Bros are signing contracts with Indian Animation companies for outsourcing and co-production.

On being asked why just few companies in India are into animation business, Ghosh said, “Animation needs a much larger investment and longer production circles. However, it has very long shelf lives and content leverage scope. A typical animation movie may take 2 years for completion unlike general movies. Further it is labour intensive, although with the advent of computers, the work has been simplified and is a relief from the days when each frame had to be drawn by hand. It is estimated that the labour may account for 70-80 per cent of the total costs for a 2-D animation production. It is lower for 3-D animation. Further, animation products are expensive to produce, on an average animation costs 5-15 times more than a live product.”

He added that the key challenges before the industry are piracy and lack of IP protection rights and an acute lack of resources, investment and government support. The slack IP laws and weak enforcement mean that studios can expect leakage of revenue at every stage.

Further, to keep in pace with technological development, companies need to invest heavily in latest technologies, he said.

BPOs giving cultural orientation on India to foreign staffSOURCE: EconomicTimes
DATE: Feb 4th, 2008This is an interesting article. A lot is talked and said about the soft skills and cultural orientation required to make global teams work together cohesively. Yet time and again, the issue about a break down in communication and lack of ‘team work’, cultural differences comes up as a major cause for offshore failures. In a recent discussion I had with Karine Schomer from CMCT.net, a change management and consulting firm, an interesting point which she raised was how do firms look at soft skills, cultural training and why is it still an afterthought. Within organization getting money to do soft skill training, cultural orientation is very hard to come by and is mostly part of a training budget. The kind of orientiation mentioned in this article is a bit easy to impart but the client-customer cultural education and training requires a more detailed planning and execution.

This was a good article I had recently linked on the blog about cultural training:
Best practices for improving cross-cultural competency of offshore teams (Jan, 2008)

ARTICLE
The story of how Jaswant became Jack, as India became the world’s back office, is passe. Here’s a look at how Jack became Jaswant as Indian firms increased their global footprint. It started in the late ‘90s when Indian IT companies started opening new centres and acquiring companies from Japan to Mexico, South Africa to Australia. Every such move meant adding local employees to their rolls. It also meant training them about the company’s work culture and mindset. Teaching them the nuances of Indian culture and society was equally important. “In global workplace, ignoring cultural differences can heighten the risk of miscommunication,” explains K Venkataraman, director, Cognizant. In fact, there’s a growing demand even among clients preparing for their maiden visit to India for help with understanding the cultural traits and differences that separate them from their Indian counterparts. Realising this need, most IT companies have now created capsules and e-learning courses for their expat employees and clients.
While each country has its own national culture, there is an overriding commercial culture that makes MNCs tick. This works for Indian firms too. Wipro, for example, has over 26 development centres across the globe but it has some core values that are rooted in India. These values give them an identity as an Indian organisation. “We simply do two things for our expat employees. Everyone is made to go through a ‘Spirit of Wipro’ workshop which initiates them about our core values. Then they are given a cultural orientation about India,” says Supriti Bhandary, GM talent engagement and development (Americas), Wipro Technology. This programme orients the images they can see on the streets, the clothes, food, values, and how Indians define time and space. Similarly, Cognizant has an e-learning tool for foreigners. ‘‘It helps them understand Indian communication styles, social courtesies, body-talk, facial and other gestures, postures and personal and social conversation,’’ explains Venkataraman. The programme covers detailed nuances about India. For instance, since Indians are conscious and accept differences of authority, they may not be forthright in the presence of an authoritarian figure. This may impact their attitude. It’s therefore important for people from other countries to not take their silence as a sign of acceptance. NIIT, which has been actively recruiting locals abroad since 1999, has a vision document. ‘‘We take them through the document when they join. Also, things like Annual Day and other such events in the social calendar of the company are followed across the globe uniformly,’’ says Ashish Basu, President, Corporate Learning Solutions, NIIT. Experts say it’s important to make the exercise interesting and fun. ‘‘The integration process has to be easy especially if a company has been acquired. Most often these employees tend to be a little uneasy and suspicious in the beginning. The transition has to be handled sensitively,’’ says Basu.

Wipro follows a fun and game method where people are made to go through certain exercises. The sales team has mandatory India visits. We have something called GAP or Global Acclimitisation Programme for the sales team from abroad. They come to Bangalore for two to three weeks to get an India experience and understanding the company,’’ says Bhandary. Similarly, fresh MBA recruits from US business schools are brought to Bangalore for a three-month orientation course. Besides working for Wipro and soaking in India, they also pick up popular Wipro acronyms like RCA (root cause analysis), BPM (best people manager), WLQ (Wipro leaders qualities) and many more. So, as more Indian IT firms spread out to newer geographies, more and more people will transform India style.
 

Citi puts BPO unit sale on hold

SOURCE: EconomicTimes
DATE: Feb 5th, 2008After all the back and forth, this story is put to bed for some time atleast – about Citi selling their BPO operations in India. From news rumors about Genpact paying 700 million dollar for the unit to all the major players in the bid. There was also a story about Wachovia being upset about the deal ( Wachovia owns a minority stake in Genpact).

Subprime woes in US might delay Citi deal (Dec, 2007)
Citi asks Genpact to match Firstsource deal (Sept, 2007)ARTICLE
Citigroup has put the sale of its BPO operations — Citigroup Global Services (CGSL) — on hold. The move comes at a time when Citi is looking at taking a hard look at its expenses which could lead to job cuts across the world. The group had initially started the sale process in the second quarter last year. It was in the process of choosing a partner in Genpact late last year. Citi has outsourcing operations in China, the Philippines, Latin America and Europe, of which CGSL was one of them. Sources said the group is now looking at taking a strategic decision on all these operations globally. “Citi wanted to have a relook at all the operations and has put the sale of the Indian operations on hold,” said a source.

There has also been a change in the senior management with Vikram Pandit taking over as the CEO from Chuck Prince. Sources said with the rupee appreciating by around 12% in this financial year, most outsourcing firms have felt the pinch on their margins. Many of these have also been witnessing a higher attrition in recent times, they said. Citigroup and Genpact were close to coming to an agreement. But differences over the term of contracts and the price could not be resolved. The market crash has ensured a major fall in valuations of most major BPO firms. At $700 million, the deal suddenly looked expensive for Genpact. When contacted, Citigroup officials said: “We decline to comment on speculations.” Said one investment banker involved in an earlier round of bidding for the captive unit: “The (Genpact) management will not be able to justify paying a valuation higher than its own to shareholders. Valuations of all BPOs have fallen because of the uncertainty in the environment.” The Citi BPO is expected to “go off the radar” for at least another 4-6 months. An e-mail sent to Genpact did not receive any response, as did a call to its president and CEO Pramod Bhasin.The BPO does end-to-end work, but the crisis in the mortgage business will have a cascading effect on all services, including loan processing and credit card collections. There was a minimum guaranteed business by Citi for a period of 5 years under the deal,” the executive said. The Citi captive was valued at over $ 600 million in the final bid, according to the figures quoted at that time. Even under Chuck Prince, there were some difference of opinion on whether CGSL needs to be put on the block as for some, it’s an integral part of the firm. Citi had, in 2004, delisted Citigroup Global Services — earlier known as e-Serve. The shares at that time were held by Citibank Overseas Investment Corporation. At the time of delisting, the company was valued at around Rs 1,200 crore. Citi was looking at a valuation of around $600 million while selling off a majority of the stake in the outsourcing firm. CGSL handles multiple operations for Citigroup entities globally, including retail banking operations like credit cards, mortgages, personal loans and the like. It has operations in Mumbai, Chennai and Gurgaon, too. It has some 11,000-12,000 employees, of which half service the international operations of the group. It caters to operations in more than 40 countries. Citigroup is present in over 100 countries internationally. It has a separate knowledge processing outsourcing firm that processes activities for corporate and investment banking clients. It also has a technology outsourcing — Citi Technology Services. Citigroup had recently said it was writing down $22.2 billion. It posted a $9.83 billion loss for the fourth quarter as against a profit of $5.1 billion in the previous year. For the full year, Citigroup net income dropped to $3.62 billion as against a profit of $21.53 billion in 2006. With the fall in profits, the group is likely to take a hard look at its expenses and would be looking at going in for an aggressive job cut. Currently, it has already announced 4,200 job cuts. But the general feeling is that there could be more aggressive cuts in the offing. The move is likely to help low-cost operations of the group like India and Latin America.

Romania Proving Popular As Software Outsourcing DestinationSOURCE: Information Week DATE: Feb 4th, 2008A # of vendors and financial services firms in the west are working actively to build a global footprint and expand in locations outside of India. Eastern Europe, including Romania continues to attract capital and firms setting up operations.In a recent deal which Genpact announced they will leverage their delivery center in Romania to service their client (Invensys, Hercules Inc). A # of vendors in India have announced centres in Romania.Invensys selects Genpact to provide F&A support (Jan, 2008)EvalueServe is planning to expand operations in Romania (Jan, 2008)WNS setup delivery centre in Bucharest (Jan, 2008)Greece, Romania and Canada top global privace index (Dec, 2007)Genpact to provide IT service support to Delaware based Hercules Inc (Dec, 2007)Tooltech expands its wings in Romania (Nov, 2007)Central and Eastern Europe IT outsource view: Notes from Ukranian Outsourcing forum (Oct, 2007)Shared Services forum event in Hungary in Feb ( See the blog event list for more details).Besides Romania, Poland has seen a fairly good traction in back office work, with a # of the large system integrators setting up shop in Poland.Krakow’s booming market (Jan, 2008)ARTICLE Romania’s entry into the European Union in January 2007 has catalyzed interest in the country’s software industry. In the past 18 months, a spate of acquisitions has highlighted Romania’s appeal as an Eastern European “near-shoring” hub.
Romania is attractive for a variety of reasons, including an ample supply of graduates from a university system strong in math and physics; relatively low costs; low turnover rates; a time zone and distance favorable to European companies; and an eager, multilingual work force.
Wirtek A/S, a software outsourcing firm based in Aalborg, Denmark, needed an offshore operation and first looked at India. But management instead decided to acquire a software company working in telecommunications: CodeWizards, based in Cluj-Napoca, a city about 400 kilometers northwest of the Romanian capital, Bucharest.
“The most important issue was that many Asian countries have very high turnover of employees–23 to 25 percent annually,” said Michael Aaen, Wirtek’s managing director. “We found that in Romania, the employees are more loyal.”
Wirtek plans to increase its Romanian staff to 200 from 40 in the next three years, Aaen added.
Just before Romania entered the EU, London-based Misys Banking Systems Ltd., a developer of financial risk-management and trading software, acquired SC Fino Capital, a Bucharest-based financial-software developer that had been working with Mysis for several years.
“EU entry removes an element of doubt,” said Tim Goodhind, Mysis’ business development director. “You believe the risks associated with business processes and regulations, and with currency, are mitigated.”
The strength of Romania’s univer- sity-level mathematics programs was a key driver for Mysis, Goodhind said. The Romanian unit now has 80 employees, and management plans to grow that number 25 percent annually. The team is already doing some core product development.

Among other companies making recent acquisitions in Romania, Adobe Systems (NSDQ: ADBE) Inc. (Mountain View, Calif.) purchased InterAKT, a developer of extensions for Adobe’s core products; Adecco Group (Glattbrugg, Switzerland) bought IP Devel, a software outsourcing firm; and Wind River Systems Inc. (Alameda, Calif.) acquired SC Comsys SRL, an embedded-software professional-services organization based in Romania.
“All of those businesses are attracted by the skilled people coming out of the universities,” Goodhind said.
Every year, Romania produces 5,000 graduates in software and related disciplines. Currently, 25,000 are employed in the software industry, according to figures from the state’s Foreign Trade Department.
Much of the software activity is taking place in Cluj-Napoca, which is quickly becoming Romania’s technopolis. One-third of Cluj’s 300,000 inhabitants are students.  “You can find local talent with a higher work ethic than in Bucharest,” said Roman Foeckl, managing director of CoSoSys, a Cluj-based developer of software for portable storage devices and endpoint security.
Foeckl, a German citizen, launched CoSoSys after a visit to Romania in 2004. He set up an office and ran a “help wanted” advertisement; a line of software engineers showed up.
Six months later, the company launched its first product, data- synchronization software for Cluj is also the location for a Nokia (NYSE: NOK) mobile-phone factory that’s due to open on Feb 11. Nokia has hired 500 people to operate a single shift but intends eventually to employ 3,500 operating a three-shift system. At the same time, Nokia is closing a plant in Bochum, Germany.
Nokia’s investment in the Cluj factory will be about $90 million. The cell phone giant also plans to build an industrial village to host suppliers and support facilities, increasing total investment to roughly $300 million– the largest technology investment in the country to date.
While Bucharest hosts the software operations of heavyweights such as Oracle (NSDQ: ORCL), Hewlett-Packard (NYSE: HP), Microsoft (NSDQ: MSFT) and SAP (NYSE: SAP), congestion and increasing competition in the capital has sparked a migration to Cluj. “People are moving [there] from Bucharest because of the better quality of life,” Wirtek’s Aaen said.
Wages have increased since Romania entered the EU, putting the cost proposition for software talent close to that of Central Europe. Nevertheless, average pay is still far lower than in Western Europe, sources agreed. Depending on experience, starting net salaries for computer science university graduates are 400 to 600 euros (about $600 to $900) per month, Foeckl estimated. Someone with three years of experience could get about double that.
Goodhind of Mysis added that Romania’s competitive dynamics are not as strong as in Poland, Hungary and Czech Republic, where multinationals and large local players compete more fiercely for staff.
“There’s an ideal balance to be struck between having enough people [and having a] glut of companies to compete for those resources,” he said.
Soft factors also tilt decisions in Romania’s favor, sources said. Wirtek found Romania’s cultural similarities to Denmark, proximity to that country and shared time zone were additional pluses, Aaen said.
The Romanian language shares similarities with Italian, Spanish and French, and most Romanians speak English. Mysis found that useful because the company develops many core products in France.
“Romania seemed a natural place for us to augment our growth,” Goodhind said.
A challenge for Romania is that it’s more an outsource destination than an original-product developer. Besides CoSoSys, only a handful software companies make their own products that are successful in Western markets, Foeckl said.
But he believes that could change.
“The people are very driven, educated and creative,” he said. “Traditionally, that hasn’t been explored, because during communism there was no room for creativity.”

More than 50 pc of BPO workers smoke: Study

SOURCE: The Hindu
DATE: Feb 4th, 2008ARTICLE
More than 50 per cent of the BPO workers smoke and are not aware of the ill-effects of smoking despite being educated, says a study being carried out by the Tata Memorial Hospital here.
Work for the two-year study which began in August last year is being carried out in four BPOs in Mumbai, Dr Gauravi Mishra, Consultant, Preventive Oncology division of TMH, said adding although the BPOs themselves are smoke-free but the staff come out of the office for smoking.
Cigarette is the most common form of smoking but the staff also go to the Hookah bars to “ventilate” their stress without realising the fact that hundreds of diseases are caused by tobacco, she said.
Cigarette smoking is more prevalent among men than women staff but women prefer to go to hookah bars, the doctor said.
The sample survey includes 800 to 1000 people under the age group between 22 and 23 years.
With consistent counselling and educating on the harmful effects of smoking on them and their future generation, the smoking behaviour could be changed, Mishra told media here.
 

Region’s first KPO sets up base at Chandigarh IT Park

SOURCE: ExpressIndia
DATE: Feb 4th, 2008ARTICLE
It’s not just infrastructure offered by information technology (IT) parks, but also low attrition rate in Chandigarh that is drawing IT companies to the tri-city. UK-based Heron Health, the first KPO (knowledge process outsourcing) company to set up base in the region (IT Park, Chandigarh) said the potential to recruit and retain a rich pool of top quality professionals is why they are here. Interestingly, IT company Tech Mahindra, too, had recently listed lowest attrition rate at its Chandigarh Centre as an important factor for opening a campus at Chandigarh IT Park.
“Our industry is knowledge based and we need people who can be retained,” said Heron directors Paul Howard and Chris Knight, adding that institutions such as NIPER, Panjab University, PGI, etc. consistently produce top quality medical staff and the office in Chandigarh will be the largest operational centre of the company.
Heron Health, which is into analyzing and interpreting information for the pharma industry, caters to multinationals such as GSK, Pfizer, Johnson and Johnson, among others. “Unlike business process outsourcing (BPO) companies we are here not to cut costs but increase capacity and are offering the best reward package in the industry to our staff,” its country head Manek Shergill added.
Mainly getting revenues from the US and Europe, Heron is now exploring India and other Asian countries. It intends to have a staff of 300 at its Chandigarh office in the next three years from the present 28 and to open another centre in the city.

Eight companies awarded innovation award by NASSCOM

SOURCE: Business Standard
DATE: Feb 4th, 2008
ARTICLE
Nasscom, the premier trade body and the ‘voice’ of the Indian IT industry today announced the winners of the Nasscom Innovation in IT Awards 2007.The broad award categories for 2007 include Market Facing Innovation, Process Innovation and Input Innovation for both emerging companies and large and MNC companies.This year’s winners include Comat Technologies, Financial Technologies India, Mango Technologies, MediaLab Asia, Mindtree Consulting, Mistral Solutions, MeritTrac Services and Texas Instruments.Congratulating the winners, Som Mittal, president, Nasscom, said, “Over the years, the Indian IT industry has made many rapid strides and has now established itself as a mature and credible player in the global IT industry. The next wave of growth for the Indian IT industry will be innovation-lead and hence possessing an innovation capability will be sine qua non for Indian IT firms, regardless of their size.”Towards achieving this objective, Nasscom had constituted the Innovation in IT awards as a platform for firms to showcase their innovations. 2007 marks the fourth edition of the awards and in this edition we have introduced a special focus on start-ups,” he added.From the twenty one companies shortlisted, eight winners will be felicitated and recognised for their outstanding contribution to the Indian IT sector at the forthcoming Nasscom 2008 India Leadership Forum, to be held in Mumbai during February 13-15, 2008.

Braving an American typhoon

SOURCE: Deccan Herald
DATE: Feb 4th, 2008ARTICLE
The slowdown in IT spending will impact Indian software companies only if the recession in the US becomes deep and prolonged, Shivani Mody and Chanda P Kumar find out.
Economic slowdown in the US has caused worry for the global economy, and India has been no exception to this phenomena. Since two-thirds of the Indian IT outsourcing revenue come from the world’s largest economy, the industry is closely studying the development. The worry is an added problem after the appreciating rupee shaved off nearly 10 per cent of the margins. The US economic slowdown triggered by the subprime crisis, occurred when banks were unable to recover home loans from less creditworthy borrowers. As banks and other financial entities have so far lost around $146 billion, many fear that the US economy is heading for a recession.

If US companies cut their spending on IT what could be the impact on Indian IT industry? It can be quite painful as we have too much at stake. In the current financial year 2007-08 total Indian IT exports (including BPO services) is expected to be around $ 50 billion and 66 per cent of this ($ 33 billion) is to come from the US. In case of a slowdown the industry may not reach its target of $ 60 billion in exports by 2010. Since the US financial sector has been badly battered by the subprime crisis, the BFSI (Banking, Financial Services and Insurance) sector accounting for 38 per cent of Indian IT exports, is likely to be worst hit. The other major verticals are telecom and hi-technology, retail, health care, manufacturing, energy and utilities. Also at stake will be IT jobs in the country which employs about 1.6 million direct staff and another 6 million indirectly.Opportunity from crisis
While the Indian IT industry is aware of the possible impact of an US slowdown, at the moment no one is worried. To gauge the mood, Deccan Herald spoke to a large number of big IT players. Some of them felt that India can get more IT jobs because of the crisis, while others saw no reduction in IT spending by their clients. Infosys Technologies’ Chief Mentor Narayana Murthy, for example, recently said that American companies will outsource more IT work to cut their cost. “Bad news for US will be good news for Indian IT firms” he said pointing to the fact that India can get a larger share of the IT pie. According to Phaneesh Murthy, CEO of iGate Global Solutions, who works out of US and a keeps a close tab on the market, technology spending is likely to go up slightly rather than coming down. He said, “I am getting hints that companies in the financial sector will now spend more dollars on technology to enhance governance, process and systems. The priority now is to plug the loop-holes so that subprime-like crisis is not repeated.”Major IT companies like Infosys, Wipro, Satyam and Mindtree Consulting, clearly stated that there is no sign of a slowdown in IT spending. Speaking about the third quarter results of the company last month Infosys Technologies, CEO, S Gopalakrishnan said, “The BFSI sector which is of concern, has shown a good growth during the quarter and we have even added new clients in this space. BFSI actually grew faster than the company this quarter.”Added Satyam Computer’s, CFO, Srinivas Vadlamani: “We have got a visibility of the new IT budget from our clients which shows a 4-5 per cent increase in IT spending. Interactions with clients do not suggest any cost cutting measures or reduction of work. As of now we see no impact and are keenly observing the situation.”
Impact in the long run
The situation will alter significantly if the current slowdown turns into a fully blown recession. Most industry experts agreed that in such a situation companies will cut back their overall technology spending and as a result the annual growth rate in Indian software exports can come down from the present 30 per cent to 20 per cent. An unrelenting recession can lead to a reduction in rates and in over-all order. “IT contracts are long-term spaning over a few years, however there could be pressure on billing rates eating into profits. The clear picture will be visible in the next 3-6 months,” observed Gautam Sinha, CEO, TVA Infotech.Murthy B S, CEO of Human Capital added to this: “The situation is a ‘caution note’ for the Indian IT industry. Companies have to be prepared with risk management solutions and even tackle the rupee appreciation issue more effectively. There might be about 10-15 per cent reduction in growth rates. The recession will definitely impact IT companies both big and small with varying degrees.” Experts believe that effect of a slowdown is expected to have an impact on both large and mid-sized IT companies in different ways. Pointed out Arvind K Singhal, Chairman, Technopak Advisors: “In most of the cases there are chances of a shakeout as we have seen happen during the US slowdown some years ago.” Agreed Sudin Apte, Country Head & Senior Analyst of Forrester India: “There is a state of confusion and uncertainty at present. Since last 3-4 months we are seeing some slump in the projects and decisions, which will continue for the quarter.” According to experts, large companies which operate in multiple geographies and verticals, are well-cushioned in case of a prolonged recession. Differentiated companies providing specialised services also have a good chance to maintain profits. Rostow Ravanan, CFO, Mindtree Consulting said, “For the next two quarters, we do not see any change in the pricing and IT spending. We will get a clearer picture in 2-3 months after the CFOs give the IT budgets. If new projects are canned then it will be a problem.”But smaller companies may suffer more in case of a cut in technology spending because the range of verticals they operate in is limited and they are not very efficient in providing higher value added services which can, to some extent, compensate for the lower billing rate.
Internal changes
Has the economic slowdown in the US sparked off internal changes in the IT outsourcing firms here? TCS emerged first to take such an action when it recently shaved off a portion of the variable pay component of its one lakh plus employees, based on the company’s performance in the third quarter the current financial year. Though the effect of the change in TCS will reduce the employee’s salary only by about 1.5 per cent for the January-March quarter, it has brought the entire Indian IT industry under the spotlight with employees beginning to wonder if they could be in trouble soon. Here again leading IT companies Deccan Herald spoke to denied of any cut in pay package. Wipro Technologies even released an official statement last week which denied reports in the media about the company reducing the percentage of variable component in salaries. “There are no plans of re-structuring employee salaries,” the release said. Infosys said nothing has changed in their pay package. Another IT giant Satyam also joined its peers in saying that it would not get into trimming variable pay of its employees. “We only give the variable pay at the end of a quarter, as computing this in advance is risky,” informed S V Krishnan, Head of HR at Satyam.
Lower hike
IT workers, who were blessed with a fat pay package that grew bigger each year may have to settle for a moderate wage hike this time as most IT firms see marginal increase in the wages this year. The Indian IT industry which witnessed an annual wage rise of 12-15 per cent last year, may settle for 10-12 per cent hike in 2008-09.“We will definitely not see a huge jump in wage hikes this year. However the ratio between fixed income and variable pay is certainly going to change, it may even go up to 50 per cent from present 25 per cent,” felt Sampath Shetty, VP (Permanent Staffing) at TeamLease, a leading staffing firm. In tune with the IT biggies, even mid-size and small companies have maintained their stance and say that they would not resort to any measures which could pinch the pockets of their employees. “Our wage hikes will be in tune with the market and remain competitive,” said Dr Anil Gupta, COO of Aditi Technologies, which provides technology consulting & outsourced product development and majority of the company’s clientele are US-based. Would a US recession lead to job cuts here? Aditi’s Gupta says that company’s hiring may rise by 40 per cent following good traction from clients. However, job market supplements of some leading newspapers have noticed a significant drop in the recruitment advertisements from IT outsourcing companies, indicating a low pace in hiring activities. Satyam’s Krishnan too is bullish on hiring: “We increased our strength from 37,000 employees to around 50,000 as of December 31, 2007. In the coming months we will further step up hiring.” Of course, to keep the overall cost low companies are increasingly hiring fresher from Tier II cities and also non-engineering graduates. So even though the US slowdown and the battle of the rupee-dollar has shaved off billions of dollars from the Indian IT companies, these companies are putting up a brave face and shunning the possibility of a doomsday, opining that a mild recession would in turn bring in the extra buck.

Interview with Russell Huntington, Watson Wyatt

SOURCE: Business Standard
DATE: Feb 5th, 2008ARTICLE

Russell Huntington believes the Indian economy’s growth outstrips even that of the Industrial Revolution. But unless businesses get their HR strategies in shape, they may not be able to reap the benefits of this prosperity, he warns.
Huntington knows what he is talking about. As director of the human capital group at HR consultancy Watson Wyatt, he is a frequent visitor to India and advises many of the country’s top companies.
On a recent visit to Mumbai, Huntington spoke with Govindkrishna Seshan on how to increase India’s talent pool and the need for sound retention strategies in emerging economies. Excerpts:

What are the key issues facing HR managers in Asia Pacific?
Most countries in the Asia Pacific region are seeing dramatic changes in their economies: the pace of growth of the Indian and Chinese economy is already well documented.
But, perhaps not surprisingly, the labour market has not adjusted. That is why there is a sellers’ market for talent. Across Asia Pacific, there is now a tremendous shortage of talent.
It is especially acute in India and China, but other nations too are facing similar situations. The unemployment rate in Australia, for instance, is the lowest in 30 years. Companies are facing a talent war that cuts across borders.
How should a company cope with this challenge?
Companies are realising that, to attract and retain talent, they need to look beyond just salary, promotions or benefits. They need to offer a value proposition that is unmatched by others in the market.
It’s no longer just about the pay, so companies don’t need to break the bank anymore. Instead, they need to look at job design. When we survey employers for best practices, employees from winning organisations almost always say that their jobs offer them continuous challenges.
When asked why they have stuck with their companies, the most common reply is that whenever they feel they are getting bored, the company has given them a new and more exciting challenge.
This could be by giving them a new role, a new project or a new field altogether. To begin with, companies must look at creating engaging challenges to excite their young workforces.
Then, youngsters are most worried about career development. So companies must look at empowering their employees. I know of a Korean company, which employs a few thousand people, that sends employees on a year-long paid sabbatical to study leadership anywhere in the world.
Although this is given to only a select few, it sends a strong message that the company is concerned about the development of its employees. In the Philippines, many companies are setting up dating agencies to help their employees find partners.
Again, the message is that the company cares for its employees and is not just worried about profits and losses. Next, companies must ensure their middle-level managers are good “people” managers. This isn’t easy, because you are asking technical or professional people to be less technical and more people-oriented.
Many organisations now lose employees to huge payhikes offered by competitors. So salaries are still important….
As I said earlier, being a smart payer is good but it doesn’t really help to be the highest payer. Companies must understand that when they lose employees to a 50 or 75 per cent pay hike, it is not a failure of their retention strategy. They are essentially losing these employees to attraction.
Higher salaries will attract employees, but will not retain them. Employees will not stick to a job they find boring or where they do not see growth, even if you offer them a 100 per cent raise. What should an organisation’s strategy be, in such a situation?
To begin with, it is important to recognise that not all attrition is bad. The director of a leading Indian BPO told me that he would like employees to leave the company after the first year as the cost of training fresh employees is far lower than holding on to experienced ones.
That is very sector specific but still, when a company loses some of its people to attraction from a competitor, it can always hire fresh talent. Of course, people will only work with a company when the work is interesting and the culture is good.
Another way to deal with attraction is to treat different sets of employees differently. Companies need to identify their critical talent and reward them well. They can choose whom they do not want to lose and who they can do without.
How do companies in other Apac countries deal with attrition and attraction?
Chinese companies are more strategic and tactical about finding and retaining talent. They are looking at ways to fight and reverse brain drain.
Many young Chinese go overseas for their education and over 60 per cent usually disappear into the workforce of the country where they study. Given the acute shortage for talent in the country, many Chinese companies are tracking international institutes that have a good proportion of Chinese students to bring these people to their workforces.
Typically, companies go to these countries, offer students summer placements in their company offices back home — students find this exciting as it means a free trip back home.
During the summer, they assess the candidate and, if found good, they make him or her an offer on completion of the course. Now this shows the extent of commitment exerted by these companies to find talent.
There are other examples. Singapore, for instance, wants to grow from a total population of 4.5 million to 7 million by 2030. Obviously, they aren’t planning to achieve that by just having more babies. Instead, the country has thrown itself open to the world. Professionals can obtain a work visa in as little as two days. Given its population, India may not look at a similar remedy. In that case it needs to take serious measures to increase its talent pool.
What can companies here do?
Over half the population of educated women do not work outside the home in India. Now, this may be cultural, but there are definitely ways to work around that.
In most European countries, this was the norm two generations ago. But companies worked around it and today almost all educated women in these countries work. Indian companies need to facilitate this change. This would mean looking away from the nine-to-five system of work hours, this would mean setting up a day-care facility for employees’ children in your company.
Some companies may need to look at setting up infrastructure to provide employees with work-from-home options. While these may seem to be extraordinary initiatives, the results they bring are also extraordinary: once women take to working, the talent pool will nearly double.
Look also at the serious commitment with which China has overhauled the level of education imparted in its universities. India must emulate that.
What are the challenes ahead for HR managers?
Going forward, the supply-demand situation is only likely to worsen. So companies need more detailed strategies. They will have to look seriously at employees from every age group, study their preferences and choices and then build their policies around these findings. It is a lot like marketing.
Companies need to research the psyche and understand what excites the employees they need most. After that, they need to tweak their work culture accordingly.
It doesn’t stop there. They also need to advertise and brand themselves around these propositions. We will see many more companies advertising and carrying our employer branding.
Companies that are doing this at the moment have already figured out what turns on their employee target group. This trend will only increase.
In other words, not only will companies have to market their products, they will also have to market the job of making the products.  

HR firms hope to co-exist with portals

SOURCE: Financial Express
DATE: Feb 4th, 2008I don’t doubt this will be the case but what I think the online portal are doing is removing the
‘least value added’ HR firms. These were really the fly by night operators ( which still exist) and primarily these firms were engaged in copying and pasting resumes on their letter heads and submitting to companies. The growth of online portals in India has been primarily faster than the US or UK because of a few key difference in the market place. First the growth in the job market in India has been at a much higher rate than the growth in the US,UK. Secondly the percentage of jobs which are entry level or one’s with minimal experience are a larger percentage of this growth and are sourceable easily online.

The growth of resume fraud, a lack of proper background checks and overinflating resumes still is at an alarming high rate in India and has to be tackled both online and offline.ARTICLE
Despite a large number of Indians (a recent survey finding 40%) grabbing their jobs in the virtual world, the HR firms are unfazed at the competition, in fact, they are lauding the job portals’ role in the hiring chain, which they say have facilitated in streamlining their own work to some extent.
“In fact, the recruitment process got benefited by technological advancements; the industry got more structured since their entry,” said Yogesh Saigal of ABC Placement consultancy. Most of the HR recruiting firms have access to job portal’s database but they feel that large proportion of resumes on the online job portals are not employable, so executive search firms must sift the grain from the chaff. “There is enough space for job portals and HR firms to co-exist as the pie has also got bigger in last few years. As per the survey, 22% of respondents still find their jobs through HR firms and job portals can never replace us in the expertise in form of sector-wise functional specialisation that we offer,” believes Vishal Chhiber, HR head, Kelly Services, India.Gurdeep Hora, managing director, Synergy Consultants disagreed, “Job portals are both a resource and competition for us, resource as we can use their database as a starting point for our assessment, competition as organisations to whom we cater also have access to the same database, what they don’t understand is many of the resume posted on these portals lack accuracy and are exaggerated.”

Despite a large number of Indians (a recent survey finding 40%) grabbing their jobs in the virtual world, the HR firms are unfazed at the competition, in fact, they are lauding the job portals’ role in the hiring chain, which they say have facilitated in streamlining their own work to some extent.
“In fact, the recruitment process got benefited by technological advancements; the industry got more structured since their entry,” said Yogesh Saigal of ABC Placement consultancy. Most of the HR recruiting firms have access to job portal’s database but they feel that large proportion of resumes on the online job portals are not employable, so executive search firms must sift the grain from the chaff. “There is enough space for job portals and HR firms to co-exist as the pie has also got bigger in last few years. As per the survey, 22% of respondents still find their jobs through HR firms and job portals can never replace us in the expertise in form of sector-wise functional specialisation that we offer,” believes Vishal Chhiber, HR head, Kelly Services, India.Gurdeep Hora, managing director, Synergy Consultants disagreed, “Job portals are both a resource and competition for us, resource as we can use their database as a starting point for our assessment, competition as organisations to whom we cater also have access to the same database, what they don’t understand is many of the resume posted on these portals lack accuracy and are exaggerated.”Moreover, they are unanimous in stating that the impact of online job sites are confined to jobs at entry level and lower income segment and restricted to specific sectors. “They are essentially realigning talent with 0 to 5 year experience with minimal impact on senior levels.” states Saigal. Similar sentiments are echoed by Chhiber, “Largely portals operate at levels where the skill set required is either low like low end sales or front desk jobs or are easily measurable like IT and ITeS but we are instead using portals as platforms alongside our traditional channels of advertising like newspapers etc to advertise jobs especially the ones that require new skill sets.” Hora concludes, “Portals have become the easiest, fastest, cheapest means to hire people at the lower levels. Hence, they have succeeded in making a mark there. But when it comes to niche positions, defined roles and senior levels, HR firms still rule. Moreover, credibility and quality control will… remain our forte that the job portals have not been able to match till now.”…

Genpact CEO to present at Sanford Bernstein on growth and opportunities in BPO

SOURCE: Press Release
DATE: Feb 4th, 2008Genpact (NYSE:G), which manages business processes for companies around the world, will present at a Sanford Bernstein investor luncheon on growth and opportunities in the offshore BPO market tomorrow, February 5, 2008, in New York City. Pramod Bhasin, president and chief executive officer of Genpact, is the featured speaker. He will be joined by Bernstein analyst Rod Bourgeois. Remarks will be audiocast live beginning at 12:15 pm EST. Dial-in numbers are as follows: 800-857-6777 (International 1-773-756-0503), participant code « bourgeois ». See www.genpact.com for details.

IT cos may trim frills to stay competitive in tough times

SOURCE: EconomicTimes
DATE: Feb 5th, 2008
ARTICLE
India’s software and BPO industry may see a human resource (HR) crisis unfold. On the one hand, there is a shortage of talent and on the other, the ability to pay is shrinking. Companies are likely to cut down overheads, expense accounts, variable pays and if needed, even core salaries, to stay profitable, said industry insiders. Following the variable pay cut by TCS, HR departments within IT software and services companies seem to be ready to shift to a cautious approach towards their salary structures.Hexaware Technologies chief people officer Deependra Chumble said: “With the rupee getting stronger against the dollar, companies are becoming cost-conscious. The significant salary hikes on job switches will certainly see a decline in two to three years, besides decreasing variable pay within companies.” The salary hikes, too, should stabilise within the same period, he added. For years, technology companies have been battling to capture the best talent, at whatever salary it may take. It was alright when these companies enjoyed 30%-plus profit margins, but now they’re in a position to count every rupee they spend. Nasscom has estimated that by 2010, India could face a shortfall of 500,000 IT professionals. Executive VP (HR) at Firstsource, Aashu Calapa, said the salary increases given out this year would definitely be less that the average increases in the past few years. “Generally, an IT/ITES company’s average increase tends to be around 13-15%, but with factors like a probable US slowdown and the recent Fed rate cut affecting the bottomlines of technology companies in the country, this would come down to 9-11% for the coming year,” he told ET, adding that rather than starting salaries for freshers coming down initially, the first to be hit would be the salary increments that experienced employees get. He added that this would come down by nearly 3-4% in the current situation. Having said this, the salary cuts would also bring a silver lining for the IT industry. Crystalgazers said attrition may come down as employees won’t gain much by jumping jobs and productivity may improve as companies would also think about increased working hours. Ma Foi chief operating officer E Balaji said: “Companies would look to reduce frills such as excessive office parties. Travel by business class by senior management will definitely come under microscope, along with companies increasing their work hours to compensate the salaries.” Corroborating Mr Balaji’s views, Mr Calapa added: “As market congestion happens — and there is a climate of uncertainty due to the US companies cutting their IT costs — employees would not jump jobs very often, and the high rates of attrition in the industry in India would definitely decrease significantly allowing companies to freeze the salary structures and not give excessive increments.” According to Nasscom estimates, the employee base for FY07 in the IT/ITES industry was nearly 1.6 million people with IT software and services adding over 177,000 employees in the period and the BPO sector adding nearly 138,000 employees in the same period. The overall IT software and services sector is expected to grow by 24-27% clocking revenues of $50 billion in FY08.