Expansion mode: RBS may set up backoffice in Chennai

ROYAL Bank of Scotland (RBS) plans to expand its financial backoffice operations in India with a new facility in Chennai with potential to develop into a 4,000-seater hub over time.
The banking major, which operates as ABN Amro in India at present, has leased nearly 4.6 lakh sq feet of office space, considered by realty players as a large deal particularly in hard times such as these, in Chennai’s Ambattur suburb.
Sources said the new leased facility would be a fresh backoffice offshoring centre of RBS globally and not necessarily a consolidation of ABN Amro’s existing operations under one roof in the city. RBS, which acquired ABN Amro, is talking about possible cost savings of over £2.5-billion in the next few years.
“India could be a net beneficiary in the context of technology development and backoffice offshoring by RBS even though it is too premature to detail the same,” said a source. When contacted, an RBS spokesperson said: “...As a result of acquisition, we now employ 8,000 people in India, serving our operations globally, and we employ more than 70,000 people outside the UK. In the last year, we have been progressing with work to integrate the two businesses and develop all our centres in the UK, India and across the globe.”
At Rs 26 per sq feet per month, the deal is literally in the sub-$1 rental regime, that is witnessing a traction from companies looking at tightening rental costs. At about 100 sq feet of space per person, the capacity of the facility would be over 4,000, a source said. Realty sources said RBS will occupy the Ambattur facility in a phased manner.
RBS has already consolidated its technology development arm with ABN Amro’s back-office operations with an overall employee count of roughly 7000. Overall, RBS staff strength in India, along with ABN Amro, is pegged at around 10,000.
The banking giant, through ABN Amro India, signed up the lease agreement with Harish Fabiani-led India Land at its 1.7 million sqft IT park. India Land has attracted investments from Americorp Capital. India Land has ongoing IT SEZ projects in Chennai, Coimbatore and Pune.
ABN Amro has a significant captive BPO presence in Chennai. At present, ABN Amro backoffice operates out of two facilities in Chennai’s business districts of Mount Road and Guindy. Realty sources said the new lease is for expansion of its overall captive BPO capacity.
Ambattur, traditionally an industrial belt, is emerging as a destination for IT/ITES activities. Located 19 km from Chennai airport, it enjoys good connectivity.

IT/ITeS TOP 10 PREDICTIONS FOR 2009

IDC India predicts that the domestic IT/ITeS market will grow by 13.4 per cent in 2009

According to IDC India, the domestic India IT/ITeS market will grow at 13.4 per cent in 2009, the slowest since 2003. The much awaited annual IT/ITeS market forecast suggests that important structural changes, taking place on the back of a global economic meltdown, will propel a new ‘market order’ in the domestic Indian IT/ITeS industry.
This new ‘market order’, termed as Growth Phase 2.0, will be quite different from the earlier phase, Growth Phase 1.0 (2003-08), during which the domestic market witnessed unprecedented growth, nearly tripling the market size from Rs 34,000 crore in 2003 to Rs.1,01,031 crore in 2008, a CAGR of over 24 per cent.
IDC’s report titled ‘India Domestic IT/ITeS Market Top 10 Predictions for 2009’ states that Growth Phase 2.0 will leverage the IT infrastructure built and consolidated during Growth Phase 1.0.
Growth Phase 2.0, expected to evolve 2009 onwards, will be built on the back of new and innovative services sought by consumers and enterprises alike. The technology behind these services—infrastructure, applications and connectivity—will need to orchestrate and re-orient completely in order to support their mass adoption.
IDC expects the India domestic IT/ITeS market growth rate to come down from an average of 24.3 per cent recorded during 2003-08 (Growth Phase 1.0) to 16.4 per cent in the coming five years till 2013. This relatively slower growth will see enhanced competition leading to a rapidly changing strategy and continuous market re-alignment on the part of ICT market participants.
2009 domestic IT/ITeS market to grow at 13.4 per cent (against
17.3per cent in 2008)
The combined India domestic IT / ITeS market grew by 17.3 per cent in 2008 to touch revenue of Rs.1,01,031crore (over Rs 86,101 crore recorded in 2007). The domestic IT market (excluding domestic ITeS) grew at 15.4 per cent in 2008 over 2007 to report revenue of Rs. 94,185 crore. The domestic ITeS market grew 53.2 per cent in 2008 to report revenues of Rs. 6,846 crore (from Rs. 4,468 crore in 2007).
IDC expects the combined India domestic IT/ITeS market to grow at a slower 13.4 per cent in 2009 to achieve revenue of Rs. 1,14,574 crore. The domestic IT market is expected to grow at 11.4 per cent in 2009 to post Rs. 1,04,937 crore, while the domestic ITeS market will post revenues of Rs. 9,637 crore, a growth of 40.8 per cent.
* Others include printer consumables, individual IT training, accessories and other revenue streams.
The major product categories expected to grow at a rate higher than the industry average include Collaborative Applications (23 per cent), Storage Software (19 per cent), System and Network Management Software (19 per cent).Within the ambit of IT services, segments reporting higher than average growth include Desktop Management (22 per cent), Information Systems Outsourcing (32 per cent), Network Management (23 per cent) and Application Management (20 per cent).Among IT solution categories the faster growing ones would be Virtualization (28 per cent), Unified Communications (25 per cent) and Business Continuity Services (20 per cent).
All these categories point towards the need for better management of IT infrastructure for their most optimal deployment and use in achieving enterprise business goals.
The India Domestic IT/ITeS Market Top 10 Predictions for 2009 are:
SLOWDOWN TO ACCELERATE IT/ITES MARKET TRANSFORMATION FROM GROWTH PHASE 1.0 TO GROWTH PHASE 2.0 The market transformation of the India domestic IT/ITeS market has already started, with market players preparing for a new landscape. As this new landscape is about a relatively lower growth rate regime, they need to innovate, leverage the existing infrastructure and align continuously to market opportunities.
Growth Phase 2.0 will be an era of following dynamic strategy as any existing strategy will not remain effective for long and would need to be re-constructed. The economic slowdown will only accelerate this transformation, which would manifest itself in terms of cost savings, productivity enhancement and customer retention in the short run, giving way to new engagement and delivery models in the long run.
INDIA TO BE THE FASTEST GROWING MARKET IN APAC The top five growth markets in the APAC region are India, China, Vietnam, Thailand and Philippines. India will continue to lead the pack with 11.4 per cent growth in domestic IT spending projected for 2009.
IT OPTIMIZATION TECHNOLOGIES ADOPTION AND USAGE TO GROW IDC believes that the emerging IT optimization technologies will move from ‘being at the tipping point’ to ‘being mainstream’ in 2009. On account of the slowdown the technologies that deliver significant cost savings such as virtualization, unified communications, open source etc. will see heightened interest and adoption by enterprises in 2009.
Technologies that can deliver near-term cost savings will remain in focus while the larger capital-intensive green investments with longer payback cycles will move down the priority list.
TELECOMMUNICATIONS SECTOR IT SPENDING GROWTH WILL BE FASTEST As the economic meltdown forces enterprises to slash their IT budgets across industry verticals, the telecommunications sector, would continue to grow at higher than average growth rate and will be the least impacted by slowdown.
THE OUTSOURCING SERVICES MARKET WILL MOVE TOWARDS CONSOLIDATION IN FAVOUR OF LARGER PLAYERS IN 2009 IDC believes that the economic slowdown will further increase and accelerate the adoption of outsourcing services by the Indian enterprises.
However, the two ends of the outsourcing services market i.e. lowend services like support services and high-end services like Business Transformations services will undergo consolidation. Low-end volume services, because of increased competition, will find margins coming down and larger players will acquire their counterparts, while at the same time accelerating their movement towards Business Transformation Services in 2009.
EXPERIMENTATION WITH ‘CLOUD
COMPUTING’ MODEL WILL INCREASE BUT WILL NOT BECOME MAINSTREAM IN 2009
IDC India predicts that in 2009, IT ‘Cloud Computing’ service offerings—including software as a service (SaaS), hosted delivery model—will get tested and adopted on a larger scale and will perform even better than in 2008. The cloud model’s advantages of lower capital outlay and operating costs, coupled with the reassurance of more major players coming on board and building capabilities (including enabling and educating the channel), will encourage more customers at the margin to invest in cloud offerings.
Enterprises, which have been shying away on account of issues of security, connectivity etc., will be forced to re-evaluate the model. Organizations across verticals will evaluate different models with services delivered through the cloud, hosted and managed by suppliers (IT vendors), TSPs (Telecom Service Providers), System Integrators or pure-play hosting players.
THE STAGE WOULD BE SET IN 2009 FOR NEW CHANNEL FORMS TO EVOLVE
The channel space had undergone shift during Growth Phase 1.0 (2003-08) with linear distribution models giving way to multiple types of channels. These multiple channels (like system integrators and ISVs) added more value to the technology adopted by the end user. Keeping the key attribute of ‘value addition’ intact newer forms of channels would emerge during Growth Phase 2.0, with the market transforming yet again. The key differentiator for the new channel forms will be their ‘services’ play as compared to the ‘product’ play of the past. This services play will occur around the emergence of ‘Cloud Computing’ technologies and the need for reliable hosting and delivery channels.
CONSUMER 2.0 ELUSIVE! DELAY IN ORCHESTRATION OF CONTENT, CONVERGENCE AND CONNECTIVITY
‘Consumer 2.0’ is not about Connectivity, Content and Convergence in isolation, but their orchestration in an integrated fashion. Not only would the consumer spending on IT moderate (growth rate of 13.7 per cent in 2009 compared to 23.6 per cent in 2008), but the emergence of Consumer 2.0 will also be affected by further delays in the 3G rollout and dismal performance on the broadband adoption front (subscribers expected to touch nine million in 2009).
ENTERPRISES TO LOOK AT AN INTEGRATED SECURITY APPROACH, REVAMP BUSINESS CONTINUITY PLANS
As enterprises look at optimization technologies like virtualization, cloud computing, hosted delivery model, a key challenge will be information security. Keeping the entire data secure on the cloud while at the same time making it accessible remotely and addressing other vulnerabilities will force organizations to look at integrated security solutions. The heightened security risk perception in view of the threat of terrorist attacks will force enterprises to look at Business Continuity services seriously. As a consequence, the Security Solutions space is expected to evolve and grow by 20 per cent in 2009.
GLOBAL IT GROWTH WILL BE HALVED
Global growth will be cut in half and take three years to come back. Taking into account a dramatic slowdown of global GDP, IDC predicts that global IT spending will decrease to 2.6 per cent in 2009 – half of 2008’s five per cent and far below 2007’s seven per cent growth rate.
Note:
IDC’s India Domestic IT/ITeS Market Top 10 Predictions for 2009 report covers only the domestic Indian information technology (IT) and IT-enabled services (ITeS) markets. IT/ITeS exports from India are not covered as part of this study.
(Source: IDC India)

Lenovo to start analytics work from B’lore hub

AROUND two years ago, Lenovo made headlines when it made Bangalore the marketing hub for its global businesses. After Lenovo took over IBM’s PC business, it found that all the marketing functions were fragmented across various regions and one of the drivers was to centralise these functions. Now the company is expanding the range of functions to include analytical work on how to maximise revenue from customers.
“The average price of a product keeps dropping every month. The challenge is how to increase the order size. So we do some predictive analysis out of our Bangalore centre about what customers who buy a certain product would also like buy. For example, what are the other accessories a laptop customer would like to buy,” said Ranjeet Kulkarni, GM and Analytics head, Lenovo.
WNS Global Services, which has done extensive work with Lenovo on marketing effectiveness optimisation, said there has been 7-10% increase in associated revenue because of these efforts, and many global firms are now centralising analytics work in India. “Earlier, analytics was a fairly distributed function across multiple product lines and geographies. Now the firms have understood the benefits of a having a single pool of people in a location like Bangalore,” said Sanjit Bhaumik, vice-president, WNS.
A leading global consumer products, which started off by outsourcing some analytical works from two of the countries it operates in, has now expanded the engagement to 44 countries. A top auto manufacturer in America, which started off by outsourcing the analytical work to measure the effectiveness of specific sales campaigns, is now setting up an integrated centre for analytics that will help it optimise employee costs, track fraudulent transactions, in addition to analytical functions in sales and marketing.

Diacritech buys US-based KPO firm

CHENNAI: Knowledge process outsourcing (KPO) company DiacriTech, which has a headcount of 700 and facilities in Chennai, Madurai and Kottayam,
recently acquired US-based e-publishing outsourcing firm LaurelTech Integrated Publishing Solutions for an undisclosed sum. “The acquisition will help position the company to work in a hybrid onshore/offshore model, capable of delivering design, editorial and project management capabilities in the US,” DiacriTech vice-president Gopinath ARM told ET. Although he refused to comment on the size of the deal, Mr Gopinath conceded the slowdown did help in getting a more favourable takeover price, but added that it had not affected the momentum of the educational KPO segment substantially. Industry sources estimate DiacriTech's annual business to be in the Rs 20 crore-Rs 30 crore range. LaurelTech is also said to be of a similar size. The educational KPO segment has had a presence in the country for the last two to three decades. India is a hotbed of educational outsourcing, followed by Philippines, China and some African countries. Globally, the segment is estimated at about $4 billion. Of this, roughly $1.2 billion worth of projects are outsourced to India and the segment has been showing a y-o-y growth rate of 30%. Apart from education, e-learning, e-book services and STM (science, technology and medicine) are some of the other segments under the KPO industry, which is estimated to be a $20-billion industry in the country. While the US, UK and Australia are the biggest market for Indian KPO firms, Germany and France are also emerging as big markets. “Command over the English language and our strength in science and mathematics had proved favourable for the industry in India,” Mr Gopinath said. The company is open to more acquisitions and is scouting for targets in the US and Europe.

ACS announces plans to acquire e-Services Group International

Affiliated Computer Services Inc (ACS) (NYSE: ACS), a provider of business process outsourcing and information technology solutions, announced on Monday (16 March) that it is in discussions to purchase e-Services Group International, a business process outsourcing (BPO) and customer care company based in the Caribbean, to expand its global delivery platform.

ACS said that the addition of e-Services, which has approximately 4,000 employees, would provide the company and its clients with a highly-trained, English-speaking workforce capable of handling complex business functions from a location and time zone convenient to North American businesses.
Upon the completion of the acquisition of e-Services by ACS, no workforce restructuring is expected.
The company said that e-Services would continue to be managed by its management team and operations would continue to be performed by e-Services' employees at their current facilities.
In addition, the clients and employees of e-Services would be backed by a FORTUNE 500 company offering a diversified suite of BPO solutions with demonstrated global delivery capabilities serving clients in more than 100 countries.
Financial details were not available.

Source: http://www.tradingmarkets.com/.site/news/Stock%20News/2225616/

IBM to continue outsourcing

US IT Majors Feel Obama’s Anti-Outsourcing Policy May Affect World Trade

HIS anti-outsourcing views may have helped Barack Obama strike a chord with middle class Americans during his presidential campaign. But he is having a tough time selling his policies among some of the largest US corporations.
The IT companies such as IBM, HP and Sun Microsystems that run large outsourcing operations in India feel that the policies of the Obama administration aimed at generating more American jobs will not affect their operations here. Top executives of these firms, currently touring India, say the anti-outsourcing policy could be detrimental to world trade. Software maker Microsoft has already aired its opposition to Obama administration’s curb on H-1B visas that provide jobs to non-US professionals in the US.
Indian subsidiaries of IBM, Sun, Microsoft, Oracle and HP combined employ over 150,000 people. IBM, which has more than 70,000 employees in India, sees no merit in US government’s protectionist policies. “We manufacture products and deliver services from virtually every country in the world. We are present in more than 170 countries. IBM goes wherever the talent and the market is,” said Edward Orange, IBM’s director – Lotus Business Unit, software group, Asia-Pacific.
Obama’s decision in February to offer a tax shield of $5,000 per employee per year to companies that keep jobs in the US had invited criticism from several quarters, especially from the $60 billion Indian IT-ITeS industry that depends on the US market for 65% of its revenues.
The local sourcing push by the US administration is unlikely to be effective in a globalised world, said Marius Haas, senior vice-president, HP ProCurve.
“We have labs spread across Bangalore, Costa Rica and Europe. It’s a competitive economy and you go where the talent is. The local sourcing policy on hardware is unlikely to work as 80% of the world now sources manufacturing from countries like Taiwan and China,” he said. HP ProCurve competes with Cisco in networking products such as switches and routers. It has R&D labs in India.
Analysts also do not see such policies making a big impact. “Companies won’t give up offshoring strategy because of this,’’ said Suvojoy Sengupta, partner of a consultancy firm Booz & Co.
Sun Microsystems, a large IT firm, says the US administration’s move could affect the competitiveness of the industry. “The policy may shrink global trade in the long run. Not every job can be outsourced. But a job has to be done at the right place and at the right time. Outsourcing is like a bag of trail mix of nuts and dry fruits, which are sourced from all over the world.

Infy BPO eyes more revenues from back-office products

INDIA’S second biggest software exporter Infosys Technologies aims to increase its revenues from platform-based back-office solutions from around 2-3% currently to almost 10% of its total revenues over next three years, as the company seeks to grow its revenues without hiring more professionals. With around 17,000 professionals in Infosys’ BPO division, the company wants to pursue a non-linear model of growth by serving different customers using the same platform.
“Platform-based BPO services has widened its scope with increasing number of clients interested in this service,” said Anantha Radhakrishnan, VP and head strategic platforms, key solutions and alliances, Infosys BPO.
Infosys BPO has four such platforms — hire to retire, source to pay, order to cash and newspaper in a box. Mr Radhakrishnan added that customers are increasingly seeking to outsource their entire back-office needs, and a platformbased approach can help address the potential in a better fashion. Under platform-based model, payments are made based on the outcome of service, and costs are shared by vendors and customers. For now, Infosys BPO will be focusing on the verticals of financial services industry, manufacturing, energy and utilities, consumer packaged goods, food distribution companies for this service. “Early wins have been in the human resource outsourcing segment,” said Mr Radhakrishnan.