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Future of Indian IT Industry
- Thread starter deepakraam
- Start date
With the global economy gradually bouncing back, the IT job market is also picking up and 2-2.5-lakh jobs in the sector are likely to be up for grabs.
The IT jobs market will, however, not be the same as it was two years ago, but will also not be as bad as it was last year, Mr Pai said, adding that the fresher-lateral hiring ratio is likely to be around 65:35% this year. Two years ago, there were 3-4 lakh jobs available in the IT market.
The industry has witnessed a lower growth rate in the past 18 months.
Infosys has plans to hire around 20,000, he said, adding that, however, campus recruitments will be lower this year as compared to the past two years.
SOURCE: ECONOMIC TIMES
The IT jobs market will, however, not be the same as it was two years ago, but will also not be as bad as it was last year, Mr Pai said, adding that the fresher-lateral hiring ratio is likely to be around 65:35% this year. Two years ago, there were 3-4 lakh jobs available in the IT market.
The industry has witnessed a lower growth rate in the past 18 months.
Infosys has plans to hire around 20,000, he said, adding that, however, campus recruitments will be lower this year as compared to the past two years.
SOURCE: ECONOMIC TIMES
desi.ladka
New member
Very good post. We have to accept that Indian Software Cos. are doing donkey's job at a cheaper rate than others and therefore earning. The reason is short-sightedness of these so called "Software-Giants".
The threats to this business model are:
1. Other countries (mainly china) are fast catching up on this and building up English language experties and would soon start competing with India.
2. With Salary rise and Rupee appreciation, our prices are increasing and will not be competitive in coming times.
The solution is building world class Products rather than focussing on doing routine(donkay's) work.
The threats to this business model are:
1. Other countries (mainly china) are fast catching up on this and building up English language experties and would soon start competing with India.
2. With Salary rise and Rupee appreciation, our prices are increasing and will not be competitive in coming times.
The solution is building world class Products rather than focussing on doing routine(donkay's) work.
Every economy is different.
Just because u r paid higher in some other country for the same job u cant treat the work has Donkey work unless u feel so.
Even a guy working for a pizza store is paid very much higher than what they get in India.
China has the potential, but India has the edge.
Clients of Indian outsourcing vendors just expect more out of the services provided, leading the Indian vendors to set up base in places such as China.
The myth that China is a key challenger to India in offshore supremacy is gradually dwindling with language, attrition and intellectual property issues plaguing multinationals, noted a recent Forrester report.
The Chinese IT consulting market benefits from various IT consulting projects of the telecommunication industry. The Beijing 2008 Olympics has helped the system integration market to garner a high-speed growth.
However, due to the historical interdependencies, cultural and linguistic similarities and physical proximity, China has been able to establish itself as a key player near shore destination for Japan and Korea. They contribute around 60 per cent of IT services export revenues and also a significant chunk of BPO revenues. The US and the UK markets account for the rest.
However, according to IDC, North American and European markets accounted for 75 per cent of the world's $320 billion IT service and outsourcing market. And these two markets are expected to expand more than 60 per cent annually in the coming years - almost twice the speed of the Japanese market.
China is unlikely to substitute for India or other mature offshore destinations in the short or the medium term - it will work best as a supplement that matures over the years.
Meanwhile, Indian IT service providers such as Satyam, Wipro, TCS and Genpact are setting up base in China and tapping the market.
Just because u r paid higher in some other country for the same job u cant treat the work has Donkey work unless u feel so.
Even a guy working for a pizza store is paid very much higher than what they get in India.
China has the potential, but India has the edge.
Clients of Indian outsourcing vendors just expect more out of the services provided, leading the Indian vendors to set up base in places such as China.
The myth that China is a key challenger to India in offshore supremacy is gradually dwindling with language, attrition and intellectual property issues plaguing multinationals, noted a recent Forrester report.
The Chinese IT consulting market benefits from various IT consulting projects of the telecommunication industry. The Beijing 2008 Olympics has helped the system integration market to garner a high-speed growth.
However, due to the historical interdependencies, cultural and linguistic similarities and physical proximity, China has been able to establish itself as a key player near shore destination for Japan and Korea. They contribute around 60 per cent of IT services export revenues and also a significant chunk of BPO revenues. The US and the UK markets account for the rest.
However, according to IDC, North American and European markets accounted for 75 per cent of the world's $320 billion IT service and outsourcing market. And these two markets are expected to expand more than 60 per cent annually in the coming years - almost twice the speed of the Japanese market.
China is unlikely to substitute for India or other mature offshore destinations in the short or the medium term - it will work best as a supplement that matures over the years.
Meanwhile, Indian IT service providers such as Satyam, Wipro, TCS and Genpact are setting up base in China and tapping the market.
Managed enterprise services segment sees steady growth
MUMBAI: Managed enterprise services has become a critical business area for large telcos like Bharti Airtel, Tata Communications, Reliance
Communications and BSNL. Sectors, ranging from banks to manufacturing to BPOs, are increasingly taking to these services. The services offered include audio and video conferencing, data centres, disaster recovery, virtual private networks and managed security services.
The managed enterprise segment is growing steadily. “The domestic market was worth $4 billion in FY09 and is expected to grow at a compounded annual growth rate (CAGR) of 23.8% till FY12,” said Nanditha Krishna, senior analyst ICT — South Asia and Middle East, Frost and Sullivan. That is not without reason. “On account of the increased need for communication and bandwidth, this segment will continue to see double-digit growth in the time to come. This is, however, not likely to exceed revenues from mobile services,” said Harit Shah, research analyst, Karvy Stock Broking.
Take a look at the numbers for some large companies. Bharti Airtel, India’s largest telecom company, earned a revenue of Rs 1,510 crore from enterprise services to corporates in FY09, up from Rs 1,264.5 crore in FY08. For the second quarter of FY10, the company had an EBITDA (earnings before interest, taxes, depreciation and amortisation) of Rs 1,102.3 crore for all enterprise-related services — this was a 5% increase from the June quarter. For the September quarter, EBITDA for this business accounted for 27% of the total EBITDA of the company. The corresponding number for the June quarter of FY10 was 25%.
Meanwhile, Tata Communications’ managed services revenues grew at a 70% CAGR between FY07 and FY09. Finally, the managed and enterprise services of Reliance Communications contributed to a part of the 40% of its total revenues in quarter ended September 2009, up from 34% in the quarter ended June 2009. The company did not provide break-up of revenues from its managed and enterprise services.
All this comes on the back of companies facing immense pressure on its revenue from mobile services. With tariffs dropping and the emergence of per second billing concept, operators have been facing the heat. In this scenario, telcos, that have invested large amounts in laying fibre optic networks across the country, have seen the managed services business becoming increasingly robust.
Source:
Managed enterprise services segment sees steady growth- ITeS-Infotech-The Economic Times
MUMBAI: Managed enterprise services has become a critical business area for large telcos like Bharti Airtel, Tata Communications, Reliance
Communications and BSNL. Sectors, ranging from banks to manufacturing to BPOs, are increasingly taking to these services. The services offered include audio and video conferencing, data centres, disaster recovery, virtual private networks and managed security services.
The managed enterprise segment is growing steadily. “The domestic market was worth $4 billion in FY09 and is expected to grow at a compounded annual growth rate (CAGR) of 23.8% till FY12,” said Nanditha Krishna, senior analyst ICT — South Asia and Middle East, Frost and Sullivan. That is not without reason. “On account of the increased need for communication and bandwidth, this segment will continue to see double-digit growth in the time to come. This is, however, not likely to exceed revenues from mobile services,” said Harit Shah, research analyst, Karvy Stock Broking.
Take a look at the numbers for some large companies. Bharti Airtel, India’s largest telecom company, earned a revenue of Rs 1,510 crore from enterprise services to corporates in FY09, up from Rs 1,264.5 crore in FY08. For the second quarter of FY10, the company had an EBITDA (earnings before interest, taxes, depreciation and amortisation) of Rs 1,102.3 crore for all enterprise-related services — this was a 5% increase from the June quarter. For the September quarter, EBITDA for this business accounted for 27% of the total EBITDA of the company. The corresponding number for the June quarter of FY10 was 25%.
Meanwhile, Tata Communications’ managed services revenues grew at a 70% CAGR between FY07 and FY09. Finally, the managed and enterprise services of Reliance Communications contributed to a part of the 40% of its total revenues in quarter ended September 2009, up from 34% in the quarter ended June 2009. The company did not provide break-up of revenues from its managed and enterprise services.
All this comes on the back of companies facing immense pressure on its revenue from mobile services. With tariffs dropping and the emergence of per second billing concept, operators have been facing the heat. In this scenario, telcos, that have invested large amounts in laying fibre optic networks across the country, have seen the managed services business becoming increasingly robust.
Source:
Managed enterprise services segment sees steady growth- ITeS-Infotech-The Economic Times
IT services market set to double by 2013: Report
NEW DELHI: The domestic IT services market in India is estimated to grow to $12.8 billion in 2013 from $5.7 billion in 2008-09, representing a
More Infotech Stories |
Performance of top IT cos in Q1 |
India's top 10 BPOs |
The rise of multinational IT in India |
Key facts on India's IT industry
compounded annual growth rate (CAGR) of 18.6% from 2008 to 2013, according to a report from Springboard Research, an IT Market Research firm.
The report predicts the Indian IT Services market will be dominated by IT infrastructure management services, which are expected to reach $7.2B in 2013 reflecting a steady 53% market share, and a CAGR of 18.1% from 2008 to 2013. However, applications services with a growth rate of 19.6% are expected to remain the fastest growing market segment. IT Consulting Services will remain the smallest segment, with an expected market share of 5% and a growth rate of 16.4%.
"The domestic IT Services market is at par with international levels in terms of average gross margin and provides immense opportunity to the vendors ," says Sudip Saha, Senior Research Analyst for Services at Springboard Research. "However, to meet high consumer expectations, vendors need to strategise around services delivery by implementing efficient processes, reusable tools & templates and replicable models," Mr Saha added.
Offlate, Indian IT industry has seen some very large deals from telecom, banking and media firms. Contracts from Aircel, Unitech, Airtel, Vodafone, Digicable, Star and Sun TV, along with contracts from SBI, HDFC and ICICI have been as large as international deals.
According to the research, banking, financial services & insurance (BFSI) lead the IT services market with a 21.5% market share, followed by the public sector and telecom. However energy & utilities, followed by healthcare remain the fastest growing vertical industries.
"With industries such as public sector, healthcare, energy & utilities, and transportation & logistics stepping up their IT spending, the appeal for the Indian domestic market has increased tremendously and is drawing the attention of domestic and MNC IT Service Providers," says Phil Hassey, vice president of Services Research at Springboard Research. "However, the key challenge remains the disability to convert the potential demand into successful client engagement," Mr Hassey added.
The Springboard report however, reveals that infrastructure hosting services showed the highest growth over the period among the infrastructure services category with a CAGR of 23.4%, closely followed by enterprise IT outsourcing, network integration and network management.
NEW DELHI: The domestic IT services market in India is estimated to grow to $12.8 billion in 2013 from $5.7 billion in 2008-09, representing a
More Infotech Stories |
Performance of top IT cos in Q1 |
India's top 10 BPOs |
The rise of multinational IT in India |
Key facts on India's IT industry
compounded annual growth rate (CAGR) of 18.6% from 2008 to 2013, according to a report from Springboard Research, an IT Market Research firm.
The report predicts the Indian IT Services market will be dominated by IT infrastructure management services, which are expected to reach $7.2B in 2013 reflecting a steady 53% market share, and a CAGR of 18.1% from 2008 to 2013. However, applications services with a growth rate of 19.6% are expected to remain the fastest growing market segment. IT Consulting Services will remain the smallest segment, with an expected market share of 5% and a growth rate of 16.4%.
"The domestic IT Services market is at par with international levels in terms of average gross margin and provides immense opportunity to the vendors ," says Sudip Saha, Senior Research Analyst for Services at Springboard Research. "However, to meet high consumer expectations, vendors need to strategise around services delivery by implementing efficient processes, reusable tools & templates and replicable models," Mr Saha added.
Offlate, Indian IT industry has seen some very large deals from telecom, banking and media firms. Contracts from Aircel, Unitech, Airtel, Vodafone, Digicable, Star and Sun TV, along with contracts from SBI, HDFC and ICICI have been as large as international deals.
According to the research, banking, financial services & insurance (BFSI) lead the IT services market with a 21.5% market share, followed by the public sector and telecom. However energy & utilities, followed by healthcare remain the fastest growing vertical industries.
"With industries such as public sector, healthcare, energy & utilities, and transportation & logistics stepping up their IT spending, the appeal for the Indian domestic market has increased tremendously and is drawing the attention of domestic and MNC IT Service Providers," says Phil Hassey, vice president of Services Research at Springboard Research. "However, the key challenge remains the disability to convert the potential demand into successful client engagement," Mr Hassey added.
The Springboard report however, reveals that infrastructure hosting services showed the highest growth over the period among the infrastructure services category with a CAGR of 23.4%, closely followed by enterprise IT outsourcing, network integration and network management.
CFOs expect IT sector to log in stronger growth in near term
MUMBAI: The government's optimism about growth and green shoots seems to be shared by most Indian chief financial officers. Over 100 CFOs across
various sectors, including the export-focused IT and IT-enabled services industries, expect their organisations to return to stronger growth in the near term guided mainly by a non-acquisitive strategy, according to a poll by research and advisory firm IMA India.
"While most CFOs are conservative in their expectations for 2009-10, their expectations for the two subsequent years are decidedly optimistic," said the survey by IMA in association with leading outsourcing vendor Genpact. No company expected negative growth beyond 2010, but appetite for acquisitions was down, added the survey, which covered 102 firms, of which a tenth were of companies with revenue grossing more than Rs 5,000 crore.
Titled '2010 and Beyond: The CFO Agenda', the study showed that a significant majority of CFOs identified growth as top priority, but intended to only achieve it organically, which is expansion of existing facilities. "The heady days of acquisition-led growth are clearly over, and are not expected to return in the foreseeable future," the study added.
The CFO, in his evolution from functional manager to business strategist, was being looked to for marking out the organisation's priorities and strategies, said the survey, adding that top organisational priorities for CFOs in the next 12-18 months was on increasing growth and improving margins. Growth was a top priority from companies in sectors such as pharmaceuticals, healthcare, IT & ITeS, and financial services.
The largest share of companies that accorded top priority to improving margins belonged to the financial services and ITeS sectors. "Most companies used the downturn to cut costs and restructure operations. And they want to continue to run a tight ship even after growth returns," said Genpact COO VN Tyagarajan. "If the economy grows at 8-9%, good companies will grow 25-30%. They have to think, if they want to add cost at the same rate as growth," he added.
About 30% of the respondents had seen a fall in their margins during the global slowdown, but over the next 12-18 months this proportion is likely to come down to 18%, or almost half of the respondents.
A majority of respondents expects a moderate improvement in margins and a small minority - from the consumer goods and pharma industries - expects a sharp increase in profitability. "Margins are expected to increase due to revenue growth or lower costs or both," added Mr Tyagarajan.
Ironically, despite the Satyam scam, the study found a third of the respondents did not have a formal compliance manual, while more than a third did not have a codified standard operating procedures.
MUMBAI: The government's optimism about growth and green shoots seems to be shared by most Indian chief financial officers. Over 100 CFOs across
various sectors, including the export-focused IT and IT-enabled services industries, expect their organisations to return to stronger growth in the near term guided mainly by a non-acquisitive strategy, according to a poll by research and advisory firm IMA India.
"While most CFOs are conservative in their expectations for 2009-10, their expectations for the two subsequent years are decidedly optimistic," said the survey by IMA in association with leading outsourcing vendor Genpact. No company expected negative growth beyond 2010, but appetite for acquisitions was down, added the survey, which covered 102 firms, of which a tenth were of companies with revenue grossing more than Rs 5,000 crore.
Titled '2010 and Beyond: The CFO Agenda', the study showed that a significant majority of CFOs identified growth as top priority, but intended to only achieve it organically, which is expansion of existing facilities. "The heady days of acquisition-led growth are clearly over, and are not expected to return in the foreseeable future," the study added.
The CFO, in his evolution from functional manager to business strategist, was being looked to for marking out the organisation's priorities and strategies, said the survey, adding that top organisational priorities for CFOs in the next 12-18 months was on increasing growth and improving margins. Growth was a top priority from companies in sectors such as pharmaceuticals, healthcare, IT & ITeS, and financial services.
The largest share of companies that accorded top priority to improving margins belonged to the financial services and ITeS sectors. "Most companies used the downturn to cut costs and restructure operations. And they want to continue to run a tight ship even after growth returns," said Genpact COO VN Tyagarajan. "If the economy grows at 8-9%, good companies will grow 25-30%. They have to think, if they want to add cost at the same rate as growth," he added.
About 30% of the respondents had seen a fall in their margins during the global slowdown, but over the next 12-18 months this proportion is likely to come down to 18%, or almost half of the respondents.
A majority of respondents expects a moderate improvement in margins and a small minority - from the consumer goods and pharma industries - expects a sharp increase in profitability. "Margins are expected to increase due to revenue growth or lower costs or both," added Mr Tyagarajan.
Ironically, despite the Satyam scam, the study found a third of the respondents did not have a formal compliance manual, while more than a third did not have a codified standard operating procedures.
karthikm4u
New member
:SugarwareZ-204:
YA I AGREEE
THAT IS WAT ITS ALL ABOUT BUT THE FUNDA MENTAL POINT IS WE MUST GET THERE
bUT WE DONO WHETHER WE MAY
YA I AGREEE
THAT IS WAT ITS ALL ABOUT BUT THE FUNDA MENTAL POINT IS WE MUST GET THERE
bUT WE DONO WHETHER WE MAY
Cos' IT security budget likely to drop this yr; rise in 2010
NEW DELHI: Indian companies are likely to spend less on IT security this year due to the impact of the downturn, but in 2010 their expenditure on
it is expected to increase considerably, a survey by global research firm Gartner says.
According to the end-user survey on Security Spending in India by Gartner, about 30 per cent of firms surveyed expect their enterprises' IT security budget would decrease in 2009.
"To some extent Indian companies may compromise on their IT security this year, as due to the downturn over 30 per cent respondents said they are likely to cut down on their budget for the same and many of them have deferred their IT security projects for 2009," Gartner analyst Matthew Cheung told PTI.
However, the situation may be improving as one-third of respondents expect their security budget to increase in 2010 compared to 2009.
"For 2010, 36 per cent respondents said they will hike their IT security budgets compared to 2009," Cheung added.
The Indian IT security market had a size of USD 120 million in 2008.
"For 2010, we forecast growth will be much faster than this year and would be over 20 per cent," he added.
The study, which surveyed about 50 Indian firms across various sectors, found hardware and software were two biggest security spending areas for them.
Security spendings are on five key areas - hardware, software, personnel, outsourcing and consulting services.
Deepak Tolani
New member
the future of Indian IT seems to be grim as our focus is more on support services. Indian IT companies are not creating products. Innovation is missing.
if Indian companies develop new product platforms we will be able to gain an edge over other countries. we must be the innovators and creators of new platforms.
if Indian companies develop new product platforms we will be able to gain an edge over other countries. we must be the innovators and creators of new platforms.
Indian IT cos set sights on clients' captive operations in US, Europe
1 Jan 2010, 1834 hrs IST, Pramugdha Mamgain, ET Bureau
For India’s top tech firms seeking to acquire an existing back office business of a large customer, the next big opportunity is emerging in the markets of the US and Europe as customers seek to sell captive operations in their home countries.
Having divested their captive operations in emerging countries such as India, some companies are now in talks with companies such as Genpact, EXL Service Holdings and Quatrro to sell their assets. Such transactions are lucrative because they can bring niche expertise at deals worth up to $200 million.
“There are few captives on the block and we are open to acquiring them. Such deals help get access to new customers besides product knowledge,” said Pramod Bhasin, chief executive of Genpact, the largest back-office firm.
Indeed, the recent acquisition of American Express’ travel services captive in India by EXL Service Holdings for $30 million not only provided the latter with an experienced management team, but also capabilities set in analytics, exception processing, and transaction processing.
“Several captives in these countries are not only burdened with high cost structure, but also lack capital to build on offshore capabilities. Moreover, their ability to add value is limited,” said Rohit Kapoor, president and chief executive of EXL.
EXL may shortly strike a captive deal in the insurance or banking space in the US or Europe. “We are in advanced talks with a couple of US and Europe based captives and onshore companies for a possible buyout. The deal, if successful, will give us a presence in these markets,” Mr Kapoor said.
1 Jan 2010, 1834 hrs IST, Pramugdha Mamgain, ET Bureau
For India’s top tech firms seeking to acquire an existing back office business of a large customer, the next big opportunity is emerging in the markets of the US and Europe as customers seek to sell captive operations in their home countries.
Having divested their captive operations in emerging countries such as India, some companies are now in talks with companies such as Genpact, EXL Service Holdings and Quatrro to sell their assets. Such transactions are lucrative because they can bring niche expertise at deals worth up to $200 million.
“There are few captives on the block and we are open to acquiring them. Such deals help get access to new customers besides product knowledge,” said Pramod Bhasin, chief executive of Genpact, the largest back-office firm.
Indeed, the recent acquisition of American Express’ travel services captive in India by EXL Service Holdings for $30 million not only provided the latter with an experienced management team, but also capabilities set in analytics, exception processing, and transaction processing.
“Several captives in these countries are not only burdened with high cost structure, but also lack capital to build on offshore capabilities. Moreover, their ability to add value is limited,” said Rohit Kapoor, president and chief executive of EXL.
EXL may shortly strike a captive deal in the insurance or banking space in the US or Europe. “We are in advanced talks with a couple of US and Europe based captives and onshore companies for a possible buyout. The deal, if successful, will give us a presence in these markets,” Mr Kapoor said.
IT majors set sights on $30 bn overseas outsourcing deals
As top outsourcing customers in US and Europe seek to renew their computer infrastructure management contracts worth nearly $30 billion next year, Indian tech firms including HCL, Tata Consultancy Services (TCS), Wipro and Infosys are bidding against incumbent multinational rivals IBM and HP for their share of the lucrative opportunity.
The top 15 vendors analysed by research firm Forrester in a recent report provided remote and onsite services for about 16.7 million desktops, 1.7 million servers and 23.4 million users globally. These vendors, including IBM, HP-EDS, CSC and some Indian tech firms including HCL delivered $83.9 billion worth of infrastructure services last year.
By outsourcing the management of their desktops, computer servers, storage and communication infrastructure, customers such as Nokia, Xerox and Citigroup plan to have leaner balance sheets, reduce their operational expenses by upto 40% and focus better on their core business.
At least three outsourcing consultants involved with helping customers outsource infrastructure management said nearly $30 billion of such contracts are up for renewal in 2010, and almost quarter of these contracts will go to new suppliers, with the rest to be renewed with incumbents IBM and HP-EDS. “In last two years we have demonstrated our capability to take over from incumbent providers,” said Anant Gupta, president of HCL’s infrastructure services division. “Despite remote infrastructure becoming popular, there were doubts about whether we can provide global support — our recent wins have proved that we can,” he added.
Among large outsourcing contracts for infrastructure management, HCL signed $350 million seven year deal with Readers Digest earlier this year, apart from similar deals with Nokia and Xerox. On its part, domestic rival Wipro acquired Citi Technology Services for around $127 million in December last year, which came with Citigroup’s commitment to outsource all future infrastructure management contracts to Wipro, potentially worth almost $1 billion over six years.
Large multinational rivals such as IBM and HP have traditionally been strong in delivering multi-year management contracts because these companies are able to bundle services with their hardware products and even offer lucrative finance and credit options to customers.
“There’s no way we would ever get into financing such deals, but we are aligning with hardware divisions of some of our competitors for offering newer delivery models such as pay-per-use,” said a senior executive at one of the top Indian tech firms. He requested anonymity because his company is in a financial silent period before announcement of financial results.
“Some clients clearly will require the scope only an IBM or HP can deliver, but many don’t,” said Dr Paul Roehrig, principal analyst at Forrester Research. “All of the India-centric firms included in the study — Cognizant, HCL Technologies, Infosys, TCS, and Wipro — have excellent forward-looking strategies for the infrastructure business,” he added.
Experts such as Diptarup Chakraborti, principal research analyst at Gartner say that Indian tech firms have already become multinationals by hiring more local workers, which will help them gain large contracts.
“With large domestic deals in Infrastructure management, Indian IT companies have already proved that they possess the relevant skill sets. Wipro’s deal with Uninor for about $500 million (about Rs 2500 crore), this year is comparable to any large international deal,” said Mr Chakraborti.
As top outsourcing customers in US and Europe seek to renew their computer infrastructure management contracts worth nearly $30 billion next year, Indian tech firms including HCL, Tata Consultancy Services (TCS), Wipro and Infosys are bidding against incumbent multinational rivals IBM and HP for their share of the lucrative opportunity.
The top 15 vendors analysed by research firm Forrester in a recent report provided remote and onsite services for about 16.7 million desktops, 1.7 million servers and 23.4 million users globally. These vendors, including IBM, HP-EDS, CSC and some Indian tech firms including HCL delivered $83.9 billion worth of infrastructure services last year.
By outsourcing the management of their desktops, computer servers, storage and communication infrastructure, customers such as Nokia, Xerox and Citigroup plan to have leaner balance sheets, reduce their operational expenses by upto 40% and focus better on their core business.
At least three outsourcing consultants involved with helping customers outsource infrastructure management said nearly $30 billion of such contracts are up for renewal in 2010, and almost quarter of these contracts will go to new suppliers, with the rest to be renewed with incumbents IBM and HP-EDS. “In last two years we have demonstrated our capability to take over from incumbent providers,” said Anant Gupta, president of HCL’s infrastructure services division. “Despite remote infrastructure becoming popular, there were doubts about whether we can provide global support — our recent wins have proved that we can,” he added.
Among large outsourcing contracts for infrastructure management, HCL signed $350 million seven year deal with Readers Digest earlier this year, apart from similar deals with Nokia and Xerox. On its part, domestic rival Wipro acquired Citi Technology Services for around $127 million in December last year, which came with Citigroup’s commitment to outsource all future infrastructure management contracts to Wipro, potentially worth almost $1 billion over six years.
Large multinational rivals such as IBM and HP have traditionally been strong in delivering multi-year management contracts because these companies are able to bundle services with their hardware products and even offer lucrative finance and credit options to customers.
“There’s no way we would ever get into financing such deals, but we are aligning with hardware divisions of some of our competitors for offering newer delivery models such as pay-per-use,” said a senior executive at one of the top Indian tech firms. He requested anonymity because his company is in a financial silent period before announcement of financial results.
“Some clients clearly will require the scope only an IBM or HP can deliver, but many don’t,” said Dr Paul Roehrig, principal analyst at Forrester Research. “All of the India-centric firms included in the study — Cognizant, HCL Technologies, Infosys, TCS, and Wipro — have excellent forward-looking strategies for the infrastructure business,” he added.
Experts such as Diptarup Chakraborti, principal research analyst at Gartner say that Indian tech firms have already become multinationals by hiring more local workers, which will help them gain large contracts.
“With large domestic deals in Infrastructure management, Indian IT companies have already proved that they possess the relevant skill sets. Wipro’s deal with Uninor for about $500 million (about Rs 2500 crore), this year is comparable to any large international deal,” said Mr Chakraborti.
Don't expect Indian IT sector to reboot this year
ndia’s $60-billion technology services industry may have hoped for a rebound in 2010 after gloomy 2009, but days into the New Year,the initial optimism is fast wearing thin.
Industry officials, analysts and other experts believe that India’s IT sector, a habitual growth monster until the crisis period last year, is unlikely to return to the ‘business as usual’ situation that existed before the crisis and will have to soon recalibrate itself to a new reality and new growth strategies.
The US and European markets, which account for about 80% of Indian software exports, are yet to show signs of a pickup in demand for outsourcing that was expected in the run-up to New Year. Taking note, industry lobby group Nasscom said it does not see any immediate upward revision in the exports growth target, which it had pegged to an all-time low of 4-7% in mid-2009.
“It’s a demand environment that appears permanently damaged,’’ said Vineet Nayar, CEO, HCL Technologies. Other business services providers like Infosys Technologies, Wipro Technologies and Genpact share the same sentiment.
After a compounded growth of over 30% since the 2003-04 dotcom bust, software export growth fell to 16.3% at $46 billion last fiscal against 27% at $40 billion in 2007-08. Last year saw Indian companies embracing survival strategies, moving to fixed costs and bundling software services with back-office operations and remote infrastructure management, to retain customers and fuel growth.
HCL’s Nayar calls it coping with a new ‘normal’ where, “we will see lower ‘normal’ levels of expenditure, lower volumes, hard costs, lower margins and lower annual increases”.
Besides tough global headwinds, Indian providers are also up against a stronger rupee that will erode margins. A Bank of America-Merrill Lynch (BoA-ML) tech sector report expects the Indian currency, which has appreciated about 4% vis-à-vis the dollar in the last quarter, to strengthen further over the next few quarters at Rs 45 by March-end and Rs 43 by December 2010.
That is bad news for Indian providers, already coping with higher costs due to wage hikes and increased sales and marketing spends.
“Budgets could remain flat for sometime,” says Suresh Vaswani, joint CEO, Wipro Technologies adding that customers continue to demand more for less.
Punjab to set up IT-knowledge park
Punjab would have a self-contained integrated Information Technology (IT) and knowledge industry park at Rajpura town in Patiala district, an official said Monday.
Spread over an area of 1,276 acres, the IT hub would be the first facility of its kind being offered by the state for investment.
The decision to establish the IT park was taken at a high level meeting chaired by Punjab Chief Minister Parkash Singh Badal here Monday.
Badal gave in-principle approval for acquisition of common land in six villages - Sehra, Pabra, Sehri, Takhtu Majra, Akri and Akar - in one go for the setting up of the park.
Officials said here that the park, 40 km from here, would house companies operating in Business Process Outsourcing, Knowledge Process Outsourcing, Legal Process Outsourcing and Engineering Process Outsourcing.
The park would be set up by engaging an international consultancy in this field.
Principal Secretary Industries and Commerce S.S. Channy said the project would be developed in a phased manner with residential and social infrastructure facilities like healthcare, recreation, health clubs and hotels.
It has also been proposed to install an Internet tower with satellite connectivity for direct software export and communication and Wi-max technology for high speed wireless connectivity.
Punjab would have a self-contained integrated Information Technology (IT) and knowledge industry park at Rajpura town in Patiala district, an official said Monday.
Spread over an area of 1,276 acres, the IT hub would be the first facility of its kind being offered by the state for investment.
The decision to establish the IT park was taken at a high level meeting chaired by Punjab Chief Minister Parkash Singh Badal here Monday.
Badal gave in-principle approval for acquisition of common land in six villages - Sehra, Pabra, Sehri, Takhtu Majra, Akri and Akar - in one go for the setting up of the park.
Officials said here that the park, 40 km from here, would house companies operating in Business Process Outsourcing, Knowledge Process Outsourcing, Legal Process Outsourcing and Engineering Process Outsourcing.
The park would be set up by engaging an international consultancy in this field.
Principal Secretary Industries and Commerce S.S. Channy said the project would be developed in a phased manner with residential and social infrastructure facilities like healthcare, recreation, health clubs and hotels.
It has also been proposed to install an Internet tower with satellite connectivity for direct software export and communication and Wi-max technology for high speed wireless connectivity.
IT companies' revenue may rise on better deals
NEW DELHI: Major IT firms are expected to post up to 5% growth in dollar term revenues in the second quarter (Q2) of the fiscal riding onback of improved business demand and deal flow.
Analysts, however, cautioned that the imminent salary hikes and increase in hiring could cast some pressure on the profit margins of the software companies . “Despite lower number of working days during the quarter, we expect IT majors to post a healthy volume growth due to higher business integration and transformation work coming from mergers and acquisitions,” brokerage firm Sharekhan said.
The rupee has largely appreciated nearly 3% against the US dollar during the December quarter, and 4.47% on an year-on-year basis.
“We expect frontline IT companies to report a 90-180 basis points sequential decline in their operating profit margins in the quarter on the back of salary hike, marginal increase in selling expenses and the appreciation in the rupee and favourable cross-currency movement,” the company said.
“We have an optimistic outlook for the IT sector. Margins will stabilise gradually. Q2 was a turnaround quarter for the IT industry and we believe that the trend would continue in Q3 as well,” Gartner’s Principal Research Analyst Diptarup Chakraborti said. IT major Infosys will kickstart the quarterly earnings season from January 12, followed by other IT majors — Wipro, HCL Tech and TCS
According to Motilal Oswal, Infosys’ consolidated revenue is expected to grow 3.7% QoQ in dollar terms, and the country’s largest software exporter, TCS, is expected to report revenue growth of 3.9% QoQ. During the quarter, the IT Industry witnessed strong deal flow. “Deals are improving and the rupee movement during the quarter would not impact the tech companies much as they are concerned only when the domestic currency drops below the Rs 45-level a dollar,” Gartner’s Chakraborti said.
NEW DELHI: Major IT firms are expected to post up to 5% growth in dollar term revenues in the second quarter (Q2) of the fiscal riding onback of improved business demand and deal flow.
Analysts, however, cautioned that the imminent salary hikes and increase in hiring could cast some pressure on the profit margins of the software companies . “Despite lower number of working days during the quarter, we expect IT majors to post a healthy volume growth due to higher business integration and transformation work coming from mergers and acquisitions,” brokerage firm Sharekhan said.
The rupee has largely appreciated nearly 3% against the US dollar during the December quarter, and 4.47% on an year-on-year basis.
“We expect frontline IT companies to report a 90-180 basis points sequential decline in their operating profit margins in the quarter on the back of salary hike, marginal increase in selling expenses and the appreciation in the rupee and favourable cross-currency movement,” the company said.
“We have an optimistic outlook for the IT sector. Margins will stabilise gradually. Q2 was a turnaround quarter for the IT industry and we believe that the trend would continue in Q3 as well,” Gartner’s Principal Research Analyst Diptarup Chakraborti said. IT major Infosys will kickstart the quarterly earnings season from January 12, followed by other IT majors — Wipro, HCL Tech and TCS
According to Motilal Oswal, Infosys’ consolidated revenue is expected to grow 3.7% QoQ in dollar terms, and the country’s largest software exporter, TCS, is expected to report revenue growth of 3.9% QoQ. During the quarter, the IT Industry witnessed strong deal flow. “Deals are improving and the rupee movement during the quarter would not impact the tech companies much as they are concerned only when the domestic currency drops below the Rs 45-level a dollar,” Gartner’s Chakraborti said.