WIPRO, INFY, TCS EYE IT CAPTIVES IN GERMANY

Pankaj Mishra, Bangalore, November 17, 2008
The Economic Times

Leading Indian tech firms including Wipro, Infosys and TCS, apart from several others, plan to acquire captive information technology units of large outsourcers such as Volvo and Bosch in Germany, as they seek to increase their revenues from Europe and also get the most out of these customers’ total IT outsourcing budgets.

According to a senior official at one of the top Indian IT firms, these captive deals could be for anywhere between $400-500 million or even more depending upon the amount of IT work they do for their parent organisations. “These captives can bring an annual revenue run rate of at least $300 million,” confirmed a senior company official. “We are evaluating them,” he added.

At a time when these tech firms are seeing a slump in the demand for software services in their key US market, which accounts for over 60% of their revenues, such captive deals in Europe will help them diversify. The IT services markets in Europe include UK ($50-60 billion), Germany ($40-45 billion) and France ($35-40 billion).

“Not only would such acquisitions help us establish better presence in Europe, but these transactions will also bring a captive customer with assured annual revenues,” added the official. Many German companies including Volvo, Bosch, Lufthansa and BMW carved out their IT departments into fully owned subsidiaries in order to focus better on their core operations.

For instance, Volvo IT, which employs around 5,000 professionals apart from almost 2,000 external IT contractors across Europe, US, Australia, Africa and Asia, was spun-off as a company way back in 1967. Lufthansa Systems AG, the IT subsidiary of Lufthansa Airlines has around 3,000 employees with revenues of almost $860 million, and 200 customers in segments of banking and finance, apart from the aviation industry.

This is not the first time Indian companies have shown interest in acquiring captive operations of a German customer. In August this year, some of the Indian tech firms were bidding for BMW’s IT subsidiary, Cirquent GmbH, which was eventually acquired by Japanese IT firm NTT Data Corporation.

“There were around three rounds of bidding, but Indian vendors could not make it to the final round because of job loss fears,” a person familiar with the transaction told ET. “In fact one of the Indian vendors had bid almost $300 million for BMW’s IT wing, but NTT did better.”

Captive organisations of large customers have always been an attractive target. In October this year, TCS acquired the Indian BPO arm of Citibank for around $505 million, which came with an assured business from Citibank worth around $2.5 billion over a period of 9 years. Citigroup Global services is expected to generate revenues of around $278 million this year alone.

When contacted, officials at Wipro and Infosys could not offer any specific details on their European M&A targets. However, a Wipro official added that his company is evaluating M&A options in order to address the lucrative IT services markets of Europe. “We are not looking at turnaround cases. Our focus is on revenue synergies, not cost,” said KR Lakshminarayana, chief strategy officer, and M&A head of Wipro Technologies.

However, as another expert mentioned, Indian companies will have to structure these deals keeping the local sentiments in mind. “Indian companies need to evolve beyond pure-play offshore vendors, and look at strategic benefits of having a pool of local IT resources in order to gain trust of these large outsourcers,” he said.

 

CHIP DESIGN: DESTINATION INDIA

Vinita Gupta
Express Computer

The recent ISA-IDC report found that the total chip design market is expected to surpass $7.37 billion in 2008, with a huge chunk of revenues coming from embedded software, followed by VLSI design and hardware/board design.

Gartner states that the market for third-party chip design services in India is estimated at about $400 million. Ganesh Ramamoorthy, Principal Research Analyst, Gartner, said, “Gartner estimates that the market will grow by 26 percent in 2008, year-on-year. Between 2007 and 2012, we expect third-party chip design services market in India to grow at a CAGR of about 22.3 percent, to reach nearly $830 million by 2012.”

Why India?

Traditionally Taiwan has been the favorite destination for chip designing, but during the last few years, India has also seen the market grow. The availability of a large engineering talent pool and cost advantages as compared to other countries has been one of the key growth drivers for this industry in India.

Dasaradha Gude, MD, AMD India, mentioned that some of the other influencing factors include a strong technical education system, reduced entry barriers, government support in the form of STPI and EOU schemes and a strong IPR framework.

He added, “India is at the forefront of VLSI design owing to the leading, cutting-edge chip design activities taking place in multinational design companies that have large scale engineering operations here. These captive units take advantage of the availability of skilled and low-cost workforce to develop products for global markets. If the same is to be done in their respective countries, the development cost will be at least 300 percent compared to India.”

The main factor is the large availability of talent in the country. “Also, the cost of engineers may have been the reason for companies to move their design operations to India in the past. However, that may not be true in the coming years as salary levels continue to rise for Indian chip engineers,” pointed out Ramamoorthy.

Global slowdown, rising consumption at home

Globally, the semiconductor industry and the worldwide market for semiconductors has matured and appears headed for single digit growth in coming years, compared to the double digit growth of yesteryears. However, the scene in the Indian semiconductor industry is quite different. Rising middle class income levels have created a huge market for semiconductor intensive products and we may see this trend to continue for some more years.

Over the years, most global chip companies have set up their development centers in the country to take advantage of market proximity and the talent pool. India as an emerging semiconductor hub has clearly gone beyond the cost advantage to innovating and creating Intellectual Property (IPs) that is resulting in complete product development.

Kasthuri Jagadeesan, Research Analyst, A&E Practice, Technical Insights, Frost & Sullivan, said, “One of the recent trends seen in this space is that of embedded systems development.”

Moving to 45nm

In a couple of years, lot of designs will shift from the present 90- and 65-nanometer to 45-nanometers.

[Globally companies are contemplating 22-nanometer designs. While 32-nanometer designs are the next step after 45nm, Big Blue is trying to leapfrog the rest of the pack by getting a head start on 22nm. - Editor]

Ganesh said, “The transition to 65nm and 45nm has begun. Indian design service companies are gaining an increasing share of designs in advanced process nodes. Designs in new process nodes bring their own set of challenges with them, but at the same time, as they are cutting-edge, they also result in fatter margins for vendors.”

Jagadeesan believed that the semiconductor integrated circuits (IC) industry is driven by the need for small, low-cost, high performance devices. Increasing demand from the consumer electronics industry and the telecommunications sector and Moore’s Law are all fueling the need for miniaturization and the move towards ever-shrinking form factors. Different types of materials and device configurations are investigated to reduce the size of a chip without compromising on a device’s functionalities.

Mobile vs. desktop processors

Most mobile processors are based on the same design as their desktop counterparts but will have thermal and power properties customized for notebook use, as battery life is one of the primary features that any user looks for before making a purchase decision on a notebook.

Another difference between mobile and desktop processors is with regard to the number of cores. The evolution of multi-core technology has made computing much easier and allows a user to run several applications at the same time without the system malfunctioning or performance issues cropping up. At present, desktop processors have up to four cores, while laptops have two and are just as fast as those found in desktop PCs. Although, laptops have just two cores, these cores are used for advanced multi-tasking, serious gaming and rendering digital media and entertainment.

 

IT'S WAIT AND WATCH

Vishwanath Kulkarni, October 27, 2008
The Hindu Business Line

The sub-prime crisis in the US that sparked off the first signs of uncertainty in the Indian IT industry has now snowballed into a full-blown economic slowdown across the globe, threatening to thwart growth for the sector.

Though industry players are cautious on the near-term outlook, analysts say a slow recovery could possibly be seen towards the second half of 2009, when the dust would begin to settle and a pick-up in technology spending is predicted.

“It could take at least another five quarters for things to return to normalcy from an IT perspective and potentially beyond that, largely due to the restructuring happening in the financial services industry. It also really depends on whether things worsen from here on not,” says David Furlonger, vice-president and analyst, Gartner.

Despite the economic downturn, research firms such as Forrester and Gartner expect a growth in technology spending for 2009. Gartner recently said though customers would reduce their IT budgets, the cut would not be as dramatic as the one seen during the dotcom bust. Gartner expects technology spending to increase by 2.3 percent in 2009, down from its earlier estimates of 5.8 percent.

Furlonger says most financial institutions have an IT spend in the range of 12-14 percent. “It is extremely difficult to say how this ratio will change in the short-term. Cost cutting means that IT spend may decrease — but if revenues fall faster as a result of the current economic crisis, then the ratio could actually increase,” he adds.

Though the US and Western Europe will be worst affected among the developed economies, the emerging nations will not be immune, says Gartner.

IT budgets will not see more severe reductions because IT is embedded in running all aspects of the business.

Avinash Vashistha chief executive of Tholons Inc, an advisory firm, says the long-term prospects for outsourcing are intact. “We expect to see a pick-up in spending from second half of calendar 2009,” he adds.

“I believe the US economy will recover by mid 2009. The emerging economies will bounce back quickly and the company is gearing up for growth by investing in non-linear initiatives,” says Suresh Senapaty, chief financial officer, Wipro Ltd.

The US crisis has already slowed down the growth momentum for the Indian IT services companies over the past few quarters as customers delay their spending on deployment of new technology applications amidst worsening economic conditions.

The turmoil that intensified in the past four to five weeks had claimed victims of some of the large financial institutions such as Bear Stearns, Lehman Brothers, Merrill Lynch, Washington Mutual and Wachovia, which incidentally happen to be large customers of the Indian IT firms. The liquidation of some of these entities has shrunk the business for Indian IT vendors to that extent, while the shotgun mergers would change the outsourcing landscape, with some vendors gaining new business and others losing it.

Some of the vendors see opportunities in post-merger integration and compliance-related work arising from stringent regulatory processes. However, the impact of the meltdown is yet to be fully seen on these firms as yet.

“The real impact of the downturn is some 60 to 90 days away as companies affected by the turmoil need time to take stock of the situation,” says Sudin Apte, analyst and head of Forrester Research in India.

 

IT IN FOR SLOWER GROWTH OVER NEXT FEW QUARTERS

K. Raghu, Bangalore, October 27, 2008
Mint

Indian IT service firms will witness slower growth over the next few quarters according to experts and analysts because of continuing recession in the US, the largest market for their services.

The trend is evident in results declared by the five largest Indian IT firms for the quarter ended September. Together, the five firms—Infosys Technologies Ltd, Wipro Ltd, HCL Technologies Ltd, Satyam Computer Services Ltd and Tata Consultancy Services Ltd (TCS)—increased revenue by 34.5% over the same quarter last year and 9.2% over the quarter ended June.

With the slowdown spreading to Europe—the other main market for Indian IT services firms—revenue and earnings are likely to be muted for the next two quarters at least, according to one analyst.

According to the results of the five firms, the US accounted for 60% of their business in the quarter ended September and Europe, 27%.

The July-September results of most firms except TCS were broadly in line with the street expectations, mainly aided by a weaker Indian currency during the quarter. But the slash in forecast in dollar earnings—the currency Indian firms bill most customers—by sector bellwether Infosys and smaller rival Satyam, and a flat third quarter guidance by Wipro reflect the uncertainty in business environment. TCS, India's largest software services firm, actually delivered results below market expectations because of forex losses of Rs 261 crore.

"The downturn will continue to affect service providers until the bottom of the cycle is actually reached," said Siddharth Pai, managing director of the Inc. "I expect that there India unit of technology sourcing advisory firm TPI will be weakness at least for another two-three quarters". The uncertainty for Indian IT firms has increased due to the bankruptcy of financial institutions in the US and Europe.

"No one knows what is happening. Customers can come out for renegotiations (on existing contracts), (and) the shortlisted firms (for new contracts) may be asked to submit new bids," said Nimesh Mistry, equity analyst with Man Financials Ltd, a Mumbai brokerage.

Banking, financial services and insurance companies account for between 26% and 44% of the revenue of the five biggest Indian IT firms.

On 13 October, technology researcher Gartner Inc. said IT spending in 2009 would grow by just 2.3%, more than halving its earlier projection of 5.8%. Nasscom, has said that it may revise downwards, in December, its July growth estimates of 21-24% growth for the current fiscal.

In its latest quarterly audit of September for global outsourcing contracts, TPI has said only 128 deals were signed for a total consideration of €11.5 billion (Rs 73,255 crore) —the weakest quarter for total contract value of outsourcing deals in the past six years.

"The issue is that we have thought the bottom of the cycle was near quite often in the past few months, only to realize it is not really in sight just yet! We really are in uncharted waters," said Pai in an email.

 

SMALL AND MID-TIER ITES IN BIG TROUBLE

P P Thimmaya, Bangalore
The Economic Times

The gloomy global economic outlook and reduced demand for technology services in the US and Europe is likely to result in an increased ITES in trouble pace of consolidation among small and mid-tier IT services companies in India, analysts say.

Export-oriented small and mid-tier IT companies were able to weather the storm of rapid appreciation in the rupee against the US dollar in 2007 and early 2008, but now they are faced with the stark reality of dwindling orders.

Sudin Apte of Forrester Research says that consolidation in the Indian IT industry was on the way anyway, but the pace may pick up in the next 18 months. He is of the view that a large number of smaller firms are in “denial mode,” thinking they will be able to ride out the bad times, but reality will sink in after they start seeing negative cash flows.

It is estimated that around 60-70% of the country’s IT services exports are contributed by the top 20 players, with the rest coming in from small and mid-tier entities. T R Madan Mohan of Browne & Mohan, a consultancy firm, says that the pace of consolidation will be high because of pressure from private equity investors. PE firms, which invested in software companies expecting an IPO in 2009, are either encouraging the companies to merge or bring in a strategic partner to reduce risk.

Analysts said this kind of consolidation is already happening for firms with a topline of around Rs 50 crore, but the major worry would be for entities, which have annual revenues of less than Rs 5 crore and servicing the BFSI market in the US or the UK.

For example, of the around 1,550 units registered with STPI Bangalore, only 28% of them have gross revenue of more than Rs 100 crore. The expectation is that through consolidation and mergers, a fifth of them will exit the system. Avinash Vashistha, CEO of offshore advisory Tholons, agrees that it would be a tough road ahead for the small and medium-sized firms. However, he also thinks that there is considerable interest among investors in these firms as their valuations are particularly low and there is greater interest in outsourcing and offshoring.

“The worry is that if there is a recession and downward trend till the last quarter of 2008, which is what seems to be imminent, then many of them have to look at drastically different business models,” says Mohan of Browne & Mohan.

 

IBM INITIATIVE HELPS SMALL COS MAKE IT BIG IN EMERGING MARKETS

Ashish Rukhaiyar, Danang, Vietnam
The Economic Times

Mai Vsan Quang started his shipping company — Asiatrans Vietnam — in 2003, a firm which is into handling logistics and port operations for many foreign and domestic shipping majors. Quang, however, had a problem. His firm was just one of the many small and medium enterprises (SMEs) operating in Danang. He wanted to bring his company on the national map and needed guidance for it.

Help, luckily, was not far away. His firm’s membership with Vietnam Chamber of Commerce and Industry (VCCI) proved helpful. VCCI is the local partner of global technology major IBM that is working with various SMEs in Vietnam, giving them recommendations on efficient use of resources. “Through VCCI I got in touch with Pradeep Setlur of IBM who worked with my staff for four weeks and suggested some important changes,” said Quang.

Setlur is one of the many IBM volunteers who are part of the Corporate Services Corp (CSC) initiative of IBM. These volunteers are full-time IBM employees and are selected through an in-house screening process. Once trained, they are sent to different countries, mostly emerging markets, to work with local companies.

“CSC is IBM’s response to globalisation,” said IBM’s senior program manager (corporate citizenship) Kevin Thomson. With this program, IBM helps in creating leaders, he added. CSC volunteers are currently working in many emerging countries including Ghana and Philippines.

IBM, said Thomson, has a very competitive online application procedure with baseline eligibility conditions. “Only the top-25 percent employees are eligible to apply,” he said. There were around 55,000 applications for 100 volunteer positions. While the first batch has already started work, the next batch would be out in 2009. Over the next three years, IBM intends to send 600 professionals to emerging countries.

 

GARTNER SAYS IT SPENDING TO SLOW IN 2009, BUT GROWTH TO CONTINUE

Mumbai
Business Standard | The Economic Times | The Hindu Business Line | 

Global economic problems are impacting IT budgets, however, the IT industry will not see the dramatic reductions that were seen during the dot.com bust, says Gartner.

At that time, budgets were slashed from mid double-digit growth to low single-digit growth.

“In a worst case scenario, our research indicates an IT spending increase of 2.3 per cent in 2009, down from our earlier projection of 5.8 per cent,” said Peter Sondergaard, senior vice president at Gartner and global head of Research.

“Developed economies, especially the United States and Western Europe, will be the worst affected, but emerging regions will not be immune. Europe will experience negative growth in 2009, the United States and Japan will be flat,” he further added.

Gartner said the events of the past two weeks will have an impact on IT budgets in the fourth quarter, but it will not change 2008 substantially.

The IT industry went through more dramatic reductions during, and after, the recession of 2001.

Gartner also mentions that in such situation the role of the management also under goes change.

“We learned that in tumultuous times, CEOs want their executives and managers to be advisors and counsellors, not just great implementers of directions given to them. What they want now most of all is agile leadership. Leadership that can guide us through simultaneous cost control and expansion at the same time.”

Organisations now view IT as a way to transform their businesses and adopt operating models that are much leaner.

IT will also not see severe reductions this time as it is embedded in running all aspects of the business and a shift to multi-year IT programs aligned with business, which is difficult to cut immediately.

 

IT TAKES THE CAKE IN EDUCATION FRAUDS

Bangalore, October 10, 2008
The Economic Times (Delhi edition)

Education-related discrepancies among the employees in the Indian IT industry increased during the second quarter of the current calendar year when compared to the first quarter, according to report by First Advantage.

The IT industry has experienced the highest increase (almost 3.5 times) in education-related discrepancies compared to Q1 of 2008, First Advantage said in its second quarterly report ‘Background screening trends-India.’

First Advantage managing director (West Asia) Ashish Dehade said, “Background screening acts as a first line of defence against potential fraud and security breaches. More sectors taking it up actively would employ fewer candidates misrepresenting information and thus, concurrently, fewer likely to engage in frauds or security breaches.”

However, this is not limited to just the IT sector alone as educational qualification-related discrepancies in the banking and financial services (BFSI) sector was the highest in the last quarters. First Advantage said all the key industries tracked have shown an increase in education-related discrepancies. The report said that maximum discrepancies in educational qualifications were related to institutions in Northern India at 34%, followed by Southern India at 30%. Almost half (48%) of all fake university cases came from Northern India; followed closely by Western India (43%). Pune topped the city list for education-related discrepancies, followed by Mumbai and Delhi.

 

53% WORKING WOMEN IN INDIA FEAR FOR THEIR SAFETY: ASSOCHAM

New Delhi,October 10, 2008
Mint

About 53% working women feel insecure, especially during night shifts in all major hubs of economic activity across the country. Most of them are employed in the BPO/ITeS, hospitality, civil aviation, medical and textile space. Their concern is that safety norms set up by their respective establishments are not adequate and given the increase in crime, their insecurities and fears are only going up.

According to the Assocham Social Development Foundation (ASDF), an assessment was carried out revealing that 48% of women who are engaged in the small-scale sector are extremely worried about their safety and nearly 26% in the medium sector and 23% in the large-scale establishments are scared to step out after the sun sets. .

Key Findings

- 34% women in the low skilled category are worried about their well being; 29% in the moderately skilled section and 8% among high skilled workforce

- The fast growing BPO/ ITeS, hospitality, civil aviation industry has generated parallel employment for cab drivers who have often been responsible for rash driving, accidents, eve teasing, rape and even murder

- 86% women on night shifts face commuting problems because of lack of adequate transport arrangements by employers. Those working in Kolkata, Mumbai and Pune face maximum commuting hurdles while those in Delhi, Hyderabad and Ludhiana the least

- In Bangalore, 75,000-95,000 women work in night shifts. There are around 2,200 IT firms in Bangalore, of which 1,600 are registered with the Department. In Bangalore, around 56% women respondents in a survey carried out amongst women working in night shifts in the IT, aviation, hospitals and BPO sector feel unsafe. Delhi topped the list with 65% of women followed by 35% in Hyderabad, 28% in Chennai and 26 % in Mumbai

- BPO/ITeS is not the only sector with post-sunset shifts. Women nurses have been doing night rounds as also those working in media, airlines, hotels and other service industries

Recommendations

- Companies to have an internal code to ensure security of women employees and to take measures to ensure they discharge their job in a secure atmosphere

- Governments to make it mandatory for companies to install Global Positioning System (GPS) in cabs, not only in call centres and BPO’s but all industries which engage women in night shifts

- Other measures that can be taken include providing self defense training to women; installing safety devices at the work place; undertaking police verification of cab drivers, security guards and peons who are deputed on night shifts and setting up efficient complaint redressal systems

 

DELHI MOST UNSAFE FOR WOMEN WORKING AT NIGHT: SURVEY

New Delhi, October 10, 2008
The Economic Times  The Tribune  The Times of India  

The national capital, infamous for crime against women, has been polled in an industry survey as the most unsafe city for the fair sex working in night shifts with companies in IT and ITeS, aviation and media sectors and hospitals.

A majority of 65 percent of women in Delhi interviewed said they felt insecure working in night shifts, while the figure was the least for Mumbai at 26 percent, according to a survey by industry chamber Assocham.

The study comes nearly 10 days after, Soumya Vishwanathan, a scribe working with a television news channel, was murdered while driving home from office in the wee hours of September 30. Police investigating the case have so far drawn a blank in the case.

Bangalore is the second most unsafe place for working women with 56 percent of those polled expressing a sense of insecurity, the survey said. In Hyderabad and Chennai as many as 35 percent and 28 percent respectively shared similar feelings, it added.

The survey-covered women working in companies engaged in business process outsourcing, IT firms, airlines, hospitals and media. It said the safety concern related to the movement outside their office premises and most of the women expect their employers to make security arrangements.

The chamber has suggested strong measures to improve security for women, especially those who move at night.

"Government should make it mandatory installation of the Global Positioning System (GPS) in cabs used not only by BPOs but also other industries employing women at night shifts," Assocham Secretary General D S Rawat said.

Female employees in the small scale sector are more vulnerable to security risks than their peers in bigger units, the survey said. As much as 48 percent of them in small firms were found "extremely worried" while the number was smaller at 23 percent for those employed in big companies.

It also showed that women employees are the most vulnerable and prone to both physical and non-physical attacks.

Due to inadequate transport arrangements by employers, 86 percent of women face commuting problems at night. In Kolkata, Mumbai and Pune, women face the maximum commuting problems compared with those in Delhi, Hyderabad and Ludhiana who face the least, the chamber said.

 

Cincom Systems Adopts Channel Route for SMBs

By Yogesh Gupta

Wednesday, September 17, 2008 12:00:00 AM IST

Cincom, which delivers software and services to simplify complex business processes, is fixed on adopting the channel route. The global software provider has signed ASM Technologies as its first channel partner in India to resell Cincom's Quote-to-Order(QTO) offerings. “We are open to aligning with more channel partners to tap the widespread SMB market. We wish to encompass around four or five partners each in western, southern and northern India within a year. We will later explore the eastern Indian market,” said Pantulu Avasarala, Director, Cincom Development Center, Cincom Systems India. To address the huge geographical expanse of the SMB market, the company has decided to adopt the channel route instead of its popular direct model. “Our partner ASM will strengthen its product portfolio and help offer richer breadth of offerings to its ever-increasing list of customers propelling our QTO offerings for complex manufacturing verticals. The other offering, the ‘Call Center Solution’, that targets brokerage, healthcare and insurance for enterprises, will be offered to SMBs through partners,” he said. Pursuing a ‘direct-to-user’ model, Cincom has empowered many clients worldwide to outperform the competition by providing ways to increase revenue, control cost, minimize risk, and achieve rapid ROI. India is one of the first countries where Cincom has decided to leverage the technical expertise of  the channels, he said. Detailing the channel strategy, Avasarala revealed, “We are looking to appoint service providers as our partners, who have excellent knowledge to showcase the value of our products to the customers. Operating in niche software offerings space, we will initially appoint partners vertical-wise for effective market penetration and channel profitability.” To lure the SMBs, Cincom, apart from license model, will also pursue revenues-based, subscription- based and hosting-based options through partners. “Our SMB offerings are scaled-down versions of enterprise offerings that enable SMBs to scale up as their organizational activities increase in the future,” he added. Cincom's QTO Product consists of knowledge-based applications covering product configuration, sales configuration, estimating & bidding, quote management,  knowledge-based application studio and enterprise integration with existing back- end ERPs,” said Avasarala. Cincom will continue to sell directly to large enterpises. Revealing the next product line for Indian markets, he said, “We are launching ‘Business Intelligence ‘solutions by next month for SMB verticals like manufacturing, insurance, healthcare and finance. The documentation management is a growing market. We plan to offer first-of-its-kind ‘Document Generation’ solution in the second half of the next year, which would lead to mass generation of customized documents depending on the needs of an enterprise.”At present, almost 80 percent of India revenues emerge from enterprises for Cincom. “With a sizeable number of potential partners within the next few months, we intend to change the landscape. We expect the ratio balancing at 50:50 for enterprises to SMBs within the next couple of years,” said Avasarala. This article is originally published at:  http://channelworld.in/news/index.jsp/artId=5636427

 

GOVERNMENT NORMS LIKELY TO COMPULSORILY SECURE WIFI LINKS

Joji Thomas Philip & Harsimran Singh, New Delhi, September 15, 2008
The Economic Times | The Hindu Business Line | 

 

In the wake of the terror emails being sent from unsecured wireless fidelity (WiFi) networks, the government is examining the possibility of issuing new norms that will make it illegal to leave such Internet connections open. The new norms may also put the onus on telcos and Internet service providers (ISPs) who sell WiFi connections to educate their customers of keeping them secure.

The department of telecom will work with the home ministry and intelligence agencies to put in place steps to secure WiFi Internet connections, which are increasingly being used in homes and offices across the country. WiFi networking companies may also be asked to limit WiFi signal right down to a defined radius by installing access points around the signal.

However, Internet service providers (ISPs) say that it is customer who is to blame. “Internet service providers are taking steps on their own to secure WiFi connections. All ISPs are installing AAA servers and firewalls. But, if you look at the terror mails, they were sent from hacked or open WiFi accounts – there is nothing we can do about this.

When people take a broadband connection, then take routers and make their homes and offices WiFi enabled, and then leave it open, there is nothing ISPs can do about it,” explained the president of the Internet Service Providers Association of India’s president Rajesh Chharia.

Industry experts say that regulations will not help much since most home and corporate users use minimal security to lock their WiFi networks making them an easy target to hack into.

Security experts suggest that WiFi users should never broadcast their SSIDs (service set identifiers) and change their access passwords. “Most routers which come in the market have a password 1234 and login id – as admin. One should immediately change it after installing. Also one should block the router’s SSIDs from broadcasting the WiFI networks and allow only particular machines to access it,” says Aujas Network Founder and COO Sameer Shelke.

Generally a WiFi router is configured to advertise its SSID to all neighbouring WiFi devices. One can block the SSID from advertising so that only by typing the name, the particular WiFi network appears.
The Wireless Fidelity (WiFi) connection of a Mumbai based power company was hacked into by suspects in Chembur, who sent the e-mail to news organisations while the serial blast continued in the capital which killed about 25 people and left about 100 injured on Saturday.

Experts say that digital forensics still holds the key to catch suspects who have even challenged security agencies to catch them.
Accessing the WiFi router or the wireless access point’s log files (present in Mumbai’s Kamran Power Company in this case), one can find out the MAC (Media Access Control) address of the WiFi card which accessed the WiFi point of that company.

Each WiFi adaptor card manufactured in the world has a unique MAC address. Identifying that MAC address would mean identifying the manufacturer of that particular network card. The manufacturers are generally based in Malaysia, Taiwan and China, global hubs of electronic manufacturing.

A high level protocol with Chinese or Taiwanese government can help the investigating agencies get hold of which factory that particular card was shipped to and when. It can also identify the bar code number of that card. Each PC or laptop maker like Dell, HP, Lenovo or Acer tags the barcode numbers of the card before assembling them into the machines.

This information can be used to find out which dealer sold that particular laptop in which part of the world and to which buyer, which in this case can be the suspect. Identifying the digital footprint can thus help trace the culprits.

US-based Meru Networks’ India head Giridhar Java says: “We can also configure a network to operate only in a particular radius. All signals going outside a particular periphery can be blocked. Another way is to throw junk to an outside receiver trying to connect. We can easily jam his or her WiFi card but that’s not legally allowed in most parts of the world.”

The easiest way to secure is to provide a password for accessing WiFi but y experts say that too is penetrable. “Basically WiFi operates in the 2.5 GHz frequency and one can still access your WiFi network by special frequency scanners but that is tougher.

 

INDIA INC GOES SLOW ON HIRING AND FIRING

Ashish Agrawal
The Economic Times (Delhi edition)

Despite recording turbo-charged growth over the last few years, India Inc’s top firms are not accelerating their recruitment drive. According to an ETIG study on employee data for more than 450 listed companies, the firms added 1.63 lakh new people to their rolls in FY08 against 1.64 lakh during the previous year. The manufacturing sector, for instance, added 12 percent less than FY07. For IT sector too, hiring came down by 13 percent. However, the sector still continues to be the top recruiter, accounting for about half of the new jobs added.

While banking sector as a whole continued to hire with nearly 40 percent increase in employee intake, the numbers have swelled because of large-scale recruitment by few private sector banks. If we exclude them, there is actually a decline in hiring. Among the companies, which have seen significant hiring include HDFC Bank, Axis Bank besides the pack of IT firms Infosys, TCS, Satyam and HCL. The study does not include data for ICICI Bank and Wipro who are also likely to figure among the top recruiters last year.

The silver lining is that employee retrenchment at an aggregate level also dropped by about 20 percent from about 44,000 people during FY07 to 36,000 people leading to a 6 percent net addition in employee base.

Among the sectors, while manufacturing firms decreased the number of people they hired they also went soft on pruning jobs. Retrenchment in the sector came down from 25,000 to 19,500 last year. Among the firms, SAIL, TVS Motors, Tata Steel and Bata were the top companies who cut their flab. For TVS Motors, the reduction in manpower represents almost 24 percent of its manpower base. Similarly for banking, the retrenchment came down from 18,500 to 15,000. The only sector, which added people across the board last year was other services (excluding financial services and IT). These firms—which would include those engaged in healthcare, transport services, telecom etc—stepped up hiring by about 21 percent. However, since their total contribution is quite low at about 6 percent of the employee base, the impact was only marginal.

 

IT SPEND TO TOUCH $110 BILLION BY 2012, SAYS GARTNER

New Delhi
Business Standard | The Hindu Business Line | The Hindu | The Times of India | Financial Chronicle | 

IT end-user spending in India is expected to grow at a compounded annual growth rate (CAGR) of 14.8 percent from 2007 through 2012 to touch $110 billion (Rs 484,000 crore) by 2012, says research and advisory firm Gartner.

In the current year, IT end-user spending is on way to reach $64.7 billion (Rs 2,98,345 crore), a 17.2 percent increase from 2007.

This prediction, supplemented by a robust gross domestic product (GDP) averaging 8 percent growth from 2007 to 2012 means, the Indian market continues to represent a significant growth opportunity for IT vendors.

“Indian businesses continue to invest in IT in order to drive operational excellence and innovation. Small and midsize businesses (SMBs) will drive the growth of various IT-related industries, with the critical involvement of value added resellers, distributors and retailers,” said Naveen Mishra, senior research analyst at Gartner.

Moreover, the report notes that India’s domestic IT services market is the fastest growing in Asia-Pacific with a CAGR of 20.2 percent in these five years, reaching $11.8 billion (Rs 53,690 crore) in 2012.

 

FORGET FAT PACKAGES & ESOPS, EXECS NOW WANT LUXE CARS TOO

Mahima Puri & Chanchal Pal Chauhan, New Delhi, September 8, 2008
The Economic Times

Fat bonuses are passé. So are million-dollar stock options. For the top dogs in India Inc, the latest and priciest carrots are luxe marques that look beyond Mercs. From Beamers and Audis to Porsches and Rolls, the line-up is getting fast, furious and seriously fancy.

Suddenly, even big wheels aren’t enough. To be a sticky sop, the wheels have to be bespoke. Picture this—a newly appointed CEO of a major retail company was offered a hefty salary package, but his demands went much beyond just monetary considerations.

His ask—a Mercedes SLK 500 to drive to work. And, the company was happy to oblige. Make no mistake–this car mania is not restricted to a particular sector. In another instance, the CEO of a BPO was offered an Audi before he joined. Nor is this drive peculiar to current sunshine sectors like retail or ITeS. Corner room occupants in banking, aviation and energy are also demanding and getting their share of asphalt adrenalin.

The mad rush for these cars is partly thanks to their growing tyre print on Indian roads. And typically it is the pricier models/variants that are in demand. Said BMW India president Peter Kronschnabel, “We are selling around 30 percent of our cars to corporate customers. We have re-jigged some of our models like the 320i, which is more chauffeur driven and offers more space at the rear. In the second year of operation in India, we have seen a sizeable shift towards the larger and expensive, 5Series coming in the Rs 40 to Rs 50 lakh bracket.”

Head-hunting firms agree that cars are the new crore-competence at the top of the job heap. Transearch India managing partner Atul Vohra said, “For CXOs, cars speak volumes. And unlike in the past, the choice for the ‘executive car’ now goes beyond Mercs to Audis to BMWs with new offerings being added each year. In most cases, the size of the car is directly proportional to the negotiating strength or position of the candidate. Hence, for indispensable talent, companies do not mind providing just about anything on wheels.”

Agreed Head Hunters India CEO Kris Lakshmikanth, “There have been cases where cars have played a vital role in a make or break situation. Like, an energy company had to negotiate for six months before they gave in to the demands of the desired candidate. Reason, he wanted a luxury sedan, at least on par with his last car if not more.”

Nor are the sops restricted to the top guys. Now it’s the middle-level executives who are being pampered even more. Companies are also offering models like the Honda Accord, Toyota Camry and Skoda Laura to their heads.

Also, employees at mid-level managerial positions or key sales personnel are also being offered hatchbacks or mid-size sedans like the Hyundai i10 or Accent, Swift or Dzire and Skoda Fabia, among others.

 

SMALL IT FIRMS OUTSOURCE MARKETING

P P Thimmaya & J Padmpriya, Bangalore, September 08, 2008
The Economic Times

Indian technology firms, which have cracked the software codes, are now ready to learn a few marketing mantras and may actually be practicing what they preach. Small and medium firms are seen outsourcing some key marketing functions like making pitch documents, lead generation, power point presentations and even reverse outsourcing (where they appoint a local agency to market their products and services in the US).

Demand is coming from startups seeking to attract potential buyers and investors and those who are looking at sustained growth. Many VCs and PE players are also approaching outsourced CMO (chief marketing officer) or such outfits for their portfolio companies.

A cluster of service providers are mushrooming to capture business from small enterprises, who either lack the bandwidth or cannot afford a high-cost, full-time marketing resource. CMO Axis, co-founded by Vinod Harith, till recently global head of marketing communications for Wipro Technologies, offers to build and run a company’s annual marketing calendar. “We also work for large companies and free management time by taking over functions like blog and website management IT presentations, powerpoint repurposing,” says Harith.

In the same space is Vijay Menon, a freelance CMO, formerly vice president, marketing at QuEST and Infosys BPO. Menon says, these enterprises may not be able to derive benefits from hiring a full-time CMO, who may come at a salary level bill of up to Rs 50 lakh per annum. Obviously, “during a downturn everybody is cautious of hiring a high-cost professional,” one industry player said.

However, Srini Rajam, CEO, Ittiam Systems, makes a clear distinction between marketing and branding. Marketing becomes the fulcrum of any organisation in deciding the road map as well as the genesis of product and services. Some parts of branding activity could be outsourced especially when a product is being taken to the market, he adds.

Gaurav Gupta of Everest Group, says, “it is a long way to go before sales force is outsourced as most companies like to be in control and have their internal systems in place. Outsourcing is catching up in telemarketing and analytics, particularly in financial services sector like credit cards, insurance and the like. Even captives of i-banks, for instance, bring to offshore tasks like pitch documents, power points, analytics and marketing support, he says.

Globally, there is a case for outsourcing for companies in the $20 million-$100 million range and the biggest challenge for them is lead generation and building a brand. The challenge in the marketing outsourcing service provider space in India stems from lack of integration between analytics, market intelligence and marketing functions, says S Sabyasachi, senior director, neoIT, an offshore advisory firm.

 

SALARY SLUMP

Urmila Rao
Outlook Money (Edition: September 10, 2008)

Next year, there will be less reason to cheer in terms of salary hikes. The average salary increase projections for 2009 are lower by a percentage point, at 13.9 per cent, according to the Hewitt Associates Salary Survey, published by the human resources consulting and outsourcing services firm.

Though 2008 is seeing a strong average salary increase of 14.8 per cent, the global economic slowdown, US sub-prime crisis and rising inflation have caused Indian companies to revisit salary budgets for 2009.

Your only option to beat the odds would be a good performance. In the current economic slowdown scenario, performance-linked salaries are going up for middle and senior executives, reveals the survey.

Hewitt surveyed 150 companies, analysing information across nine primary industries, including BFSI (banking, finance, security and insurance), retail and IT/ITES sectors, among others. It measured actual and projected salary increases, and compensation practices for six specific job categories from top executive to manual workforce.

As many as 42 per cent of the companies said that they would have lower salary increases, bringing in a greater correlation between performance and pay, while 28 per cent stated that they would hire fewer staff. Meanwhile, 30 per cent have increased performance linkages to counter fixed pay hikes. None of the organisations surveyed are expecting a salary freeze for 2009.

Sandeep Chaudhary, leader of Hewitt’s Rewards Consulting Practice in India, said: “There hasn’t been any dramatic move in salary cuts. Instead, companies are looking at innovative ways to cut other costs like travel and recreation without compromising on employee salaries or learning and development. This is a sign of a growing and mature economy.”

The average salary increases across levels continues to be led by middle and junior management.

 

INFORMATION TECHNOLOGY CAN IMPROVE HEALTHCARE DELIVERY

Kolkata
Business Standard

There was a need to make the healthcare sector more IT-oriented, opined experts at a seminar on healthcare organised by the Confederation of Indian Industries (CII).

According to Rajarshi Sengupta, executive director, Deloitte & Touche Consulting, there was urgent need to integrate the back office operations of hospitals by use of technology.

Apart from few hospitals in south India, no hospital in the country had tried to integrate the back office operations.

Speaking on the occasion, Hemant Kumar, director, health solutions group, India, Microsoft Corporation, said the aggregate revenue of the mid-sized hospitals in the country was expected to be $10 billion by 2010-11. This would be possible because of the unique combination of low cost and high standard of healthcare services in India.

In India, the success rate of bypass surgery was 98.7 percent, against, 97.5 percent in the US. In India, the cost of the surgery was one-tenth of that in the US. However, still 60 percent of the patient's time in a hospital is spend on furnishing information to the doctors.

Experience shows that a patient's time in his stay at the hospital could be reduced by 39 percent by improved IT structure, Kumar said.

V V Varma, managing director, Lazarus Hospital, said, studies show that PPP partnership in Singapore resulted in increase in life expectancy, which 78.4 percent in Singapore, against 63 years in India.

 

THE ROAD TO SMB IT NIRVANA

Express Computer

Project management is something of a Black Art. Change Management is a topic that deserves far more attention that it usually gets. The IT manager in the average SMB lacks the kind of extensive resources that a CIO/CTO in a large company can tap. So what is the SMB IT manager to do? There are some basic principles that, when applied diligently, can spell the difference between the success and failure of IT at an SMB.

- Communicate, communicate, and communicate: Do not leave your users hanging dry on the line. You have to communicate any major change before it you make it. Maintain a database of cell phone numbers of all HODs and SMS details of any proposed change to them before you make any substantial change to an existing system, particularly if the system in question is an essential one (think messaging, file & print, ERP etc.).

- Pick an appropriate solution: An enterprise-class solution may or may not work for a medium business. It definitely will be no good for a small business. There are SMB-specific solutions out there. Give them preference over enterprise solutions that have been jury-rigged to fit your needs. Exchange and Notes are wonderful solutions for large companies with thousands of users or even for IT-savvy organizations with a smaller user base. However, for a small company or even a medium business that does not have an IT team with sufficient skill sets they can mean a messaging system that is slow, unwieldy, underpowered and doesn’t scale when user’s needs grow. This is no reflection on the enterprise software. It is, however, exactly what happens when an SMB is unable to invest sufficiently in hardware and bandwidth to provide a decent messaging experience to end-users. Overall, an SMB is better off opting for a hosted e-mail solution from Google or Rediff rather than going in for a do-it-yourself approach.

- Listen to your users: When things go wrong it is all too easy to shoot the messenger. Instead, listen to your users and work with them to find solutions when things go wrong even if you feel that the problems are silly. From the user’s perspective, they are probably game changing.

- Big Bang/Steady State: The choice of how you go about upgrading and introducing new systems lies between the ‘rip off the plaster in one quick jerk as it’ll hurt less’ also known as the Big Bang and the ‘let’s do things incrementally’ or Steady State model. Each has its plusses and minuses. Take a call based on the situation. If you must put in a new SFA application as sales are languishing thanks to lack of timely information or lack of sharing of information between sales staff, then you need a Big Bang. If you have users complaining about slow response time and overflowing mailboxes on your e-mail system an incremental approach where you pinpoint the heavy users and determine if their needs are real in conjunction with business heads and then roll out upgrades for those users first might work better in such a case.

There is no magic wand to wave and chase the IT blues away but the above principles can help foster a healthy working relationship between the IT team and the rest of the organization.

 

SOFTWARE PRODUCT EARNINGS TO RISE 10-FOLD

Bangalore
Business Standard | The Economic Times | The Hindu Business Line | The Financial Express | The Times of India | 

The Indian software product sector is expected to register a 10-fold increase in revenues over the next seven years. Revenues may range between $9.5 billion and $12 billion by FY15, from the current $1.4 billion, according to a new Nasscom-Zinnov study.

However, these Indian companies are yet to reach out vigorously to the developed markets such as the US and Japan and remain confined to the domestic market. Of the existing 371 software product in India, over two-thirds were launched in the past three years.

Over 100 companies started their operations in 2007. The top 10 companies still dominate the software product development market, accounting for 84 percent of the segment revenues from India.

"We have taken a conscious decision to focus on India and some emerging markets where the risk is lower. We are looking at markets where we find it easier to enter, experiment faster, and where the market tolerance is higher," explains Bharat Goenka, MD, Tally Solutions. Even after 21 years of its existence, Tally is primarily focussed on India, apart from some emerging markets such as West Asia and Africa.

Vishnu Tambi, co-founder of Nagpur-based Excellon Software, concurs, "We introduced our first product – AutoSol – in 2006, and so far our customers are largely Indian. We believe that India is a very good market to test a product, and then go out. We are now preparing ourselves to enter into some emerging markets such as Malaysia, Thailand, the Philippines and Cambodia."

On its part, the Nasscom-Zinnov analysis reveals that the size of the domestic software product market in FY08 was $2.3 billion, of which, the Indian software product companies cornered about $460 million and the global software product companies garnering $1.84 billion. In return, the Indian software product companies sold about $960 million worth of products outside India – mostly in emerging markets.

Pari Natarajan, CEO, Zinnov, asserts, "We very strongly feel that by 2015, Indian software product business revenues would be more evenly balanced between domestic and export-based sales, and the share of revenues from the domestic market would increase from 32 percent in FY08 to an average of 41 percent by FY15 to reach $4-5 billion."

He adds that the key parameters – such as proximity of Indian software product businesses to the local market requirements, excellent understanding on localisation requirements, and ease of adopting customised and targeted sales approach – would fuel this growth.

The study also states that over the past three years, the annual revenue aggregate of the Indian software product businesses has grown at a CAGR of 44 percent. Leading Indian software product firms have strengthened their product portfolio through steady investments in organic growth as well as through overseas acquisitions.

However, industry leaders believe that the Indian software product industry is already late in trying for a success in a much larger market such as the US, which was the strong forte for the Indian IT services company. To take the products to markets such as these, requires a higher marketing investment and greater understanding of the market requirements.

The fact that most of the Indian product companies, while devising their plans, think specifically about the domestic market, makes their products unattractive to established markets abroad.

"We are already late in tapping opportunities in the US market. There is a history of services' companies going to the US, but not the product companies.

This is the reason why most Indian product companies should look at non-traditional markets such as India and China which are scaling up first, and where the demand is very high in areas such as security, retail, online gaming and mobile space," opines Sudhir Sethi, chairman & MD, IDG Ventures.

 

INDIA ALL SET TO RULE SOFTWARE TESTING MARKET

Durba Ghosh, New Delhi
The Economic Times

India is all set to become a leader in the software testing market with an increasing number of software development companies outsourcing their software testing work here. Industry analyst firm Gartner has pegged the worldwide software testing market at $13 billion and the global market for outsourced testing services to be around $6.1 billion, of which India is expected to corner a 70% share.

Software testing implies checking any IT system prior to implementation for multiple aspects like functionality, reliability, usability, security, compliance and performance. Market players like Hexaware and AppLabs believe that the need for outsourcing software testing has grown due to the high level of complexity and multiple intersection points in modern software.

“The winning combination of cost, communication, exposure to various domains, testing principles and test tools gives a clear edge to India in software testing,” said Hexaware Technologies global delivery head and chief software architect Ramanan RV. While software services are growing at an average of about 10-12% globally, testing is growing at over 50% every year. The market opportunity for Indian offshore testing companies is seen at around $8 billion by year-end, from $2-3 billion a year ago.

“Indian businesses have matured in terms of making IT central to all business processes. Hence, there is a very high level of business dependence on error-free software code,” said AppLabs president and CEO Makarand Teje.

A global case in point is eBay, which experienced a 22-hour outage of its website in 1999 due to software flaws. It cost eBay $5 million in revenue and an 11% drop in share price. The outage affected 1.2 million customers who were either trying to sell or buy something on the website.

Along with the growth witnessed in offshoring of software testing to India, the average deal size of such projects is also on the rise. A few years ago, the average deal size for an outsourced testing project was about $50,000-60,000, requiring a few testers. That has now grown to about $2-4 million per project.

According to Gartner, India will require around 18,000 testing professionals every year over the next three years to fulfill the demand seen in the software testing market.

 

TRANSFER OF COMPUTER SOFTWARE HELD TAXABLE

H P Aggarwal, New Delhi, August 4, 2008
Business Standard

When a foreign company transfers computer software to an Indian company from outside India, is the foreign company liable to pay income tax in India? This issue arose in a recent case of Airport Authority of India (AAI), which entered into two contracts with a US company – one for hardware and other for software. Whereas supply of hardware was held as non-taxable, but the supply of software was treated as “royalty” and “fee for technical services”.

Commercially there are two types of softwares, namely, “unbranded software which is specialised and exclusively custom made to cater to the needs of individual clients”, and “branded software” or “off the shelf software” which is standardised and marketed as such. The software supplied to AAI consisted of customised software.

AAI contended that when the US Company shipped the software and documentation, the property passed to AAI outside India. It also contended that the entire activities under the contract except some support activities were performed outside India. The essence of the contract is outright sale of some copyrighted software, but the software could be used only for the specified intended purpose.

The issue before the AAR was whether payment received by US Company under the transaction is liable to tax in India in the hands of the US Company? The AAI pleaded that the supply of software should be treated as sale of goods and the resulting income should be treated as business income.

Reliance was placed on a SC decision in the case of Tata Consultancy Services vs Union of India [2004-271 ITR 0401 {SC)] in which the supply of software was treated as sale of goods. It was also contended that there is a distinction between grant of licence to use a copyright and sale of a copyrighted article.

The Indian I-T Act does not contain any clear provision with regard to transfer of computer software. Therefore, a taxpayer is entitled to take help from internationally accepted commentaries like the OECD Commentary, which provides for treatment in case of transfer of full ownership rights as well as for partial alienation of rights. It is clear that even in case of partial alienation of rights, in certain circumstances, the consideration will be a business income and not royalty.

The AAR dismissed the assessee’s reference to OECD commentary, which clarifies the distinction between the right to use copyright and transfer of a copyrighted article. According to OECD only a transfer that enables a transferee to commercially exploit software copyright will give rise to royalty income.

But where the transferee gets exclusive rights for use, though short of full ownership, it will nevertheless be a case of sale of software. In the Microsoft case also, the Tribunal rejected the assessee’s contention to rely on the OECD commentary. In this case, the payment in respect of supply of software with an exclusive right to use was treated as royalty and was hence held taxable in India. The Tribunal rejected the plea to rely on Tata Consultancy case.

Even if the rationale of the ratio laid down is not questioned, the judgments will have a tremulous effect on India’s outsourcing business, which constantly requires new software besides modification and updgrade of the old one. The government should take a practical view and clarify the Indian law to synchronise the same with OECD commentary.

 

POOR WILL BE LEFT OUT AS HEALTH CARE COSTS RISE

Seema Singh, Bangalore, August 4, 2008
Mint

Although India’s spending on health-care delivery and drugs will rise almost five times to $126 billion (Rs5.4 trillion) in 2015 from $27 billion in 2007, over 800 million of its poor will still struggle with medical costs, says a report by Institute for Business Value, or IBV, of International Business Machines Corp, or IBM. Citizens will bear most of the cost, just like today where out-of-pocket spending accounts for 78% of the overall spending, the report says.

“Escalating medical spending inflation, which increased more than 200% between 1995 and 2005, will increasingly force citizens to choose between public and private services, or to forego care altogether, except for life-threatening situations,” says Healthcare in India: Caring for more than a Billion, a proprietary study by IBV.

“This is the first comprehensive attempt to look at the drivers and inhibitors of change which also lays down some key models in health-care delivery and management,” says K.S. Raghunandan, director of solutions and business development at IBM India Pvt. Ltd.

Just like the Reserve Bank of India computerized banks in the 1990s when foreign banks started coming in, some apex Indian agency now needs to lead the way and lay down technology standards in health-care, says Mohammed H. Naseem, vice-president of health-care at IBM India. “Inter-operable standards in electronic health records, clinical management and other areas can reduce incremental cost.”

The report brings out this shortcoming. Private hospitals, it says, are increasingly investing in IT systems but most progress is in areas such as billing, accounting and administrative systems, rather than clinical information systems.

“It’s true. There’s no holistic solution in IT infrastructure because Indian companies provide piecemeal answers and we have to go to overseas companies that do not understand our requirements well,” says Devi Prasad Shetty, cardiac surgeon and promoter of Bangalore-based Narayana Hrudalaya Pvt. Ltd, which owns a chain of hospitals.

The report says India needs to stress on preventive health-care. “We know prevention is better than cure, but the extent to which it can be beneficial was a revelation,” says Raghunandan. The report says 329,670 cancer cases, 51.2 million cases of heart disease and 41.4 million diabetes cases can be prevented by 2015, if Indians adopt a healthy lifestyle.

 

BLESSING IN DISGUISE: ATTRITION RATES MAY SLOW DOWN TOO

Pradipta Mukherjee, Kolkata, August 3, 2008
Business Standard

It’s a blessing in disguise, of sorts. Indian companies, which had to face a huge attrition problem over the last few years, can finally breathe easy. HR analysts said the economic slowdown is expected to reduce the attrition rates across industries, at least for the next two quarters.

The attrition rates had touched almost 35 per cent in some industries such as financial services and retail, primarily due to companies ramping up their manpower. But the party seems to be over for the time being.

The country's second largest bank, ICICI Bank, for example, froze promotions, reduced bonuses and cut annual increments in April this year — a sure indicator of companies trying to bring in cost efficiencies to prepare for the slowdown ahead. The bank says its attrition rate has not gone up.

Sampath Shetty, vice-president, TeamLease Services, a staffing firm, says the overall employment outlook has seen a decline over the last four quarters, with cities such as Mumbai and Kolkata reaching a growth threshold for job opportunities. Chennai would experience a hiring slowdown, with most of the manufacturing firms at the last stages of large-scale hiring for Greenfield projects.

Others agree. Milind Sarwate, chief of HR and strategies at Marico, says managing attrition had become very challenging for the FMCG industry, even after good salary hikes and career opportunities.

"But as the economy cools down, the attrition rates in the FMCG sector will come down from the current 20 per cent to around 12 per cent very soon. The companies will hire less, leaving limited options for employees to switch jobs."

Y P Yadav, managing director of Genius Consultants, a recruitment and corporate training firm, estimates the attrition rates in the retail and real estate sector to come down to 25 per cent beginning next quarter — a fairly high number, but is better than the earlier rate of 30-35 per cent. This is because retail chains will hire less and depend more on temporary staff and variable payments.

Spencer's Retail, for instance, will do away with about 40 of its not-so-profitable stores and hire less people. The existing employees will be relocated to the new stores locations. Spencer's used to hire 500-600 people per month till last year. But over the next two quarters, the company would recruit about 200-300 people per month, according to a spokesperson of the company.

“The July-September quarter will determine the course of industry over the next two years. A lot will depend on the performance of the economy. New recruitment will depend on how businesses shape up during the coming quarter,” said Amitabh Mundhra, director, Simplex Infrastructures.

According to data provided by Yadav, the information technology sector, including BPO services, software and hardware companies, currently witnesses average attrition between 35 and 40 per cent, which will again slow down as corporates curb hiring.

For instance, Patni Computers reduced its workforce by 400. Companies like IBM and TCS have slashed jobs in their software and BPO operations. IT company Hexaware has also announced that it will not hire for the next two quarters.

Simultaneously, telecom and banking services currently have an attrition rate of 25 – 30 per cent, while media, entertainment and manufacturing witness an attrition of 15 – 20 per cent currently, Yadav informed.

According to Devang Sampat, VP – marketing and programming of Cinemax multiplex chain, “The overall slowdown would cause less expansion which will directly affect recruitment plans. For instance, till last year we were expanding by 100 screens per year. But now due to the overall slowdown we are looking at 20-25 screens per year. Each Cinemax property would employ close to 100 people, and that will obviously come down drastically as we expand at one-fourth the rate compared to what we used to.”

Aviation, which has also been a big employment-generator, is yet another example. Go Air, for example, axed 400 jobs in the past six months and has frozen recruitment plans. Deccan, too, has frozen recruitment and is reviewing its business plans due to the sudden increase in jet fuel prices.