Indian outsourcing giants miss profit expectations

Volatile currency markets may have done more damage to two of India's largest outsourcing firms than waning business from Wall Street did.

Profits at Wipro Ltd. and Tata Consultancy Services Ltd., India's largest software services provider, came in below analyst expectations, largely due to foreign exchange losses.

While turmoil in financial services firms around the world has led to slowing growth for India's outsourcing industry, many analysts say it's still too early to see the full effects of the crisis on earnings. TCS said that net profits in the July-September quarter rose 1.17 percent over the same period last year, to 12.6 billion rupees (US$256 million). Revenue for the quarter was 69.5 billion rupees (US$1.41 billion), a 25 percent increase over the same period last year.

Earnings were dented by a loss of 2.6 billion rupees (US$52.5 million) from foreign exchange hedges, the company said. Executives said TCS, which gets about 42 percent of its revenue from banks and insurance companies, would likely benefit from helping financial services companies to streamline, integrate mergers and handle regulatory compliance.

The company's chief financial officer, S. Mahalingam, said TCS has made provisions for losses from two of its struggling Wall Street clients — which he declined to name. He also would not reveal the dollar size of the potential loss, but the company wrote down US$10 million in bad and doubtful debt last quarter, up from US$1 million in the first quarter.

The company said it has 20 deals in the pipeline and is on track with an aggressive hiring program. Wipro's net profit in the quarter rose 1 percent to US$177 million. Revenue rose 36 percent to US$1.38 billion, the Bangalore-based company said.

Excluding currency and tax charges, adjusted net income was US$204 million, up 17 percent.

But Wipro offered a muted growth outlook because of economic uncertainty. Wipro said revenue from technology services this quarter will barely rise, to US$1.12 billion from US$1.11 billion.

"The global economic environment has deteriorated significantly over the past couple of months, and our outlook is cautious in the near term given the extent of strain on the global economy," Wipro Chairman Azim Premji said in a statement. "However, we are confident on the resilience of our business model to tide over these challenging times."

Source: IHT

 

Gartner rates offshore outsourcing hot spots

Gartner recently walked IT folks through its global sourcing–also known as offshore outsourcing–methodology in a spiel that was part informative and part subtle hint that the consulting and research firm offers these services.

Much of analyst Frances Karamouzis’ talk at the Gartner Symposium ITxpo focused on the basics such as determining why you want to go offshore, what’s the business impact and the people headaches you may encounter. But amid all the holistic models and other management-speak Gartner went all Consumer Reports with its ratings. The charts that follow are worth the price of admission (and maybe even worth the Gartner subscription).

Here’s a look at Gartner’s ratings for the Americas:

And Europe, Middle East and Africa:



And Asia Pacific:

 

Reading between the lines the question remains on how many IT execs would seriously consider half of these locales including some of the up-and-coming countries like Morocco, Latvia, Egypt and Panama.

Gartner’s chat is probably geared towards massive multinationals, but given Canada and India were really the only two that knocked Gartner’s scorecard out of the park it may make sense to start there. Another looming question: How would states in the U.S. stack up? Would it make sense to stay at home and play the labor arbitrage game by state?

Source: ZdNet
 

Green Outsourcing: A competitive advantage and revenue driver

“It’s not just about cost anymore”, that is what Josie Sephton, Principal Analyst of Freeform Dynamics wrote in her article, saying that cost might be the initial driver for outsourcing boom but with the changing times environment protection is becoming a much more important factor than it was 3 years ago in making outsourcing decisions.

The green market seemed to have also found its way in the outsourcing world. Last year ZDNetAsia author Martin LaMonica regarded IBM’s Project Big Green as not an act of taking corporate responsibility but as a move to secure a new source of revenue. “From an overall business opportunity perspective, this is absolutely huge, though I couldn’t put my finger on how big now,” said Sharon Nunes, the vice president in charge of developing the Big Green Innovations business.

In a survey done by Forrester Research in April this year, half of the 738 companies consider green criteria and recycling programs for choosing their suppliers. Last year, more than 21% of publicly listed companies included “green policies and performance” in their outsourcing contracts according to the 2007 Black Book Outsourcing Green. In addition to that more than 94% intends to incorporate “green” in their renew contracts. For the private companies, 36% of the executives said that they are considering greener outsourcing service agreements in 2008.

Outsourcing giants seemed to have recognized the potential revenue from tapping into the ‘green’ market, “seizing the green market and investing heavily in reducing their carbon footprint. IBM, for example, has announced its ‘Project Big Green’ which aims to turn the company carbon neutral” as reported by ZDNetAsia. Also this year in July, they introduced the Green Technology Suite to help organizations use IT to assess and improve green agenda according to Global Service Media.

Being a green outsourcing firm also has its competitive advantage especially when regulatory bodies start implementing stricter outsourcing guidelines which factor in environment protection. National Outsourcing Association director Mark Kobayashi-Hillary said that outsourcing companies who start investing in green practices and technology early on will benefit the most when regulatory bodies start implementing environment protection laws. Two months ago the U.K government already made announcements of its intentions to release outsourcing guidelines which incorporates environment protection. This then “creates a new level of expectations for outsourcing providers, with environmental concerns entering the formal selection process for suppliers”, as reported by ZDNetAsia.

U.S. firms alone spent more than $ 3billion in green initiatives last year according to Kothandaraman Karunagaran, Director of Infrastructure Services. Projected demand for green clauses in the outsourcing industry is essentially high with information technology outsourcing at top estimated at 94.4% and Business Process Outsourcing at 79.5%. Surely with these figures, the Philippine outsourcing firms should seriously consider using green initiatives to give them competitive leverage especially if it wants to reach its $13 billion goal by 2010. Some of the awarded green outsourcing firms in the Philippines are IBM, Accenture, HP, Pricewaterhouse Coopers and Johnson Controls, eTelecare, Convergys, Teletech, LogicaCMG and Integreon.

Source: Outsourcing Insider