India’s IT industry body slams mass layoff reports

Indian software trade body Nasscom on Thursday dismissed widespread media reports of mass layoffs in the country’s hugely important information technology industry but warned that the sector must reinvent itself.

IT outsourcing has long been one of India’s flagship industries but recent news reports have claimed that major companies, including Tech Mahindra and Wipro, are making thousands redundant due to increased automation.

“The numbers being reported across different sources are incorrect and are not in line with the actual employment progression,” the National Association of Software and Services Companies said in a press release Thursday.

“The industry continues to be a net hirer with talent acquisition continuing across sectors and remains one of the largest employers of the nation,” it added in the statement following a conference in New Delhi.

Several Indian newspapers, including respected business dailies like “The Economic Times” and “Mint”, have reported major IT firms are in the process of gradually laying off thousands of staff, although the companies themselves are yet to comment on numbers.

Nasscom claimed that 170,000 new jobs had been created in the recently ended financial year and predicted that up to three million new positions would be added by 2025, but conceded that there was a slowdown in the rate of hiring.

It also called for employees to learn new skills to help companies’ keep up with demands for newer and more innovative technologies.

“Going forward the focus for companies will be on skills and proficiency levels rather than scale, hence it is becoming imperative for employees (both current and potential) to skill themselves in domain specific requirements,” it said.

Nasscom says that the IT outsourcing industry employs nearly four million Indians and saw revenues of around $154 billion.

India has been popularly termed as the “back office” to the world as companies, largely in developed nations, subcontracted work to Indian firms, taking advantage of the country’s skilled English-speaking workforce.

But there are concerns it is losing its sheen as companies move towards automation and seek newer technologies while there are also fears over US President Donald Trump’s curbs on H-1B visas, which allow aspiring Indian engineers to work in America.

Source: Iphys.org-ndia’s IT industry body slams mass layoff reports

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Indian IT firms struggle to generate revenue from digital businesses

Tata Consultancy Services Ltd (TCS), Infosys Ltd and Wipro Ltd are grappling with falling revenue per employee and operating margins as Indian software firms struggle to generate revenue from new businesses such as data analytics even as demand for old services weakens.

Declining revenue per employee (RPE), a measure of how well a company delivers value-added work to clients, rebuts claims made by companies that they are generating more business from offering solutions in areas generally classified as social, mobile, analytics, cloud and Internet of Things. Since there is no common definition, digital for now remains a fuzzy word.

“The biggest issue with digital is the lack of clarification and definition of what it is,” said Phil Fersht, chief executive officer (CEO) of US-based HfS Research, an outsourcing-research firm. “For most of the Indian majors, they include the whole ‘SMAC Stack’ which is social, mobile, analytics and cloud, where many traditional IT contracts can be sugar-coated.”

Declining RPE and profitability are key reasons behind Indian software companies planning to cut their existing workforce as employee costs account for over half of their total operating expenses.

For both TCS and Wipro, RPE has declined in the periods since these companies started to report business from digital technologies.

TCS claims digital revenue accounted for 17% or $3 billion of its $17.58 billion revenue at the end of March 2017. A Mint analysis shows that despite the country’s largest IT firm reporting a 71% increase in digital revenue from the time it first reported digital revenue at the end of June quarter in 2015, overall RPE declined 7.1% by the end of March quarter.

Ditto for Wipro. India’s third-largest software services company saw its RPE decline 3.2% in the last year despite the management’s claims of 28% growth in digital revenue.

Infosys has until now shied away from disclosing revenue from digital technologies. However, the management has been most vocal on using artificial intelligence and automation platforms and over the past 33 months, CEO Vishal Sikka has spoken on steps taken to move away from deploying armies of engineers to manage the IT infrastructure of clients based in the US and UK.

Still, Infosys’s RPE has fallen 3% since October-December 2014, Sikka’s first full-quarter as CEO.

Over the past decade, faster computing power and higher internet usage across the world has made Fortune 1000 companies look at newer technologies like data analytics to run their business better. Offering solutions by using data-crunching technologies command a high price even as automation tools are fast changing the way outsourcing companies traditionally did business of either managing computers or offering customer support to clients and client-run businesses.

So what explains this divergent trend of a fall in both profitability and RPE despite strong growth in digital?

First, home-grown IT firms generate tiny business from offering next-generation solutions and bulk of the digital revenues are simply re-badged old traditional work.

“Take for example a classic work like ERP (enterprise resource planning) upgrade to support a subscription billing model. Now that project to any IT services vendor worth their salt is being classified as digital revenue, is this really digital?” asked Ray Wang, founder of Constellation Research, a technology research and advisory firm.

For this reason, a few executives believe that a better metric to evaluate health of an IT firm is to see the growth in data analytics.

“We are moving in a world which is seeing a data explosion. How do you eventually make sense of large sets of data? A true test is how can I make my company better monetize this,” L&T Infotech Ltd CEO Sanjay Jalona, said in an interview earlier this month.

L&T Infotech, India’s sixth largest IT outsourcing company, reported a 9.3% dollar revenue growth in the year ended March 2017 to end with $970 million in revenue, thanks to a 35% increase in business from data analytics. L&T Infotech also improved its profitability from 17.2% at the end of the March quarter last year to 18.9% even as RPE jumped by 9.3% to $48,832.5.

Both TCS and Infosys do not disclose revenue from data analytics.

A second issue is that even a strong growth from next-generation technologies is not enough to offset the decline in demand in the traditional areas of work.

“In some sense, there is an inflection point, where the pricing pressure for traditional business is still high. Some of our largest customers de-grew and so it impacted Mindtree. So despite the strong growth in digital, I cannot really tell you when this higher growth in digital will be able to offset the decline in traditional business,” said Mindtree Ltd CEO Rostow Ravanan.

Source: Livemint -Indian IT firms struggle to generate revenue from digital businesses

Why Lloyds Bank is ‘outsourcing’ IT services to IBM

Dive Brief:

  • U.K.-based Lloyds Banking Group plans to move almost 2,000 staff members to IBM as part of a £1.3 ($1.59) billion, seven year IT outsourcing deal, the Lloyds Trade Union announced this week.
  • Staff will be outsourced to IBM, and then over a four-year period the work will be “offshored,” The Stack reports. Though 1,961 staff members — including permanent staff, third parties and contractors — will transfer to IBM, after four years, just 193 staff members will remain working on the Lloyds contract.
  • Through the deal, Lloyds is looking to save £760 ($938) million in costs, make IT more agile and streamline the business, according to The Stack.

Dive Insight:

Earlier this year Lloyds suffered a distributed denial of service (DDoS) attack that caused the bank to shut down for two days. Though the bank said no accounts were compromised, it was certainly a wake-up call. Cyberattacks are a huge risk to the finance industry, and concerns have been growing significantly in the wake of attacks and near-misses.

The deal will start by outsourcing staff to IBM, in what is basically an “as a Service” model. Outsourcing IT labor no longer means companies are simply going to bring in foreign labor to do technology work at a cheaper rater.

Rather the outsourcing model is being turned on its head as companies rely on as a Service models, creating an entire spectrum of outsourcing. On one end, it’s labor arbitrage. On the other end, it’s a software or infrastructure-driven model that is far more sustainable and profitable. In this case, relying on IBM’s networks with its vast pool of resources can also increase security and systems reliability.

The Deal

Lloyds Banking Group is to offshore nearly 2,000 IT jobs as part of its shift to IBM, according to the Lloyds Trade Union.

In a recent presentation, Morteza Mahjour, the group’s Chief Information Officer, confirmed that Lloyds will outsource large parts of its IT estate to IBM in a deal worth £1.3bn over seven years, the union said in a newsletter.

Staff will be outsourced to IBM, and then over a four-year period the work will be offshored, the union told members in an update yesterday.

As exclusively revealed by The Register earlier this year, under the deal IBM would pay for the data centre assets, transfer them to its balance sheet, and then charge Lloyds for the ongoing management.

Project Aurora was due to be announced in January but negotiations with IBM are taking longer than originally thought, said the union.

The Windows, Unix, Linux and IBM I-Series platforms will form the bulk of the estate being outsourced to IBM. That will include 2,000 of the 3,200 applications currently used by Lloyds Banking Group.

The union said it expects the deal to be announced in the next few days.

Earlier this year Lloyds was hit by a cyber attack which led to a two-day outage. The mega-bank said that no accounts had been hacked or compromised.

According to the union, Juan Colombas, LBG’s chief risk officer, confirmed that cyber-attacks were the biggest risk to the finance industry.

The union said: “The question is whether security is better managed by systems that are run by [Lloyds Banking Group] or by a third party whose staff are based offshore?”

A spokeswoman from Lloyds said: “As we have said to our colleagues, we are considering options to extend use of cloud technology in pursuit of the Group’s aim to be the best bank for customers.

Source: ciodive.com- Why Lloyds Bank is ‘outsourcing’ IT services to IBM

Image credit: Thinkstock

Capgemini Recognized as an Advanced Thought Leader in Global Insurance IT Outsourcing

Capgemini, a global leader in consulting, technology and outsourcing services, announced today that for the second consecutive year it has maintained its position as a leader and star performer in Everest Group’s IT Outsourcing in Global Insurance PEAK Matrix™ Assessment. Capgemini achieved this recognition by demonstrating strong insurance business growth through multiple new domain-focused solutions and continued investments in its global network of Applied Innovation Exchanges (AIEs)1.

In the report, Everest Group analyzed the capabilities of 24 Applications Outsourcing (AO) service providers specific to the global insurance sector and selected Capgemini as one of five Star Performers. Star Performer distinction is awarded to service providers that demonstrate the strongest forward movement over time on PEAK Matrix™ characteristics of leaders on the AO services’ matrix including: continued domination in the insurance AO marketplace with differentiation through a large-scale, global delivery model, extensive consulting capabilities, a comprehensive solutions’ portfolio, and being cited by clients as preferred vendors for change management and large-scale transformation projects. Capgemini’s Wellness Active Risk Management2, eUW applications3, Digital Attending Physician Statements (APS)4, and All Channel Experience (ACE)5 proprietary solutions were highlighted as key to its success.

Everest Group cited Capgemini’s acquisition of IGATE as giving it the ability to grow some of its key accounts, which demonstrated strong insurance business growth momentum. Capgemini was also named as an advanced thought leader and early adopter of next-generation technology themes.

The insurance industry is at an inflection point, where technology disruption and new business models are fundamentally reshaping the current landscape,” said Jimit Arora, Partner, Everest Group. “Focused investments in R&D initiatives, domain-focused partnerships, an enhanced delivery presence, and strong growth momentum in its insurance application outsourcing business helped Capgemini secure its positions as a Leader and Star Performer on the 2016 Everest Group Insurance AO PEAK MatrixTM.”

“We are delighted to be named as a Leader and Star Performer in IT Outsourcing in Global Insurance by the Everest Group for second year in a row,” said Jack Dugan, Executive Vice President and Global Head of Insurance for Capgemini’s Financial Services Strategic Business Unit., “This is a strong validation that our investments in domain and innovation are generating significant value for our clients and partners.”

Please find a copy of the report here.

Source: businesswire.com- Capgemini Recognized as an Advanced Thought Leader in Global Insurance IT Outsourcing

IT Outsourcing Review: Ukraine

Satprnews.com have arranged the project in order to reveal the most captivating and informative data bringing the greatest use to the readers. Our mission is to take off the blanket and show all the benefits of IT outsourcing that Ukraine can offer to both national and foreign clients.

The website is being built in a way any user can find everything necessary helping to choose Ukraine as its priority for doing business with. Different topics coverage in the Blog provides an analysis of the main advantages and disadvantages of the country since there is a good pile of information already available.

Another part is the IT Outsourcing Playbook which is a brief and structured outline of the main information about Ukraine and its current IT outsourcing potential. Playbook aims at providing the most significant and precise data that will not mislead the reader about the local IT environment.

And, finally, an analytic Research on different IT outsourcing-related issues and trends can be ordered in case if you need more information about Ukraine or other CEE region countries. Moreover, the team is already working on new updates to the structure of the website.

Ukraine and its IT arena are open to the world and invite new businesses to be established. If you don’t want to miss and keep tuned with the newest issues, visit our website http://outsourcingreview.org/?scr=rw and subscribe via email to receive our newsletters.

Source: satprnews.com-IT Outsourcing Review: Ukraine

Sourcing Predictions 2017 – Feature – outsourcing

The sourcing world is changing fast, embracing new technology and ideas while transforming business models. 2017 will be another twelve months of evolution in the industry. Sourcingfocus.com has been asking what people predict for the industry in 2017.

“Organisations will be forced to think more radically about how they source services for their organisations. The blistering pace of technologically driven change means that the status quo that has been accepted for many years will now be challenged. The digital and automation revolution will continue to accelerate and impact more organisations in more significant ways.

In practice this means long standing outsourcing arrangements changing – outsource to in-house, in-house to outsource, changes in 3rd party supplier – with a view to transforming the capability of organisations. Decision makers who in the past often extended contracts as the most risk averse choice will now need to bite the bullet and change to alternative suppliers. The will expose poor Exit planning and inadequate knowledge management processes and systems.
For some organisations 2017 will be a year where that take off, for others it will be the year they start their terminal decline.” said Chris Halward, Global Standards Director of the Global Sourcing Association.

With that in mind it may be time to upskill with a GSA workshop, you can find out more here.

“2017 will continue to see an expansion of cloud and digital transformation initiatives. Many deals which might historically have been done as a form of outsourcing transaction will instead be recrafted as a cloud services arrangement” says Kit Burden of law firm DLA Piper.
Movement towards the cloud and digital services will continue to transform not just business life but home life as well. The introduction of technologies that utilise the cloud into all aspects of our lives is on the rise with devices such as Amazon’s Alexa a key example.
“Process standardisation through the cloud may be the single most important element for CFOs to put into action. The agility, dynamism and standardisation of cloud-based applications give companies the means to continually innovate, a competitive necessity in a business world that is constantly changing” says Andy Bottrill, Regional Vice President of BlackLine.

Benson Schliesser of Brocade says “Research into machine learning (ML) algorithms has been advancing for many years, but in 2016 we saw it storm onto the mainstream stage. ML algorithms can now be trained on all sorts of data, thanks to the availability of high-powered processors, “big data” collection architectures, and open source software implementations. And in 2017 we will continue to see ML expand in importance as a fundamental technology driving innovation in every industry.”

Robotics and AI also feature heavily in predictions for the industry in 2017. “AI has gradually been creeping into the business landscape for a couple of years now. In 2017 there will be a noticeable shift towards a broader incorporation of the technology. The latest robots have the ability to learn how to complete multiple jobs, so they can be plugged in practically anywhere along the supply chain” says Wendy Kent, COO at Matrix.
“The impact that Robotic Process Automation (RPA) will have on sourcing in 2017 should not be underestimated. According to intelligence firm, Research and Markets, the global RPA market is expected to reach $8.75 billion by 2024 (up from $0.183 billion in 2013), as companies increasingly scramble to take advantage of the enhanced accuracy, cost savings and scalability that RPA promises to deliver” notes Laurie Padua, Director of Technology and Operations Consulting, Alexander Mann Solutions.

The GSA is running a ‘How to make RPA and AI work’ workshop in London on 22/02/2017. Click here to find out more.
“Customer service has become an integral part of creating a successful brand and, as a result, many companies are placing customer experience at the heart of their business. This means that we have seen a shift in the relationship between brands and third-party BPOs. Rather than acting as an external service provider, BPOs now work closely with their customers to becoming a truly collaborative partner – one that can transform business processes and introduce innovation to better serve the company and customers. It is likely that this close collaboration will continue in 2017 and beyond.” says David Potter, SVP – Business Development at Firstsource Solutions.

You can learn more on how to improve the customer experience your organisation offers at ‘Excellence in Customer Experience’.

Tom Kemp, CEO of Centrify notes how cyber security will change over 2017. “In 2017, we’ll see a renewed effort by government regulators to accelerate the implementation of security technologies. Ignoring the regulations or inching toward adherence will no longer be acceptable. Extensive progress will be expected – and required.”

“Brexit has brought upon many uncertainties to European outsourcing, especially in relation to IT staff augmentation. Ultimately, it depends on what trade and immigration agreements are made between the UK and other EU countries. If they remain similar to the current EU agreements, then the level of skills provided by non-UK EU workers will remain broadly the same. However, if EU workers have to re-apply for visas or are limited in numbers, this is when we will see a massive skills gap develop” says Robert Barbus, Operations Director of Soitron Group on the future of Britain outside the EU.

Source: Sourcingfocus.com-Sourcing Predictions 2017 – Feature – outsourcing

Outsourcing trends to watch in 2017

This year, we saw outsourcing integration challenges multiply, production workloads and enterprise systems hit the cloud, and security hit the top of the agenda.

So what’s ahead for 2017? Uncertainty for one thing. Industry watchers expect a number of shifts in the IT and business process services space — not least of which will be the initiation of more flexible outsourcing terms as the world watches and waits to see what happens once president elect Donald Trump takes office and Brexit takes hold.

We also expect to witness maturation in cloud computing, robotic process automation (RPA), and cognitive capabilities while entities like the call center and business models based solely on labor arbitrage fade into history. For more on what our outsourcing experts expect in 2017, read on.

1. Industry insecurity reigns

The coming year will be a time of uncertainty for the outsourcing industry, both within the U.S. and abroad. “It will be one of a handful of times that outsourcing will be affected by the political climate, says Rebecca Eisner, partner in Mayer Brown’s Technology Transactions practice. The new administration coming to power in the U.S. could have an impact on trade agreements, regulations, tax policies, visas and immigration–ultimately impacting the outsourcing industry, which continues to rely on the benefits of global labor arbitrage. Brexit only adds to industry anxiety in the U.K. and Europe.

Companies have already begun assessing and auditing their contracts to determine the impact, says Christopher A Seidl, partner and chair of the global business and technology sourcing group at Robins Kaplan. “In 2017, this will lead to deeper discussions between parties, and more renegotiations, over terms relating to currency, changes in the law, and the overall costs of the deal,” Seidl predicts. “They will also seek to add flexibility into their outsourcing arrangements through, for example, new termination rights, rights to move locations, rights to insource, and other similar protections,” Eisner says.

In the business process services space, the political environment and the higher-end work being outsourced will lead to more work being be delivered from onshore locations, predicts Rajesh Ranjan, partner with outsourcing consultancy Everest Group.

2. Security stays top of mind

Information and data security will continue to be a major concern over the next 12 months. “Traction for advanced security automation, threat intelligence, and security analytics solutions will continue to be robust as enterprises look to build a holistic approach to enterprise security and fend off business risks,” says Jimit Arora, partner in the Everest Group’s IT services division. “As-a-service models to scale security capabilities and dynamically support cloud-based workloads will also gather steam.”

Vendors will take more of a lead role in protecting the enterprise through security offerings, adds Seidl. “Vendors won’t simply be thought of as an entry point for hackers, but rather as an ally for regulators, politicians, and businesses who continue to be challenged in looking for solutions.”

3. Intelligent automation drives down costs

“Intelligent automation and robotic process automation will take a step function forward for certain providers, disrupting existing commercial outsourcing structures and driving down costs and, to a lesser degree, prices in the market,” predicts David Rutchik, executive managing director with outsourcing consultancy Pace Harmon. “This will result in supplier margin expansion, greater savings opportunities for enterprise buyers, the need for enterprises to renegotiate existing outsourcing deals, and the bifurcation of the ‘haves’ and ‘have nots’ in the marketplace.”

4. Customers demand more from cloud

The novelty of cloud computing adoption has worn off, and the grace period for providers is over. “Clients will force cloud providers to mature,” says Adam Strichman, founder of boutique outsourcing consultancy Sanda Partners. “Clients will become more savvy about what a cloud service really means, and these ‘me too’ cloud services are going to have to grow up or be kicked to the curb.” Customers will be looking to leverage cloud as the core platform for new internal and external initiatives, adds Arora. “Enterprises will demand significantly more value from cloud service providers to drive transformation in their business.”

5. Offshore providers pivot

“The days of unprecedented growth for the tier one offshore firms appear to be over,” says Chip Wagner, president and partner with Information Services Group (ISG) Business and Emerging Service. In addition to the potential impact of Brexit and a new U.S. administration as well as increasing automation, offshore providers are also dealing with currency exchange issues. All of that has lead to increased margin pressures and staff downsizing, says Wagner. “Clients will seek differentiation of solutions driven by automation and new technologies, as well as better governance to manage increasingly multiple smaller deals.”

Indian providers will significantly increase their functional capabilities in key process areas and build better organizational change management capabilities, says Rutchik. “This will enable them to compete more effectively with the IBMs and Accentures for more transformative and strategic work.” Look for acquisitions and hiring from U.S. and European consultancies.

 

Source: Cio.com – Outsourcing trends to watch in 2017