Coal India IPO likely in six months now | Govt to sell 15% stake in Coal India 
February 3, 2010
Source:  ET Bureau

CHENNAI: IT companies need to scale up capabilities, tweak service delivery models and gear themselves up to tap new markets, as the outsourcing industry is expected to go through rapid changes in the coming decade, according to R Chandrasekaran, president and MD of Nasdaq-listed Cognizant, which competes with Indian offshore companies such as TCS, Infosys and Wipro. 

Mr Chandrasekaran outlined the major trends that the IT industry would witness in the coming years at an event organised by India’s software lobby Nasscom in Chennai. While the Indian IT-BPO industry grew to over a $52-billion sector past year, a Nasscom-McKinsey study pegged the industry’s exports to touch $175 billion by 2020. 
However, IT companies will have to prepare themselves with high-end skills, expand services and take advantage of structural shifts happening across the sectors to keep the growth momentum going. 

“By 2020, many of the services will be bundled as end-to-end rather than discrete services. So we need to deliver capabilities and expand. The market is expected to go through rapid changes. We need to scale up capabilities, high-end consulting and tap new geographies,” said Mr Chandrasekaran. 

While the Indian IT industry derives bulk of its revenues from the US and the UK, this trend, too, will change with the focus shifting to Asia. “The bulk of the new opportunity is from the non-traditional markets. Service offering is going to be different and is going to require an overhaul,” he said. 

Apart from changes in the IT industry, the sectors they serve are also on the cusp of change. For example, the healthcare and lifesciences space are going through a phase of consolidation, which could throw up fresh opportunities. “Right now, we are looking at the cyclical shifts in the industry, but there is also a structural shift happening in the industries. We need to understand what these changes are and gear ourselves,” he said. 

The other mega trend, which IT companies tap into was the rising consumerism, particularly in the area of mobile phones, which is morphing from a talking tool to a utility gadget that delivers services. 

Coal India IPO likely in six months now | Govt to sell 15% stake in Coal India
February 3, 2010
SOURCE : ET Bureau

BANGALORE: A day after US President Barack Obama reiterated his plans for creating new jobs, amid rising double-digit unemployment in the rise of multinational IT in India

India’s nearly $60-billion outsourcing industry remained hopeful that its top export market will continue to grow with more companies seeking to cut costs by outsourcing work to low-cost locations. 

On Wednesday, Mr Obama vowed in his first State of the Union speech that he will make creation of local jobs his top priority in 2010, and hinted that his government could end tax breaks for companies creating jobs overseas. 

This is not the first instance of Mr Obama upping his anti-outsourcing rhetoric. In May last year, he had said American companies’ shipping jobs overseas will be required to pay more taxes, and that tax-deferral benefits for such companies will be ended. “It’s a tax code that says you should pay lower taxes, if you create a job in Bangalore, India, than if you create one in Buffalo, New York,” Mr Obama had said. 

Som Mittal, president of Nasscom, the country’s association of software exporters, said Mr Obama has several short- and long-term pressures to cope with, but that does not mean any significant impact for the outsourcing industry. “We will be their solution and not the problem,” he said in an interview. 

The proposed ‘jobs bill’, which is aimed at creating more local employment in the US, is focused at reviving manufacturing, retail and construction jobs. Last year, Mr Obama had suggested that his government would end tax incentives for American companies creating jobs overseas by removing ‘deferred tax’ on foreign income for these companies. However, no specific proposal has been brought forward to outline the execution of this move. 

Mr Obama also mentioned that his government would double America’s exports and also work on the bilateral trade agreements. “These cannot be achieved by following protectionism,” said Mr Mittal. 

Experts argue that such protectionist measures are short-sighted because many US companies derive significant revenues from outside the country, and any protectionist stance could lead to a backlash in other markets. Some of the top outsourcing customers, include Citigroup, GE and JP Morgan. 

For instance, Citigroup in 2007 generated 52% of its revenues outside the US, and over 60% of its workforce operated from abroad, as its banking business spanned 100 countries. Citigroup’s international revenues stream kept pace through 2008, despite the financial crisis, and amounted to a whopping 74% of the total revenues. Outsourcing experts such as Rodney Nelsestuen, senior research director at US-based TowerGroup said with top US banks seeking to reduce their operational expenses outsourcing could rise, and not contract as feared. 

“Outsourcing will increase as a measure to reduce operating costs to offset other cost increases such as a (still not approved but only proposed) new tax,” said Mr Nelsestuen. “The pass-through of an additional cost of business will likely be distributed throughout the customer and supply chain, resulting in higher cost financial services, lower margins, strategies to reduce operating costs, here is where outsourcers will see an expansion of outsourcing, not a contraction,” he added. 

Indeed, when Mr Obama proposed that he will attempt to recover over $100 billion from top US banks by introducing new taxes, local sourcing experts said there was no clarity on such proposals to analyse any impact on offshoring. “Increased tax could lead to generally lower investment and greater cost reduction initiatives (such as offshoring),” said Andy Efstathiou, director of US-based research firm NelsonHall’s banking sourcing program. 

“Actual bank behaviour would depend on the nature of the tax, the administration has not stated how it intends to implement the tax, it has stated the tax would only last for a few years,” he added. 

Cognizant keen to develop its Coimbatore facility
February 3, 2010
SOURCE: ET Bureau

COIMBATORE: IT services major Cognizant is well on course to make Coimbatore a key constituent in its success story. 

Described as one of the largest CTS facilities in a tier-II city, the techno-campus built at a cost of Rs 180 crore has seven floors with a capacity to employ 6000 professionals. 

The company also has plans to expand the facility and the second phase is expected to add 6500 seats. "We are aggressively increasing our strength at the new facility. In the last few months, we have added hundreds of people and at present, we have 3500 employees ," Cognizant VP and centre head, Coimbatore Vishnu Potty told ET. 

"It is a big facility and one of the fastest growing delivery centres in the country. So we want to hire people as quickly as possible," he said, adding the training academy with 20 class rooms inside the new campus is buzzing with activity now. 

On the reported delay in sending call letters to last year’s campus placed students, Mr Potty said all of them would come on board by March 2010. CTS has started its next round of campus recruitments and so far around 1900 students have been picked up from selected engineering colleges in and around the city. It is said colleges in this region contribute to 10% of the company’s annual campus hiring.