Analytics to see rise in M&A activities

Market research and analytics, a relatively new entrant into the knowledge process outsourcing (KPO) industry, is expected to witness a spate of mergers and acquisitions (M&A) in the coming days.

The M&A activity in the area will see companies acquiring small and niche players in the US and Europe to improve their front-end capabilities and consolidation in the domestic market, largely dominated by over 110 small-size companies in the revenue bracket of $2-$10 million.

The domestic market research outsourcing (MRO) and analytics industry, pegged at $300 million, is growing at a rate of 50 per cent on a year-on-year basis. Larger BPO firms including WNS, Genpact, TCS BPO, Wipro and Infosys BPO offers market research and analytics service to global corporations as a part of their KPO offerings.

Besides, pure play market research and analytics service firms including CrossTab, Ugam Solutions, Annik Systems and Dexterity are also growing at a good pace with the rise in demand for their services both from the US as well as Europe.

The trumpet of consolidation in the domestic market was already blown in 2006 when WNS acquired Bangalore-based Marketics for about $65 million, a deal that raised many eyebrows due to the fact that the valuation of the company was almost 16 times its revenue which was about $4 million at that time, with a headcount of 200 people.

Though many industry veterans complain that KPO firms are being overvalued, most of them are also keen on acquiring such companies. Offshore BPO services provider EXL Service which has acquired Inductis, a research and analytics company in 2006, is looking at couple of more acquisitions in this space to add to the capabilities.

Wipro BPO, which also provides data analysis and market search services, has already made its intention clear at the recent Nasscom BPO summit. Ashutosh Vaidya, Head, Wipro BPO, had said the company was considering suitable candidates for acquisitions.

Ugam Solutions, a pure-play MRO service provider, is actively looking for prospective candidates in the US for acquisition. Jointly owned by Avalon Consulting and KVS Group, Ugam Solutions is presently ninth out of the top 25 market research companies across the world.

The company which is estimated to be in the revenue range of $35-40 million, has already appointed a local investment bankers Avendus Advisors to help it in the acquisition process. The acquisition is expected to happen in the next 1-2 months.

“The analytics market in the US is highly fragmented. The company we are looking at in the US, is in the revenue range of $5-15 million and will bring us news skills like statistical modelling, advanced analytics and data mining. This will also help us in improving our front-end in the US as a hook into the new clients,” said Sunil P Mirani, CEO of Ugam Solutions.

According to a recent study by ValueNotes, the competition in the offshore MRO space will be tougher in future with the entry of BPO players in the space. “MRO industry might witness some mergers and acquisitions post 2009.

While pure play vendors will continue to lead the MRO space, competition will intensify with the entry of large BPOs. End to end offerings will be the key to survival for pure-play MRO vendors,” Neeraja Kandala, ValueNotes analysts was quoted as saying in the report.

The global survey research market is about $10 billion at present, of which 40 per cent of the works which are more operational in nature are outsourcable. The operational market research works include designing of survey questions, conduct the survey, write the report after analysing the survey, and its interpretation.

Analytics play a major role while conducting a behavioural data analysis which play a key role in containing customer churn.

ValueNotes estimates that India’s revenues from off-shored MRO services stood at about $150 million in FY 2007 and expected to reach $800 million by FY 2012. The industry is expected to employ about 33,000 people by 2011-12 from the current level of about 9,000.

Apart from India, countries like Romania, Philippines, Costa Rica and China also provide market research and analytics outsourcing services

Source from: Business-Standard.com

India’s Jobs, Wages Grow Due to Foreign Outsourcing

Industry grows 30% to employ more than 1.2 million people

Vish Ramamurti is home again. Sixteen years after leaving India to pursue a better life in the United States, the 37-year-old electrical engineer has returned to Bangalore. There were many reasons for his reverse migration: aging parents, homesickness and a desire to teach his children his native language. But the real driver was job opportunity.

Last July, Ramamurti joined Wipro Ltd. in Bangalore as a general manager while his wife accepted a transfer with her semiconductor firm. Their combined pay is close to the salaries they made in Austin, Texas.

“I’m not going to say we are completely comfortable with this place,” said Ramamurti, who is still adjusting to the long hours and his new Indian colleagues, “who talk about very personal things at work.”

Still, Bangalore has its advantages. Ramamurti dodges cows and crater-like potholes to reach the office, but his home is a luxurious 2,500-square-foot condo staffed by a full-time cook, driver, nanny and two maids.

India’s IT software and services engineers are climbing their way up the economic food chain. Between 2007 and 2008, the outsourcing industry grew 30 per cent, reaching $39.5 billion in export revenues and employing more than 1.2 million people.

No longer a ghetto of low-level software jobs and call centres, Indian corporate behemoths such as Wipro, Tata Consultancy Services (TCS) and Infosys Technologies Ltd. have transformed outsourcing to include such critical services as market research and analytics, copy editing, patent generation, the drafting of legal documents and engineering plans.

While software programming and call centres still flourish here, Indian companies are running entire IT departments, designing Ericsson and Nokia phones and monitoring water and wastewater facilities such as Thames Water Utilities Ltd. Even new government services are being offered.

The states of New Mexico, Nebraska and Mississippi are outsourcing their unemployment and taxation payment processes, Mexico has off-loaded its social-security services, and Bahrain has launched e-visas to a new division of TCS.

India became the darling of IT outsourcing because it offered cheap services. But the next generation of outsourcing no longer relies entirely on wages as salaries continue to climb.

“Five years ago, outsourcing was a dirty word,” says Debashis Ghosh, vice-president and general manager for Global Delivery TCS India North.

Although TCS has worked with a handful of multinationals since the 1970s, including General Electric Co., most Fortune 500 companies have kept mum about their outsourcing deals.

“But the word is getting out,” he says.

“Companies are more open because outsourcing is widely deployed and because they are facing the challenge of finding the right set of people to sustain growth,” says S. (Kris) Gopalakrishnan, chairman of Infosys.

More mid-sized and small firms are jumping on board, and revenues are more diversified with a greater amount of work coming from Europe and Asia than the U.S.

As a result, a second tier of Indian outsourcing firms has emerged, including Evalueserve, Integreon Managed Solutions Inc. and Mindcrest India Private Ltd. Fuelled by an army of lawyers, architects and business graduates, they focus on what’s known as knowledge processing outsourcing (KPO). The firms call this “climbing the value chain.”

“CEOs are now asking their CIOs why they aren’t looking into (outsourcing),” says Ghosh. “Suddenly, India is a good brand to be associated with. It means you know how to leverage talent and globalize.”

Wipro, which counts Nortel as a long-time client, recently added Delta Airlines, AGL Resources and Credit Suisse.

Wipro chairman Azim Premji says 45 per cent of his company’s revenues are generated from new value-added services. In one example, Wipro helped consolidate the claim processes for a U.S. Midwest insurance company. Before outsourcing to India, the insurance firm had 400 claim officers spread across different branches. Some were underemployed, while others were filing for overtime, says Charan Bhalla, vice-president at Wipro. After Wipro stepped in, the claims were processed 20 per cent faster, and the payouts, which had varied from branch to branch, were standardized.

While Wipro, TCS and Infosys handle only Fortune 500 firms, companies such as Evalueserve are staking out the mid-sized and small companies. At its offices in the New Delhi suburb of Gurgaon, Canadian bankers and dealers are commissioning investor reports and research. Evalueserve has one intellectual-property team that drafts the specifications and compliance for patents for new products and inventions, and a legal team that writes non-disclosure agreements and confidentiality clauses. No niche is too small.

“We are like a small consulting shop without the consultant,” says Sanjoy Choudhury, assistant vice-president.

AC Nielsen recently signed a $1.2-billion US contract with TCS. In addition to running the IT platform and back-end financial and human resources, TCS will handle some of Nielsen’s analytics and data references.

“It’s still early days, and everyone is going one step at a time,” says Ghosh.

Taking on more operations is a great way to extract more revenue from a single client, but it’s also changing the way Indian firms work.

“As we seek new partners to work with us around the world, we started thinking, ‘Why do we need to do everything in India?’ ” says Ghosh. “As we go up the value chain, we are going global.”

Outsourcers are insourcing. TCS has 155 offices outside India. Five years ago, it had 300 non-Indians on the payroll; today they represent 1.1 per cent of the 111,407-strong workforce.

Wipro has 46 offices overseas — including a new one in Toronto — and is scoping for new centres in the United Kingdom, Germany and the United States.

By opening offices in Europe and the United States, the Indian firms have telegraphed a new sensitivity to cries that outsourcing creates job losses. But the strategy is also helping businesses cope with outsourcing: Sales staff have multiple languages. They also help alleviate the fear factor.

“A lot of clients still don’t feel comfortable sending their work to India,” says Ghosh.

New clients want six to 12 months to test outsourcing by going through a local office, he says. India’s western outposts will serve as security blankets for jittery new clients.

Source from The Vancouver Sun 2008

European Firms not Confident of Outsourcing to India

Many European firms have found India’s offshore model inadequate for the kind of work they would like to outsource, a report by market research firm Forrester has said.

“Several European firms sent large teams to India during the past six months as a way to test the offshore waters, but we found that these initiatives lacked a solid vision and strategy for the type of work to be sent offshore, Senior Analyst with Forrester Sudin Apte said.

The report ‘Offshoring Strategies for Continental European Firms’ found that Indian providers struggle to build up meaningful local presence.

Their risk-averse approach means that they won’t make even smaller local staff acquisitions unless they see a direct and immediate increase in their European sales books, it said.

The report has also advised Indian offshore providers eyeing continental European business that they must change their risk-averse attitude and invest in building sizable local capability to win deals from European firms.

The report highlights that both Indian as well as European offshore providers have problems helping their European clients go offshore.

Source from: Economictimes.com

Engineering and Architectural Outsourcing at Boom

Domination of India software industry doesn´t need introduction any more. India software development and support services are catering the industry in the best possible manner. And making these more complimentary is the outsourcing process of services and support to India. Big shots gun Like US and UK are outsourcing their work to India. And in the process of outsourcing each and every single work is outsourced and architectural and engineering outsourcing is vital part of this outsourcing process.

Engineering and architectural outsourcing implies producing drawings in India where as the designers are far there in other countries waiting for the drawings produced in India. This is called on-site (design base) where as the production site is called off-shore. As Indian brains are best in the industry countries like US, Europe and Australia are outsourcing engineering and architectural designs and work. They are open to Indian market and this is making our economy more booming and strong.

Successful engineering outsourcing has following points for success:

Great Brains at Minimum Budget: Engineering outsourcing is not an easy job and these engineering designs and work needs lot of input. The ontime delivery and throughput is must for the timely success of the project. Which is very much essential to make any project successful? And keeping in mind the budget and the duration of work involved, Indian market offers best man power with brilliant brains and less costing. Delivering the quality engineering drawings and work at the right time. The main reason for engineering outsourcing to India.

Motivational Factors: Great Indian brains are more motivated showing more productivity for higher rewards and remuneration. As the cost difference between onsite and offshore has great difference. People on offshore production center are highly paid and show more productivity.

Quality and Standard: As engineering outsourcing, engineering works, engineering designs needs great perfection and quality. World knows that India brains are hard to find. And work standards are very competitive and error free. Indians show great level of professionalism, in each and every department of services. Getting the best quality and timely works lure these countries to outsource engineering and architectural work to India.

Pricing: As the pricing of quality work, design and development is very much cheaper in countries like India. Countries like US and Europe get their work delivered at low price.

Brain Drain: As due to bad infrastructure and economy, India suffers brain drain, but due to engineering outsourcing. Indian brains will not be going to leave their country as they will be lured by good salary and prospects by these companies. They will also have all options open to visit the on. Thus attracting the best talent to them these engineering outsourcing firm benefits to maximum.

These points make engineering outsourcing so successful in India. And there are many firms which are offering the best services for engineering outsourcing.
Source from: losangeleschronicle.com

What Differentiates Knowledge Process Outsourcing from BPO

Financial services knowledge process outsourcing (KPO) industry is expected to be worth $5 billion by 2010, a study by KPMG said.

Sharing his views on the report, Pradeep Udhas, Global Partner-in-Charge, Sourcing Advisory, KPMG, has said that the success in offshoring business operations has encouraged many multinationals to start outsourcing key business processes and high-end knowledge work. The KPO phenomenon will have far reaching consequences for the global financial services industry over the next three years.

He feels that there is likely to be a significant shift in the boundaries between ‘outsourceable and ‘non-outsourceable activities; offshoring strategies are expected to embrace new locations and most global banks and insurers are expected to adopt KPO strategies, the study says.

Decisions about outsourcing may be accelerated to preserve and increase competitive advantage; boutique providers will leverage KPO to create new services and offerings and more rigorous regulatory and compliance control will likely be demanded as KPO providers deliver more complex services.

India is expected to remain a preferred location for KPO activity but organisations are expected to look for alternative locations for additional delivery centres, both from customer and service provider perspective.

The study also says that there are a few limitations on the potential growth of the KPO industry over the next three years like skill-set shortage, a declining U.S. dollar and compliance and regulatory pressures.

Some of the key challenges that can emerge in the industry are: maintaining high quality standards, investment in KPO infrastructure, lack of talent pool, requirement of higher level of control, confidentiality and enhanced risk management, it points out.

It says that the KPO industry has indeed come off age. Clients are recognising that process complexities, higher billing rates and skilled resources requirements differentiate KPO from BPO.

Source from: Hindu.com

Outsourcing Wish List

Mumbai, India: At the NASSCOM conference for India’s IT services industry, CIO of Best Buy and CEO if its international operations Robert Willet shared his list of reasons why an organization should outsource and according to him if cost savings are the No.1 reason you feel you should outsource then, you probably should not outsource at all.

His wish list includes –

1. To harness new and better skills and capabilities
2. To implement projects, take on additional, more challenging projects and add skills and capabilities to your forte
3. To reduce risks
4. To leverage specialized, technical skills that your organization may not be able to afford on a full time staff
5. To lower cost

Willet also offered other insights into the IT industry. He believes that projects should be customer centric and not product centric. So the IT team must assess each project from the point of view of whether it is customer centric or not. He says that organizations do not necessarily require retail specialists to improve customer management and relationship.

Willet goes on to say that the one skill that IT companies including his Best Buy need to perfect is the skill to pick up and learn from the ideas and experience of peers, competition and the industry in general. These ideas, advice and experience need to be assessed, learned and put to use.
Source from: Informationweek.com

Architectural Outsourcing – Drawing A New Design

ASK an architect fresher what he or she is earning, and he or she will mumble something about `growth prospects’ and `initial period’, because the field, they say, is a slow starter in terms of salaries. However, today freshers have the option of making close to five figures if they choose to go into offshoring companies.

Architects say that while medium-sized architecture firms pay a starting salary of Rs 5,000-6,000 for fresh architecture graduates and Rs 3,500 for fresh draughtsmen, architecture-outsourcing companies start with a salary of Rs 10,000-12,000 and about Rs 6,000 respectively.

Architectural outsourcing could mean anything from designing an entire building that is going to be erected thousands of miles away with the help of satellite pictures, to receiving a few rough sketches from faraway clients and filling in the details.

Mr Umesh Pujara, ASE Design Soft, an engineering design and draughting services company, said the company’s clients provide it with a few rough sketches, and the company then takes over the entire back office work, from detailing to elevations. “The complete job is done here,” he said.

The driving force, of course, is the cost, about one-tenth of what it would cost in the US, according to Ms Sujitha Arvind, Lead Architect, Exceed International, India, a company that specialises in commercial development. “Also, the number of professionals in the US and Europe have decreased in the last few years,” she added.

Ms Arvind explained that detailing of projects from the US is simple because all the details are standardised. She said that a fresher could be trained in the details over a period of six months. In fact, Exceed prefers to recruit freshers. “We have very few senior people,” she added.

And as an industry it seems to be picking up. ASE Design Soft has seen the number of projects that come in double over the last three years since its inception in 2003, according to Mr Pujara.

The real estate division of Exceed’s Chennai branch started two years ago with four employees, and now has about a hundred draughtsmen, architects, engineers and project managers. “And we can expect to grow to around 1,000 in two years,” said Ms Arvind.

As a result, mainstream architectural companies are being deprived of their share of an already decreasing pool of talent. Mr Pramod Balakrishnan, Senior Architect, Edifice, an architecture and interior design company, said, “Growth in terms of number of employees is not as much as we would like. The volume of work is growing, but there is a real paucity in available talent.” Architects said that the top students passing out of architecture schools opt to study abroad, while it is the bottom half that stays back, which might account for that paucity.

Ms Arvind said that not only is the pay much higher, but also BPOs provide a better work environment. “The facilities at a BPO are at the same standard as a multinational corporation, both in terms of work environment and also software,” she added.

And the smaller companies have been hit the hardest. Mr Yogesh Sharma, Architect/Partner, Design Works, said the attrition rate at his firm is high. “Freshers work for one or two years, and then go either to a bigger firm or to an outsourcing company. We have become like a training centre.”

He said that despite the salary factor, the growth opportunities are not as strong in an architectural BPO, because you cannot build up a significant portfolio working there.

Written by Abhinav Ramnarayan
Source from Thehindubusinessline.com