From:	Baroni Limited [baroni-limited@tiscali.it]
Sent:	24 April 2007 17:55
Subject:	Baroni Limited - Newsletter' - 11/07

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IT Execs Look Beyond India For Possible Offshore Sites.
At Gartner Inc.’s Outsourcing Summit here last week, the consulting firm said wages paid to tech workers in India for application-related services continue to rise.  For instance, in 2004, a U.S. customer might have been billed $22 per hour for a Java programmer in India.  By next year, that same programmer’s services may cost nearly $40 per hour, according to Gartner.
One conference attendee whose company runs its own offshore development facility in India agreed with Gartner’s assessment of the wage increases in India.  'We’re finding that ourselves,' said the attendee, who requested anonymity.  He added that his CIO asked him last year to investigate other countries, and his company is currently looking at China as a possible alternative for offshore IT work.
Most outsourcing customers are insulated from wage increases under their contracts with IT services vendors.  But not all are.  And in general, there seemed to be a willingness among the IT managers at the conference to explore the globe when it comes to offshoring.
For instance, Nashville-based Nissan North America Inc. gets application development services from Satyam Computer Services Ltd.  in Hyderabad, India.  All of that work is done in India now.  But James McClanahan, Nissan’s director of applications, said that if Satyam were to suggest moving some of the development operations to another country, he might not object — as long as the work met the same service standards.
'I don’t believe there is an affinity to any particular location,' McClanahan said.  He added, though, that India has “the critical mass and capability” in terms of skilled workers.
If Gartner’s wage-growth forecast for India becomes a reality, the salary that a Java programmer could command there would still be less than half of what one in the U.S. might earn.  But rising salaries are among the pressures that outsourcing vendors in India must deal with.  Another is a shortage of experienced middle managers, said Gartner analyst Frances Karamouzis.
Peter Nassim, an outsourcing manager at Automatic Data Processing Inc.’s Canadian operation in Etobicoke, Ontario, said that if he was told by his offshore services vendor that he could get a better rate or skill set in a country other than India, he would consider the suggestion.
'It’s the deliverable that matters to me,' Nassim said.  Location would become a bigger issue if ADP needed specific language skills or had concerns about security, but in that case, such factors could be built into a vendor’s requirements, he added.
Lisa Gage, director of corporate strategy and planning at General Motors Corp., said the automaker is focused on getting all of its IT operations, including service providers, to follow standardized processes.  GM’s outsourcing vendors are responsible for deciding where work should be done, she said, and they can’t pass along any wage increases to the automaker 'so labour costs aren’t an issue for GM.  What matters to her, Gage said, 'is the quality of the product.'
Outsourcing vendors at the conference, as well as Gartner, said country-specific locations remain a selling point in some cases.  Wages aren’t necessarily the most important reason for considering certain locations: Time-zone and skill advantages are part of the mix, as are language skills.
For instance, Brazil-based IT services firm Politec Inc. touts its relative closeness to the U.S. from a time-zone perspective as a selling point that distinguishes it from vendors in India.  'That in itself makes a critical difference for certain types of work,' said Eric Olsson, a consultant at Politec.  Vendors in India once received 80% of all offshore IT spending by U.S. companies.  Now they get about 59% of the $26 billion that U.S.  companies pay for offshore services, according to Gartner.
Bipin Thomas, a vice president at Satyam, said that the IT wage increases in India have been mitigated by productivity improvements and increased automation.
But Gartner’s warning about a shortage of experienced project managers in India 'definitely is a real issue,' Thomas said.  To try to offset the shortage, Satyam has created its own leadership school to develop skills it needs.
Published in Computer World by Patrick Thibodeau

Top Stories 
US Cos hint at larger IT spend
A Citigroup Research survey which polled 200 global CIOs to gauge the IT spend outlook for 2007 said CIOs appear bullish on the economy and IT spend for the current year.  'However, the underlying numbers indicate low single-digit growth in IT budgets,' said the survey.  Further, companies will want to get more out of their IT spends.  There will be three clear trends:- reduction of cost through applications offshoring; increased remote infrastructure management and total outsourcing,
Customers admit blame for outsourcing failures
The TPI report, which is based on responses from 40 large firms undertaking outsourcing projects, found that almost a third admitted poor management on their part and unrealistic expectations are largely to blame for failed IT outsourcing deals.
Hawaiian Airlines To Offshore 250 Jobs
In order to cut costs, Hawaiian Airlines is moving much of its reservation call centre abroad -- eliminating as many as 250 Hawaiian jobs.  Beginning April 15, the Hawaiian Airlines reservationists will likely be in the Philippines.  The airline said that it's nothing uncommon.
Prudential Jobs To Offshored
Prudential has said that the work of 2,000 UK staff was under review after it outlined plans for cost savings worth £195M a year.  The group said it was in discussions with outsourcing firms but had yet to make a decision on the future of 3,000 jobs serving its UK business, which are split between the UK and an offshore operation in Mumbai, India.
Fonterra to offshore IT jobs to India?
New Zealand's largest company, dairy group Fonterra, is considering outsourcing its worldwide information services functions to HCL in India.  Fonterra chief information officer Greg James told ZDNet Australia that the HCL outsourcing proposal had reached the due diligence phase but the company was still 'a couple of months away' from making a decision.
UK Southampton council partners with Capita
Southampton City Council has given approval to final negotiations with Capita to become the council’s Strategic Service Partner (SSP).  Capita will work with the council to provide improved services to its customers while reducing costs.  The partnership (SSP) will deliver a range of council services, including Customer Services, IT, Property Services, HR, Payroll, Revenues and Benefits, and Procurement.
Simon & Schuster Selects Cognizant for IT Infrastructure Services
Under the agreement, Cognizant will provide Simon & Schuster with end-to-end information technology infrastructure management services including, helpdesk, network management, server management, application infrastructure support, and desktop support.
BVS Inks Outsourcing Deal with Siemens
The Slovak Bratislava Waterworks Company (BVS) has awarded a four-year, $24M outsourcing deal with Siemens, a German technology company.  Under the terms of the contract, Siemens will establish an integrated control facility for BVS.
Severstal-auto signed outsourcing deal
Severstal-auto has signed a long-term agreement with Compulink for outsourcing its basic IT services.  The services will include all aspects of corporate multiservice network management, Microsoft Active Directory and Microsoft Exchange Server 2003 administration, and user support service rendering.
Bahlsen Awards BPO Contract to TDS
Bahlsen, a Hanover-headquartered cookie manufacturer, has awarded a Business Process Outsourcing (BPO) services contract to TDS, a German IT-services provider.  The duration and financial terms of the deal have not been disclosed.  Under the terms of the BPO contract, TDS will provide a wide range of BPO services including IT and HR to Bahlsen.
Service Provider News 
Consultancy AT Kearney's study shows China, India Seen Dominating Outsourcing
India and China will retain their low-cost labour advantage and dominate the offshore IT and business process outsourcing services market for another 20 years.  The annual Global Services Location List, by management consultancy AT Kearney, says that while wages in offshore locations have started to rise they will remain cheaper than 'onshore' alternatives for the 'foreseeable future' - even taking into account the most aggressive projections of wage inflation in developing economies.
India’s outsourcing success has 50 countries trying a me-too
From Canada to China, Brazil to Bangladesh, there are countries-in-waiting across the globe, vying to replicate India’s success story by using what most of these other nations also have in abundance— manpower resource.  So is it time for India to start worrying?  Not really, says Iyengar.’  There are six specific ingredients that make up an off-shoring success story - a large resource pool of graduates, government support, a strong vendor base, training ecosystem, English language proficiency, and process and quality capability.  None of the 50 countries on our radar have all of these, except for India.'
Small outsourcers squeezed out in India, says Forrester
Small and medium-size outsourcing companies in India are being marginalized as customers look for larger outsourcers with big brands and strong financial results, according to Forrester Research Inc.  Tata Consultancy Services Ltd.  (TCS), Infosys Technologies Ltd. and Wipro Ltd, the top three companies are expected to account for 41% of India's outsourcing export revenue in the Indian fiscal year to March 31.  Three years ago, the same three companies accounted for 26% of outsourcing export revenue.  Small and medium-size companies are better off if they pick a few service lines, and vertical markets, and focus on creating domain expertise, Sudin Apte, Forrester's senior analyst said.
Xansa wins £8M deal from Threshers
Threshers has signed a five-year deal with outsourcing and technology company, Xansa, to support its central IT systems.
Serco secures £26M ICT service contract with South London Southwark Council
The south London authority chose Serco to upgrade and remotely manage its IT infrastructure.  The five-year modernisation plan is expected to lead to £3M in efficiency savings, while the use of energy saving equipment and systems could add another £230,000 in annual savings.
TeleTech Signs Agreement With Leading Financial Services Provider
TeleTech Holdings, Inc., announced that it has signed a multiyear agreement with a leading financial services firm.  The agreement will support business process services for a Fortune 200 financial services provider.  TeleTech associates will provide account management services, primarily supporting the firm's credit card business, to enhance customer retention and loyalty efforts.  Services include an integrated BPO solution encompassing statement inquiries, credit limit increases, address changes, finance charges, payments, billing disputes, merchant and cash authorizations, balance transfers, enhancements, and reward programs.
HP renews Johnson Controls contracts
Hewlett-Packard Co has renewed two IT infrastructure services contracts with automotive systems manufacturer Johnson Controls Inc.  Under a five-year deal, HP will provide infrastructure management and software deployment services to 1,000 locations across 60 countries, and will provide desktop and helpdesk services in the Americas region.  HP will act as a single point of contact for IT staff and end-user queries, with the aim of cutting service-resolution times.
IBM Wins Outsourcing Work From Indian Company
IBM said it had won a 10-year contract from Indian mobile network operator Idea Cellular valued at between $600M and $800M.  IBM will help handle services like billing, revenue assurance, credit collection and subscriber management, and manage the Indian company’s IT infrastructure.
Convergys Tapped for Rosetta Stone Calls
Rosetta Stone, a Virginia-headquartered language learning software provider, has awarded a customer relationship management (CRM) services deal to Convergys, a Cincinnati-headquartered BPO services provider.
TCS Close To $1 Billion Contract from T-Systems
TCS is close to bagging a billion dollar outsourcing contract from T-Systems, a unit of Deutsche Telekom.  This would be the first $1 billion contract coming to an individual Indian IT company.  Industry experts speculate that this barter deal will give TCS a company stake in T-Systems, equivalent to the value of a service contract.
New Costa Rican Global Recruitment Centre Launched by RPOworldwide
The opening of the Costa Rican centre marks the sixth Global Recruitment Centre for RPOworldwide, and increases the company's round-the-clock recruitment coverage in North, Central, and South American time zones.  The new centre is forecast to expand to a staff of more than one hundred in the next twenty-four months.
Atkins acquires Advantage Business Group
Atkins, a UK-based professional, technological consultancy, and support services provider catering to the defence sector, has acquired Advantage Business Group, a UK-based defence and systems consultancy, for about £19.4M in all cash deal.

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