Subject:	Baroni Limited - Offshoring Newsletter 07/2009

Call us to discuss how we can help your organisation, have an independent, impartial and competent assurance on your off-shoring / outsourcing relationship – Don’t rely on Balance Sheets, forecasts and company reports.

Outsourcing market: BFSI bucks trend
Even as the first quarter of 2009 witnessed the global outsourcing market plummeting 7% in terms of transaction volume compared with Q4 2008, the banking and financial services (BSFI) sector picked up to register a 30% growth in transactions, fuelled especially by increased activity in Europe.
According to the latest quarterly 'Market Vista: Q1 2009' report on global outsourcing and offshoring activity by the Everest Research Institute, the same period saw global annual contract value (ACV) plummeting 16% from US$3.55 billion to $2.97 billion.
Meanwhile, BPO activity dropped 15% in transaction volumes. 'Our analysis reveals that aggregate US$ revenues across the Market Vista Index of suppliers continued its decline and dropped by 2.2% in Q1 2009, falling in step with the 2.5% decline in previous quarter. Revenues of offshore-centric suppliers registered a 2.3% decline, while those of traditional global suppliers declined by 2.2%,' Nikhil Rajpal, Principal, Everest Group, elaborated.
It was found that the North American outsourcing market clocked a 15% decrease in transaction volume during the first quarter this year compared to the previous quarter.
Though Europe recorded a fall in transaction volumes, its ACV was higher than Q4, mainly aided by some large deals. With the BFSI segment doing well, it was found Asia continued to dominate offshore delivery. Activity included 20 new announcements in Q1, compared to 22 in each of the previous two quarters.
A trend noted was that there was a preference for tier-II cities with new centres arising in locations such as Iloilo City and Bacolod in Philippines, and Gdansk, Lublin and Poznan in Poland. The study also warned of potential near-term risk issues arising in Mexico, El Salvador, Poland and Thailand.
******************************************************************************************************************
Call on us for independent third party benchmark to assure you that price and service levels remain market competitive and identify specific areas for potential savings.
******************************************************************************************************************
Operating cost of captive IT R&D centres comes down
The slowdown in the global economy, along with the depreciating rupee against the US dollar, have seen a reduction in the operational costs of captive IT R&D centres in India, according to a study.
The cost of running an R&D unit or a product engineering captive in India was down by about 6% in 2008 in absolute dollar terms and it is expected to decline further by another 10-12% in the next 12 months, according to the study ‘Operations Cost Benchmarking for Product Engineering Captives in India.
The report said that owing to the global economic meltdown and strict budgetary constraints, R&D centres in India were mandated by their headquarters to manage costs effectively over the last 12 months. In addition to this, the depreciation of the rupee against all major currencies favoured reduction in cost across MNC R&D centres in India. According to the study, the cost of running an R&D centre in India was in the ratio of $39,000 per full time equivalent (FTE). An FTE is an employee engaged on a regular basis.
This has seen an increase of more than 15% till 2006, but decreased for the first time in the last five years. 'We have found people cost to be the single largest contributor to the entire pie of operations cost and we believe that salary escalation will be in control in the foreseeable future and will only start picking up in the next 2-4 years, 'said Praveen Bhadada , engagement manager.	

 	
 Top Stories	
 	
Global outsourcing market deal volume 7% lower in Q1
Global outsourcing market saw a seven% drop in transaction volumes in the first quarter of 2009 against the preceding quarter, according to Everest Research Institute. The global annual contract value (ACV) dropped 16% to $2.97 billion during the period. According to the latest ‘Market Vista: Q1 2009 report’ on global outsourcing and offshoring activity tracked by Everest, the transaction volumes in the BPO space fell 15%. 'Revenues of offshore-centric suppliers registered a 2.3% decline, while those of traditional global suppliers declined by 2.2%,' Mr Nikhil Rajpal, Principal, Everest Group, said.
Overall IT spend to dip 3.7% in 2009
With several sectors still struggling with the effects of the global financial crisis, expenditure on IT (information technology) is expected to decline 3.7% in 2009. A survey by research firm Gartner says budgets for IT hardware ' including client computing (PCs), servers, storage and printing systems' will bear the brunt of cuts, with spending expected to decline 14.9%. Industry-wise, insurance, media and consumer business services' client computing plans were on track, while companies involved with telecommunications, wholesale and agriculture, mining and construction sectors are most likely to reduce spending.
Restructuring in US industries may benefit IT offshoring companies
'As a result of the restructuring in financial services or automotive industries, they are going to increase their outsourcing and some per centage of that is going to come to places like India,' said Mr John McCarthy, Vice-President and Principal Analyst, Forrester Research. Such deals are potentially going to get finalised next year, and the present year would still see a lot of confusion and uncertainty, he added. The big deals are likely to be broken down and phased over a period of years. Though the healthcare sector has not been negatively affected by the downturn, if the authorities go ahead with the healthcare reforms, it might inject some uncertainty into the system, he said.
Frost: Contact Centre Industry in Asia Pacific to Grow Over the Next Five Years
The contact centre industry in Asia Pacific is expected to grow at a compound annual growth rate (CAGR) of 10.5% by the year 2014. Asia Pacific had been a high growth region for the contact centre industry till the recent economic slowdown. The total number of seats in Asia Pacific for the contact centre industry stood at about 1.7 million seats in 2008. Frost & Sullivan predicts the contact centre industry to cross over 3 million seats by 2014.
US offshores 22,000 green jobs to India
Soaring energy cost and regulatory pressure have put pressure on firms in the US and Europe to embrace green technologies. 'We see the (green job offshoring) trend increasing as the US and the UK outsourcing buyers are seeking lower cost in labour and energy consumption.' says Doug Brown, co-author of the influential 2009 Green Outsourcing Report. Indian firms have passed this test with flying colours as over the last few years they have aggressively invested in appropriate hardware, waste disposal, recycling, eco-friendly buildings and other green technologies.
Obama's tax will not impact BPOs: E&Y
According to the E&Y expert, the captive outsourcing units of Americans will be impacted by the proposal as it would be required to adhere to the regulations of the home country. On the other hand, the domestic Business Process Outsourcing units provide services to companies from different countries, including America, will primarily be governed by Indian laws and may escape the impact of changes in the US tax laws, Ernst & Young Tax Director Rajendra Nayak said.
Channel 4 Outsources HR processes
UK television station Channel 4 has outsourced its human resources administration and payroll process to its IT services supplier of 17 years, Logica, the company revealed this week. The deal involved moving 25 HR processes onto an Oracle application, which went live during April 2009.
Honeywell Opens new Engineering Centre in Bangalore
has set up its second research, development, and engineering facility in Bangalore, India, with an investment of US$50M. According to David Cote, chairman and CEO of Honeywell, the facility will accommodate about 3,000 employees. Honeywell has a strategic focus in the Indian market.
Cathay extends Unisys ties
Cathay Pacific has extended its existing agreement with Unisys Australia for hosted solutions – Unisys’ Passenger Service System and Logistics Management System - through 2012.
Green Cargo expands its collaboration with EDB
The Swedish logistics company Green Cargo AB has signed a new and expanded agreement with EDB Business Partner that covers IT operating services, applications management and consulting services. The agreement represents total contract value of SEK 300M over 5 years. 
SWIFT chooses MindTree as offshore service partner
MindTree will host a new secure SWIFT offshore delivery centre (ODC) here, providing SWIFT with the ability to control development costs and to modulate capabilities at short notice. MindTree and SWIFT staff will jointly design, integrate, develop, enhance and maintain a number of SWIFT's products, according to a statement issued here. 	
 	
 Service Provider News	
 	
Megadeal trends show services tactic switch by IBM
Big outsourcing deals no longer a big focus Gartner analyst group said the number of contracts worth more than $1 billion in announced contract value held steady last year, but that IBM seems to be moving away from targeting these megadeals and toward smaller, more-profitable deals. The number of reported outsourcing megadeals awarded to a single service provider in 2008 was 12, an increase from 10 in 2007. These were valued at $17.1 billion, compared with $12 billion for 2007.
Accenture sets up unit for low-priced contracts
Accenture’s new unit will handle all low-priced projects, especially the ones that are below its benchmark pricing. Accenture normally charges about $27-28 per hour from its premium clients. The new contracts are believed to be about 10% cheaper. The company did not respond to a detailed e-mail sent by ET last Friday.
TCS bags outsourcing deal from Volkswagen
Tata Consultancy Services has bagged a five-year IT outsourcing deal with Volkswagen (VW) Group UK which for the first time will use a mixture of onshore and offshore services for managing its software infrastructure.
Wipro lands Unitech telco's mega IT deal
Wipro Infotech, the India and Middle-East business arm of Wipro, said it has been awarded a nine-year IT outsourcing contract by Unitech Wireless. While the companies did not share any financial details, people familiar with the deal said the contract is worth between Rs 2,500 crore and Rs 2,800 crore.
Logica wins Finnair contract
Logica has won a three-year contract from Finland-based airline Finnair to provide end-user services, workstation environment maintenance and management, and server management. Datamonitor estimates the value of the deal to be approximately $24m.
IBM signs 5-year Services renewal Agreement with Canadian Pacific
IBM will continue to operate the IT infrastructure for the Calgary, Alberta-based railway. This renewal provides Canadian Pacific with cost management, while improving services to customers.
3i Infotech agrees to buy J.P. Morgan Treasury Services
IT solutions firm 3i Infotech today said it has agreed to buy J P Morgan Treasury Services' national retail lockbox business (NRLB) to expand capacity and capabilities of its unit Regulus. 'Virtually all NRLB employees have been offered positions with Regulus, which will process more than 700 million payments annually after the deal,' 3i Infotech said in a statement.
Ness Technologies signs outsourcing contract with Insead
Under terms of the agreement, Ness Technologies will provide IT services to assist Insead in optimizing operational costs and improve overall IT services in order to yield benefits for the school's IT investments. As part of that process, Ness will help Insead standardize technology across its locations in Abu Dhabi, Fontainebleau, New York, Singapore, and Tel Aviv.	

:: To subscribe, unsubscribe write to Baroni-limited@tiscali.it ::
: Glad to have your comments Baroni-limited@tiscali.it ::
Copyright © 2009; Baroni Limited. All rights reserved 
P        Please consider the environment before printing this e-mail

 	Baroni Limited
London
Chennai
Venice	 		 Office: +44 (0)20 8660 6457	

 Fax: +44 (0)871 264 6922	

 Email: Baroni-Limited@tiscali.it	

 Website: www.Baroni-Limited.com	

 		
VAT Number:          814 6408                                 Company Registration Number                    4741496
              Registered Office: 10 – 14 Accommodation Road, Golders Green, London, NW11 8ED
**********************************************************************
This document and any attachments may contain information that is confidential and is intended only for use of the recipient(s) to whom it has been addressed.  
No person, without written confirmation of their contents, should rely on the contents of this eMail. This eMail and the information it contains are supplied in good faith but the Company shall not be under any liability in damages or otherwise for any reliance the recipient may place upon them.

Furthermore, this document is sent for information and/or negotiating purposes only and shall not have the effect of creating a contract between the parties.

If you have received this eMail in error, please notify the sender(s) immediately by telephone. Please destroy and delete the message from your computer. Any form of reproduction, dissemination, copying, disclosure, modification, distribution and/or publication of this eMail is strictly prohibited save unless expressly authorised by  the sender(s).  Thank you for your co-operation.
**********************************************************************