From:	Baroni Limited [Baroni-Limited@tiscali.it]
Sent:	12 February 2008 10:15
Subject:	Baroni Limited - Offshoring Newsletter' - 02/08

Sensitivity:	Confidential

Indian IT services market to grow to $10 billion by 2011: Gartner
Indian IT services market is pegged to grow to $10.73 billion by 2011 at a five-year compounded annual growth rate (CAGR) of 23.2%, according to Gartner, Inc.  Key factors driving growth are agility, growth, cost takeout and innovation. But a factor which is acting as a prime impetus for companies to consider external service providers (ESPs) is the continuous turnover rates of key IT staff in the range of 15 to 20%.  ''Growth of the IT services market is primarily being driven by economic growth, high growth among the small and midsize businesses (SMBs), government projects and increased customer focus,'' said Arup Roy, senior research analyst, Gartner. ''Many IT service providers, multinational companies (MNCs) and domestic have now recognised this potential and developed strategies exclusively for the domestic market. Many IT organisations are planning to spin off their IT organisation into an independent entity to capture the growing opportunities,'' added Roy.

The market segments that are expected to witness the strongest growth are consulting, IT management and business process management (BPM) services with five year CAGRs of 28.1, 23.8 and 27.1%, respectively. Consulting revenue, although coming from a small base, grew 30.1 percent to $340 million in 2006 compared with 2005.

As companies mature in their overall approach towards IT, it becomes more complex and sophisticated; they invariably have to rely on external providers to help them with consulting services. IT management revenue grew 27.3% from 2005 to $549 million in 2006. Increased adoption of remote infrastructure management services has driven the development of network operation centres / security operation centres, remote management centres and other managed service offerings from ESPs.

BPM in India is a high growth area that is moving beyond traditional customer relationship management (CRM) services. The primary challenges that are driving organisations to engage business process outsourcing (BPO) are cost, growth and business innovation. The primary objectives of BPO engagements are productivity improvements, process/business transformation, and cost-containment to improve profits.

India: IT Services Market Forecast by Segment, 2006-2011 (Millions of Dollars)
-----------------------------------------------------------------------2007--------2011--------CAGR (%) 2006 - 2011-
Hardware Maintenance and Support--------------------868--------1724--------.20.7
Software Support----------------------------------------------774--------1771----------24.8
Consulting---------------------------------------------------------474--------1174---------28.1
Development and Integration----------------------------1765--------3516--------.21.1
IT Management--------------------------------------------------743--------1598---------23.8
Process Management-----------------------------------------406---------948---------27.1
Total----------------------------------------------------------------5031------10729---------23.2
---------------------------------------------------------------------------------------Source: Gartner (December 2007)

Both global and Indian vendors have leveraged these growth areas and the top three vendors, IBM, Tata Consultancy Services (TCS) and Wipro Infotech, together accounted for 26.1% of IT services vendor market share in 2006.

In 2006, IBM surpassed TCS to become the top vendor, taking 11.2% market share. TCS and Wipro occupy the second and third positions with 10.9 and 4.1% market shares, respectively. However, the Indian IT services market is still fragmented, with the majority of the market being serviced by smaller local players that account for close to 40% of the IT services market.  Commenting on the vendor landscape, Roy said, ''As the market matures, competition will intensify and then lead to consolidation. Vendors that are unable to find a niche for themselves, or smaller vendors with no real differentiators, will be acquired by larger, more-aggressive competitors. End user IT organisations or captive unit spin-offs will have a difficult time in competing with well-established providers unless they also find their own niche.''	

 	
 Top Stories	
 	
Survey : Vast Majority Of U.S. Companies Don't Offshore IT Work
A recent phone survey of 1,400 CIOs conducted by staffing firm Robert Half Technology found that only 5% of CIOs said their companies have offshored technology jobs, while 94% said they companies have not. One percent wasn't sure.
Asia Pacific leads outsourcing market with major growth
Outsourcing growth in the Asia Pacific region was double the global average in 2007, according to the latest TPI Index. Although the number of contracts signed in 2007 grew by just four percent, their total contract value increased 30 percent year over year from US$9.9 billion to US$12.8 billion and annualized revenues showed a 13 percent increase, nearly double that of the global average. The average value of outsourcing contracts in Asia Pacific increased by 25 percent from US$141 million to US$176 million, due largely to increased mega relationship activity in the region, especially in the last quarter of 2007.
Legal outsourcing to India a reality: NYLJ
According to the report, the positive feedback given by the companies having outsourced their work in the past is leading to many other firms getting receptive to the idea, which includes some of the 10 largest law companies in the Fortune 500 list. 'LPO salaries for Indian lawyers are generally well below 10,000 USD a year. By comparison, a US contract lawyer usually earns around 30 USD an hour while associate base salaries at major firms in New York start at 160,000 USD a year,' said the New York Law Journal (NYLJ) in its January edition.
DPWN to outsource global IT functions to HP
Deutsche Post World Net, a German postal, logistics, and courier company, has agreed to outsource part of IT operations to HP, a US-based IT company, for a seven-year period. The final agreement is expected to be signed by mid-2008. Through the contract, Deutsche Post aims to save approximately USD 1.47 billion over the next 7 years by reducing IT costs and using IT resources efficiently.
Westpac to Offshore Jobs to India
Westpac, an Australian bank, is offshoring 10 HR jobs in Sydney (Australia) to Genpact, an Indian BPO services provider, to reduce costs. The bank believes that offshore companies operate efficiently.
Sony Pictures and TCS sign SOA agreement
Tata Consulting Services (TCS), an Indian IT service provider, has been selected by Sony Pictures Entertainment to develop and implement Service-Oriented Architecture (SOA) that will assist Sony and its clients to utilize IT assets in an improved manner. SOA solutions will be based on technologies from Sony Pictures, TCS, and BEA Systems to assist enterprise organizations in aligning business functions for greater flexibility and efficiency.
Experian Awards IT Contract to Perot Systems
Experian, an Irish information services provider, has awarded an IT services agreement to Perot Systems, Bangalore, for supporting, maintaining, and developing the company’s legacy applications. Perot will deliver support services, such as applications development, legacy systems, applications maintenance and support, and testing services for the Information Solutions Design and Delivery (ISDD) applications portfolio of Experian.	
 	
 Service Provider News	
 	
LogicaCMG creates new outsourcing division
LogicaCMG is creating a new outsourcing services division to help boost that share of the firm's business and bring services closer to customers. LogicaCMG said European customers are increasingly demanding a global delivery model. It said the new division will take end-to-end responsibility for outsourcing services, ensuring that customers have access to the most efficient and cost effective blend of onshore, nearshore and offshore support.
Ness Technologies Wins $7M Contract With Israel's Ministry of Construction and Housing
Within the context of the project, the ministry's old system, based on a mainframe platform, will be replaced. The new system will enable multiple online operations to be performed vis-a-vis housing companies and banks. In addition, the system will enable the public to perform various actions, from checking eligibility for housing assistance to checking on the progress of a query made to the ministry, as part of the e-government process.
Cognizant, Infosys eye IT deal from Wal-Mart
Infosys reportedly has been engaged by Wal-Mart to define the business and technology strategy for its global e-commerce business. According to sources, Wal-Mart is likely to place an outsourcing order in the range of a billion dollar plus and this may have India based players like Infosys and Cognizant in the fray.
Wipro Infotech bags $100M Arabian Airlines contract
The company has won a five-year, $100-million contract from Saudi Arabian Airlines, its first large deal from the Middle-East. As part of its privatisation programme, Saudi Arabian Airlines has undertaken an extensive business transformation exercise, which includes overhauling the central IT applications. The next-generation IT infrastructure transformation contract has been given to Wipro Arabia, a joint venture between Wipro and Dar Al Riyadh Group that provides IT solutions & services in Saudi Arabia.
EDS wins contract with Port of Melbourne
EDS, a US-based IT and BPO services provider, has been selected by the Victorian Department of Infrastructure to carry out a one-year pilot to test new technology, which has been developed to enhance the speed of cargo transfer at the Port of Melbourne. The move is in line with the department’s plans to improve the efficiency of cargo transfer.
T-Systems, Frequentis Sign 5-Yr Outsourcing Contract
T-Systems have been selected as the outsourcing partner by Frequentis for the basic operations of the European air traffic control database, European Aeronautical Information Services Database (EAD). The financial terms of the contract were not disclosed. Services will be provided through T-Systems’ data centre, T-Center, in Austria. T-Systems will be responsible for providing IT infrastructure and core services such as helpdesk for EAD. The ICT service provider will assist in enhancing the security and seamless processing of air traffic across Europe and Canada.
TCS to set up subsidiary in Moscow by March 2008
Tata Consultancy Services will set shop in Moscow by March with an eye on lucrative markets in Russia and CIS members. According to leading business and political daily Kommersant , TCS subsidiary in Moscow will sell the company's products and services here and other CIS countries.
ACS Establishes IT Centre in Mexico
Affiliated Computer Services (ACS), a US-based IT and BPO services provider, announced the establishment of its office and IT centre in Apodaca, Mexico. The company has a headcount of 280 in the centre. The move is in line with the company’s plans to enhance its global outsourcing abilities.
eTelecare to set up unit in UK for its client
Philippines-based contact centre services provider, eTelecare Global Solutions, has announced plans to establish its subsidiary in the UK - to manage the operations of its client, Virgin Media	

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