From:	Baroni Limited [Baroni-Limited@tiscali.it]
Sent:	27 January 2008 19:12
Subject:	Baroni Limited -Offshoring Newsletter' - 01/08

Sensitivity:	Confidential

Review of Year 2007: What Next in 2008 ?.
2007 has been a dynamic year in the information technology outsourcing industry. India remained the destination of choice' for IT service delivery, in terms of the market, maturity of vendors in the market, the cost, the quality and the experience.

The Indian rupee rose to record levels (more than 11% in value against the U.S. dollar in 2007) while the U.S. dollar declined against most major currencies, impacting global IT service providers and clients alike. Infosys reported a currency impact of 2.8 percent on Q3 profitability; Wipro contemplated six-day workweeks, and EDS and Mphasis considered billing clients in rupees.  Experts expect the rupee to continue its rise in 2008, and shall keep global IT service providers and clients on edge. If the currency gap widens, Indian outsourcing providers & multinationals firms with big presence in India will start indexing their prices to local salaries, promoting other offshore locations like China and Latin America, delay hiring of new staff, and building currency hedges into contracts.  The rupee appreciation is far quicker against the dollar than against the pound or the euro, so in 2008, Indian offshore IT service providers will look aggressively in Europe to source business.

In 2007, Mega-deal segment with $1-billion in total value or $200 million annual contract value, are dropping in both number and size. As client relationships with service providers are maturing, mega-deals are expected to diminish in 2008 except few exceptions.  It is likely that in 2008, outsourcing industry leadership will move from a small group of U.S.-based service companies who have dominated the industry since its inception, including IBM, EDS, CSC and Accenture, to include foreign companies that are growing, such as TCS, Infosys and Wipro. Recently, Indian Provider, Tata Consultancy Services announced a $1.2 billion IT service deal with The Nielsen Company, technically the biggest offshore contract to date, hinting at the increasing maturation.

The change in the market landscape has proven some of the original reasons to setup wholly owned subsidiaries (captives) in low cost locations less relevant today. Setting up captives in low-cost countries like India is expected to slow down in 2008, except the captives are established for high-end work like R&D or engineering services. Other sourcing models like Build -Operate-Transfer (BOT) will also fade away from the market due to the mounting challenges after transfer phase at the client-side.

During 2007, merger and acquisition activity among service providers went into high gear. IBM has been buying up companies for years: more than 40 software and services companies since 2000. Computer Sciences Corp. announced a few weeks ago that it would buy First Consulting for $365 million. Last spring, EDS paid $380 million to acquire a 52% stake in Bangalore-based IT and business process outsourcer Mphasis. The consolidation activity was most notable for the inroads Indian providers made into the U.S. market by buying local providers. In 2008, Offshore IT and BPO service providers will continue to acquire firms in Europe and US for niche skills, business domain and delivery capabilities, and also for the client pool.

Clients would keep a close watch for other symptoms of currency stress, and also look beyond India to balance their offshore outsourcing portfolio. From Canada to China, Brazil to Bangladesh, countries are-in-waiting across the globe, announcing various incentives vying to replicate India's success story by using what most of these other nations also have in abundance- manpower resource.

Attracting, developing and retaining talented employees will become a major challenge for both service providers and businesses building their internal capabilities. The global talent wars will further widen the economic gap between the cost of talent management and expected cost baseline. In the old days, Indian outsourcing providers, did not want automated tools because they wanted to charge for more bodies, but today they don't have the bodies or if they do, they are getting too expensive, so they are adopting even more efficient processes, creating their own automation tools and even buying them from third party vendors.

According to the predictions IT outsourcing analysts are making, the headline for 2008 in the IT service market could be 'the more things change, the more they stay the same.' Experts expect the offshore outsourcing market will continue to develop, in India and beyond.
Gartner believes that the outsourcing market has reached a tipping point with regard to utility delivery models, and that change and innovation will take hold and accelerate in this area through 2008 and beyond. More providers are developing utility-based offerings across infrastructure, application and business process domains. The trend toward software-as-a-service (SaaS) is gaining the most traction, with major software vendors, such as Microsoft and SAP, and large Internet players, such as Google and Amazon, making announcements about new SaaS offerings and mass-customized software platforms. User organizations need to realize that the utility delivery model is a viable alternative to traditional outsourcing, and they should seriously consider utilities in their sourcing strategies.

Thus, 2008 is going to be yet another fascinating year for Offshore Outsourcing and our News letter for the fifth Year would highlight, the latest happenings, who breaks ahead of the pack, who stumbles, who fall's, and how it all pans out.

We look forward for your continued patronage and would be glad to hear your views, to improve the content and quality of the Newsletter.
Editorial Team – Baroni Limited and partner, PR Offshoring Newsletter	

 	
 Top Stories	
 	
HRO Supplier Segmentation Means Fewer Choices for Buyers, says Everest Research Institute
Outsourcing of human resources functions (HRO) is expected to top $2.85bn by the end of this year and regain momentum in 2008, according to Everest Research Institute, part of the Everest Group. At the same time, companies will have fewer choices in human resources outsourcing (HRO) suppliers due to clear segmentation in the HRO supplier marketplace. Everest Research ranks Hewitt as the HRO market share leader in North America. Accenture leads in Europe.
Billion dollar IT outsourcing deals to decline in '08
According to Everest Research Institute, fewer IT outsourcing (ITO) mega deals will occur in 2008. A decline in the number and size of mega deals, defined as contracts of $1 billion or more in total contract value, will instead result in a focus on existing mega deal renewals and an increase in price competition by suppliers, according to a study by the institute. 
Shell Strikes Massive IT Outsourcing Deal
According to published reports, Shell executives decided to slash thousands of IT positions in favour of outsourcing as part of a massive restructuring designed to reduce operating costs by $850 million annually. Reports indicate that leading candidates for all or part of the outsourcing deal include EDS, AT&T, Deutsche Telekom's T-Systems.
Barclays plans captive unit in India
UK-based Barclays Bank plans to set up a captive unit in India. The bank’s third-party BPO partner Intelenet is setting up a 1,000 people BPO centre for the bank in Noida. Barclays, however, will still continue outsourcing to Intelenet, which currently does work for Barclays’ processes from its Mumbai centre, according to industry sources. The Noida-based BPO unit is being built on a Build-Operate-Transfer (BOT) basis. The BPO unit will be transferred to Barclays in a few months time, though the timeline is not yet clear.
Top Dutch telecoms giant outsources HR to LogicaCMG
Leading Dutch telecoms provider KPN has signed a £29.7m deal with outsourcing company LogicaCMG. LogicaCMG will run the call centre and the supporting HR information systems as well as the personnel and payroll administration for 17,000 employees. Sixty HR experts from KPN's service centre joined LogicaCMG on 1 January as part of the deal.
People's Federal Savings Bank Selects Open Solutions' Enterprise-Wide Relational Data Processing Platform
People's Federal Savings Bank announced it has selected Open Solutions Inc.'s the Complete Banking Solution, a relational core data processing platform, to address its enterprise-wide data processing needs.  People's Federal Savings Bank manages assets worth USD 490 million and has 15 branch locations. The entire solution will be operated in-house by the bank. In addition, the bank will use the technology to meet the requirements of its merger initiative which will take place in May 2008.
ITeS market set to cross INR 1 trn in 2008: IDC
According to a study conducted by IDC, the Indian IT and IT-enabled services (ITeS) market is expected to reach INR 1.1 trillion (USD 27.9 billion) in 2008, witnessing an increase of 24 percent over 2007. The growth in IT and outsourcing services market in the country will be driven by increased demand for sophisticated enterprise and consumer services in the market. In addition, an increased adoption of software-as-a-service (SaaS) by small and medium businesses (SMBs) and service-oriented architecture (SOA) is also expected to contribute to the growth of the country’s IT services market in 2008.	
 	
 Service Provider News	
 	
India Inc loses $5.7bn on US bourses
A total of 16 Indian companies listed in the US, which includes IT giants like Infosys, Wipro and Satyam, have lost close to six billion dollars in the first week of trade here on the New York Stock Exchange and Nasdaq. In the first four days of trading, the total market capitalisation of all the Indian companies on domestic bourses rose by Rs 2,66,706 crore ($67bn) to a record high of Rs 74,36,689 crore (close to $1.9 trillion). However, the Indian companies have seen their market value on the US bourses plummeting to 131.8 billion dollars, from 137.5 billion dollars at the end of 2007.
Innodata Isogen Contracts To Support Technical Documentation Systems For Alcatel-Lucent Technologies
Under the terms of the agreement, Innodata Isogen will support applications maintenance and online technical services for Alcatel-Lucent's desktop and XML publishing platforms, content management systems and delivery and deployment platforms.
CapGemini to lift India headcount to 40,000 by 2010
CapGemini, Europe's biggest computer consultancy, plans to increase its headcount in India to 25,000 by end-2008 and to 40,000 by 2010, a senior official from its Indian operations 'We continue to remain bullish on the growth that we are seeing in India,' Salil Parekh, executive chairman at CapGemini India, told a news agency in an interview at the World Economic Forum summit in New Delhi.
Ness Technologies Wins $6 Million Advanced Geographical Data Management Deal for Prague
Ness announced that it was engaged by the Spatial Information Division of Prague Municipality to implement the Digital Map of Prague (DMP) project, worth $6 million. The project includes building a digital map of the Prague area to be used as the reference source for the division's geographical information systems, and flexible, operational digital map management to facilitate ongoing enhancement of quality and content. DMP will simplify planning queries, supporting various authorities, and will benefit the Czech capital's citizens.
Mastek to raise $40M for buyouts abroad
Offshore outsourcing company and IT giant Mastek is raising $40 million in order to acquire companies with intellectual property rights in the insurance and healthcare space. “With the acquisitions, we would look at a few strong customers. So if we add about ten strong customers in the US and the UK, it should be beneficial,” Ram added.
Wipro opens BPO centre in the Philippines
IT major selects Cebu for its first Philippine facility, citing availability of highly skilled local talent. Wipro plans to hire more than 900 employees for its 45,000 square-foot Cebu facility, which will handle customer-focused support processes starting the 2nd of January, 2008. The company is also looking at establishing additional centres in other fast-growing cities in the Philippines.
WNS to set up delivery centre in Navi Mumbai
PO service provider WNS on Thursday said it would establish a delivery centre in an approved Special Economic Zone in Navi Mumbai. Earlier this year, WNS established a centre in a Gurgaon SEZ.	

 :: To subscribe, unsubscribe write to Baroni-limited@tiscali.it ::
: Glad to have your comments Baroni-limited@tiscali.it ::
Copyright © 2005; Baroni Limited. All rights reserved 

Office: +44 (0)20 8660 6457
Fax: +44 (0)20 8645 9297
Email: baroni-limited@tiscali.it
  Website: Baroni-Limited.com

Baroni Limited
68 Penwortham Road
Sanderstead, Surrey CR2 0QS

 

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.
**********************************************************************