As we enter in 2009, it's time to look into the big happenings that kept made headlines in 2008. In many ways 2008 can be called an unprecedented year, history has seen collapse of corporate giants, but never has so many companies that signified the strength of the financial industry gone bust, and with them throwing the entire world economy in tailspin.
With the economy down, the fate of IT industry could have been better. The financial crisis means IT industry losing out as much as $170 billion in sales in 2009. As meltdown melted IT spending, IT companies went on a belt tightening mode: giving pink slips, extending holidays and cutting perks.
Other than the grim reality of meltdown, the year 2008 also saw several big mergers and launches. Indian telecom industry finally made its 3G leap, with MTNL launching the services in Delhi. On M&A front, the IT services giant EDS merged with HP. Indian IT cos too were no behind in the acquisition space, three big IT companies buying overseas firms to extend their global and product footprint.
Here's bringing to you all the big IT stories of 2008.
3G launch
In December, Indian telecom sector took another technological leap, with the launch of 3G services in the capital city of country, Delhi.
Mahanagar Telephone Nigam Ltd (MTNL) put India on the 3G global map with the launch of third generation (3G) mobile service 'Jaadu' in Delhi.
The 3G services will give mobile users high-quality voice transmission and access to high-end data applications on their mobile phones, including broadband Internet access, interactive gaming and download movies, video clips and music. They can also enjoy other multimedia features such as video conferencing, mobile TV etc.
For example, a user will be able to download a 3-minute song in approximately 15 seconds with 3G. This compares to 8 minutes usually required in existing mobile technologies.
This will help mobile players to offer high-end value-added services like movie downloads, mobileTV, etc to prop up their ARPUs (average realisation per user). Presently, Indian mobile operators generate only 7-10 per cent of their revenue from non-voice services, primarily dominated by SMSes.
As for the pricing, MTNL is yet to release a commercial tariff plan. The company is currently serving corporate clients and will rely on their feedback before the commercial launch.
Tech terror
The gruesome terrorists attacks that rocked several parts of the country brought to the fore the fact that the technology which makes our live simpler has also become a handy tool for terrorists. The use of technology is evident everywhere, right from providing recruiting grounds (social networking sites) to being a communication platform (Internet, mobile and satellite phones) to providing geographical details (digital maps).
The ease and frequency with which terrorists freely communicated using sat-phones, BlackBerrys and used Google maps to pin down locations, deepened the intensity of terror attacks across the country.
The recent Mumbai carnage also saw terrorists using Google Earth maps to establish locations, sat-phones for un-intercepted communication, Global Positioning Systems and VOIP (Voice over Internet Protocol).
Earlier in Feburary, Lashkar-e-Taiba terrorist Fahim Ahmed Ansari, arrested by Uttar Pradesh Police with maps and details of the spots hit during the recent terror attacks, in his statement had conceded that his masters showed him the maps on Google Earth to pin-point the specific targets.
The Google Earth Map gives a bird’s eye view of the city providing detailed topography of the area in the forms of actual photographs. The details provided in the application can be useful for identifying buildings, roads, streets.
Also, unlike the mobile phones that can be easily intercepted by the security agencies to track data, sat-phones are non-interceptable in India. This is primarily because no satellite phone network operator has its centre in India. Also, since these phones are satellite driven and the operator doesn't need any interconnectivity with India's domestic network, the communication cannot be traced.
Microsoft's Yahoo chase
The year 2008 began with the software giant Microsoft proposing a $31 per share buyout to Yahoo. However, the bid was rejected by Yahoo board of directors saying it "substantially undervalues" the company. On its part, Yahoo announced an expensive severance package which made any acquisition attempt more expensive.
In May, Microsoft revised its offer to $33 a share, which was again rejected by Yahoo. This was followed by speculations that Microsoft may go for a forced deal with the company talking tough.
Yahoo reportedly tried exploring alternative deals with News Corp, Google and Time Warner unit AOL. The chief executive Jerry Yang kept waiting for the software giant to offer a better price than $47.5 billion for Yahoo. However, it never happened. Instead, Yahoo's stock started to fell and hit nearly five-year lows. Yahoo's plan 2, an advertising deal with Google too failed, after Google pulled out fearing a court battle with the US Justice Department.
In November, Yang stepped down and Yahoo, in December, overhauled its severance plan apparently hiked to discourage Microsoft's acquisition plans.
Infy loses Axon
Infosys-Axon deal was hailed as the largest outbound acquisition by an Indian IT company. The analysts termed Axon as strategic fit for Infosys.
Then came the rumours that there was competition: a rival UK security firm has quoting a price higher by 7 pence per share to counter Infosys' offer.
But the software giant was confident. MD and CEO, S Gopalakrishnan said that the company can sail through the deal with its transaction advantage of a full cash deal offer.
However, it seems the Indian IT giant underestimated its rivals, tough competition was there, and closer home. In October, HCL Technologies makes a counter offer to Infosys' Axon bid by raising the value by 8.3 per cent to seal the biggest overseas deal by an Indian firm in this space. The deal got shareholder's nod in November.
HCL beats Infy to bag Axon
The deal for the first time saw two leading Indian vendors, HCL and Infosys, used to fighting over deals, battle it out over an overseas acquisition.
Infosys had made a cash offer of 407.1 million pound for buying out Axon. The country's fifth largest software exporter, HCL Tech, raised its counter bid 441 million-pound ($811 million) to clinch the deal.
HCL Technologies recently completed the acquisition and the new entity would pursue deals worth 1.2 billion dollars.
Post-acquisition, HCL Axon is headed by Steve Cardell, the President of Axon. The independent entity have about 4,500 consultants which includes 1,700 people involved in the SAP practice in HCL.
Enterprise Application Services (EAS), the sector in which HCL AXON operates, constitutes 11 per cent of HCLs revenue. Company's Corporate Vice President and Head - Enterprise Application Services Ram Krishna said that HCL-Axon will create a business accounting for 25 per cent of HCLs revenues.
Satyam saga
The year 2008 would have ended for India's fourth largest IT company, Satyam, just like it will for most other IT cos with worries of ongoing economic gloom. However, there's much more on Satyam plate to tackle now.
The company's troubles began on December 16 when Satyam announced acquisition of Maytas Infrastructure for $1.6 billion (Rs 7658-crore). Institutional investors strongly opposed the move. Satyam's ADR lost 50 per cent on NYSE. Faced with shareholders' revolt and heavy criticism over corporate governance issues, in the early hours of December 17 the company withdrew the proposal. But the scrip lost over 30 per cent in India.
What came as the next severe blow to the Hyderabad-based IT provider facing flak from investors on its decision to acquire Maytas' was World Bank banning it for 8 years over bribery and corruption charges. Ramalinga's family loses half a billion dollars in a week as stock crashes.
Then the worst followed. Shocked by Satyam’s admission to BSE that the company’s promoters have pledged their entire shareholding to institutional investors, independent directors Vinod Dham (father of Pentium chips) and Harvard Business School professor Krishna Palepu, immediately resigned from the board. Also, Indian School of Business dean M Rammohan Rao followed suit. Another independent director, academic Managalam Srinivasan had quit earlier.
This leaves Satyam with only five directors on the board, from nine directors earlier.
Wipro buys Citi unit
India's third-ranked outsourcer, Wipro Technologies acquired Citi Technology Services Ltd, India-based captive IT unit of Citigroup Inc, for $127 million in cash and signed a six-year service agreement worth at least $500 million.
As part of the deal, Wipro and Citi will sign a master services agreement for delivery of technology infrastructure services and application development and maintenance (ADM) services for six years. Under this the banking giant will source services worth at least half a billion dollar from the Indian vendor.
Citi Technology Services is based in Mumbai and Chennai and employs around 1,650 staff servicing the bank’s offices in over 32 countries. Apart from its core focus area of technology infrastructure services, the business also specialises on ADM for cards, capital markets and corporate banking.
Citi Technology Services is expected to report revenue of $80 million in 2008, up from $53 million last year. The deal done through Wipro Technologies, the information technology arm of the New York-listed Wipro, is expected to close in March 2009.
TCS buys Citi BPO
In one of the largest deals in the Indian BPO sector, IT major Tata Consultancy Services, clinched a deal to acquire Citigroup Global Services Ltd (CGSL), a large captive BPO of Citibank operating out of India, for $505 million (around Rs 2,425 crore).
In addition to the sale, Citigroup which is shedding its non-core assets worldwide, signed an agreement with TCS to provide, through CGSL, process outsourcing services to Citi and its affiliates for an aggregate amount of $2.5 billion over a period of 9.5 years.
Citigroup Global Services has around 12,000 employees in India and expects revenues of approximately $278m in 2008.
The acquisition broadens TCS’s portfolio of end-to-end IT and BPO services in the global banking and financial services (BFS) sector.
CGSL provides end-to-end process management across the BFS spectrum and a broad array of services to Citi’s consumer, corporate and global wealth management businesses worldwide.
Citigroup Global Services, the India back office unit, began as a business processing arm for Citi India in 1992 and expanded to serve Citi's global operations in 1998, according to its website. The unit operates out of seven facilities across Indian cities and offers back office services to Citi's consumer, corporate and global wealth management entities in 50 countries.
Pink slips scourge back
This year the ugliest face of slowdown, pink slips, came back to haunt Indian IT pros. The year that saw the slowdown hitting major IT players, many companies resorted to pink slips to beat the downturn blues. India's sunshine sector handed pink slips as the heat of global meltdown severely affected revenues and growth opportunities.
Country's largest software exporter, TCS laid off close to 500 employees and put many under performance scrutiny. Wipro too followed with 1000 employees shown door. India's fourth largest IT player, Satyam too laid off 4,500 jobs to cope up with the turbulent times. Mumbai-based Patni Computer Systems too gave pink slips to 400 employees on grounds of non-performance.
Incidentally, all companies termed the job cuts as purely performance-based. However, it came as no surprise that pink slips were a belt tightening measure from IT companies facing sagging bottomlines due to global economic turmoil.
According to the latest news on the layoff front, software giant Microsoft is reported to be planning a 10 per cent cut in its global workforce.
Bill Gates dethroned
This year tech tycoon Bill Gates not only made his exit from the company he founded, but also lost his position as the world's richest man, a title he had held since 1995. Gates' friend and investment mogul Warren Buffett, succeeded him as world's richest man according to Forbes magazine's annual ranking of the world's wealthiest people.
The magazine estimated Buffett's worth at $62 billion, and Gates' fortune not too far behind at $58 billion. But Gates didn't slipped one position down, Carlos Slim, a Mexican telecom tycoon, came in second with an estimated worth of $60 billion.
Riding the surging price of Berkshire Hathaway stock, America's most beloved investor Warren Buffett saw his fortune up $10 billion from a year ago.
The exit of Bill Gates marked an end of era. Gates retired from Microsoft, the company he co-founded with college-friend Paul Allen in 1975. In June, Gates quit as full-time chairman and software architect of the world's largest software company to work full-time at his charitable organisation Bill & Melinda Gates Foundation. Gates will remain the company's non-executive chairman.
Purse tightening begins at Google
Meltdown has left none, not even the world's top tech brand Google remains unscathed. In a cost cutting mode, the Internet search giant Google is cutting its famed `generous perks'.
Google, known for hosting the most extravagant holiday parties and pamperimg its employees with free food and drinks on the house, has gone into a strict cost saving mode.
Company's cost cutting programme include cutting new projects, ratcheting back spending, chipping away at perks and reducing employee strength. The austerity measures came in as Google's revenue growth has slowed down dramatically over the past one year.
Google also scaled back its holiday celebrations this year due to a global economic downturn and an ever-expanding workforce that had grown to 20,000 in October.
Not only this, the Web giant gave employees mobile phones instead of cash gifts this Christmas as it reins in costs during the recession. About 85 per cent Googleites got handset powered by Google’s Android operating system as a holiday gift. Last year, Google handed out $1,000 cash gifts to most employees.
Company's chief executive Eric Schmidt said that Google has adopted such necessary actions in wake of current turbulent times. He added that the company will no more give an engineer 20 people to work with on certain experimental projects.
HP-EDS merger
In the month of May, HP acquired EDS at a price of $25 per share, or an enterprise value of approximately $13.9 billion.
The deal makes HP the second-largest player behind IBM, and is HP's largest acquisition since it acquired Compaq for $20 billion six years ago.
Acquiring EDS advances HP's stated objective of strengthening its services business. The specific service offerings delivered by the combined companies are: IT outsourcing, including data center services, workplace services, networking services and managed security; business process outsourcing, including health claims, financial processing, CRM and HR outsourcing; applications, including development, modernisation and management; consulting and integration; and technology services.
The combination aims to provide extensive experience in offering solutions to customers in the areas of government, healthcare, manufacturing, financial services, energy, transportation, communications, and consumer industries and retail.
However, in the month of September HP announced that it will lay off about 24,600 employees over the next three years in an effort to streamline the company following its US$13.9 billion acquisition of Electronic Data Systems.
Source: Indiatimes Infotech
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