No easy going for IT companies in Europe

For India’s top tech firms seeking to grow revenues from Europe in order to offset lower spend by American clients, it’s going to be Key facts on India's IT industry

a long, arduous journey, said research firm Forrester on Wednesday.

The US, which accounts for over half of India’s $60-billion software outsourcing industry, has traditionally been the top market for Tata Consultancy Services (TCS), Infosys and Wipro, among many others. However, over the past few years, Indian tech firms have been trying to mitigate their high American exposure by focusing on Europe’s $14-billion market for software and back-office services.

“You cannot replicate the US model in other markets. Unlike the US, European customers are not thinking primarily about costs. If Indian companies follow the same model for another 2-3 years, they will struggle,” said Sudin Apte, principal analyst of Forrester Research. Mr Apte, who surveyed around 400 European customers in order to understand their outsourcing priorities, said India’s tech firms will need to go beyond just hiring local workforce for sales and delivery efforts, if they really want to become successful in Europe.

“Offshoring in North America is a standard business decision, however in continental Europe, it’s a religious decision,” said Mr Apte, quoting one of the customers surveyed for his study.

Indeed, for almost a decade, the UK has been the top market for Indian companies with customers such as British Petroleum (BP) and British Telecom (BT) outsourcing projects to TCS, Infosys and Wipro. However, the UK, which outsources around $9 billion worth of projects to India every year, does not reflect the entire Europe.

“The United Kingdom is very similar to the US, unlike continental Europe where language and cultural barriers exist,” added Mr Apte.

Many European customers are more comfortable working with delivery teams in neighbouring countries, instead of signing large offshore contracts. “For example, Romania’s historical ties with Bulgaria, Italy, Greece, and Germany makes it easy to connect with clients in these locations,” Mr Apte added.

However, mature outsourcers such as BT, BP and ABN Amro have had no such bottlenecks, while deciding to work with large Indian offshore services providers such as TCS, Infosys and Wipro.

“For globalised European customers, outsourcing is not a new phenomenon, but for many companies, especially those who are pan-European only, outsourcing and offshoring is not such as hot thing,” he added.

Compared with Forrester’s survey in 2008, the current research shows a drop of more than 20% in the number of companies that were thinking about starting an offshore initiative for the first time. “This means that in the next 12 months, we will see few first-time offshore users sending their work to locations like India,” said Mr Apte.

The Forrester research also found that multinational firms such as IBM and Accenture are better positioned that the Indian IT vendors when it comes to serving customers in continental Europe.

“Accenture has more staff serving continental Europe customers than anybody else - it’s not about pure offshoring anymore,” he said. For instance, Accenture serves more than 300 customers from Germany with a few hundred staffs making use of the managed services model, which allows the company to serve more with less.

Agencies

Will BT take back 2,000 Desi jobs to UK?

BT chief executive Ian Livingston has announced that the company will revert at least 2,000 call centre jobs from India back to Britain.

The company has a significant presence in India where the telecom major has a customer service staff of 11,000 employees.

At the group's annual meeting Livingston was asked by an investor, about the group's planning to close call centres in India. Livingston disclosed the plans to revert jobs in his response to the question.

However, BT said the move had nothing to do with the quality of service offered in India. A BT spokesperson said, “This is not about customer service as the service in our operations around the globe is of very similar standards. It is about the effective deployment of our resources.”

“We have opportunities to bring some activities, carried out by our partners, back from outside the UK to permanent BT employees in the UK who are skilled to do this work,” he said.

CNet.com

Will BT cuts 15,000 more jobs in 2009?

Britain's BT Group cut its dividend and said a further 15,000 jobs would go after a 1.58 billion pound ($2.4 billion) write down and restructuring at its Global Services unit drove it to a fourth quarter loss.

The group, which had for years looked for growth at its Global Services unit which supplies the IT needs of multinational companies, also said it would almost double its pension contributions to 525 million pounds ($794.1 million) a year.

BT, which has twice previously in the past year warned about profits at the Global Services unit, said earnings before interest, tax, depreciation and amortisation and contract and financial review charges were 1.35 billion pounds, down 14 percent.

Profit before tax on an adjusted basis was down 40 percent and on a reported basis showed a 1.28 billion pound loss.

To help meet its increased pension obligations, BT cut its final dividend to 1.1 pence to give a full year dividend of 6.5 pence, which was down 59 percent on last year.

The pension contributions will almost double from the previous 280 million pound annual payment to 525 million pounds a year for the next three financial years.

BT has been engaged in a three-yearly pension review to establish the size of its deficit and what it should contribute to the scheme on an annual basis, based on its asset values and liabilities.

The last review in 2006 put BT's deficit at 3.4 billion pounds and set annual contributions on a 10-year recovery plan at 280 million pounds.

BT said on Thursday the contributions would rise to 525 million pounds but did not reveal the new deficit from the three-year review.

A leading pensions expert said on Wednesday that BT's pension deficit now stood at 11 billion pounds

BT said its triennial pension funding valuation was at an advanced state of completion. It did give its pension position at March 31 on an IAS 19 accounting basis as a deficit of 2.9 billion pounds net of tax, compared with a surplus of 2 billion pounds last year.

"Three out of four of BT's lines of business have performed well in spite of fierce competition and the global economic downturn," Chief Executive Ian Livingston said.

"However this achievement has been overshadowed by the unacceptable performance of BT Global Services and the resulting charges we have taken."

Agencies

BT likely to layoff another 10,000 jobs

British Telecom (BT) is preparing to axe another 10,000 jobs. The huge redundancy programme will be announced next month alongside a horrendous set of year-end figures that will include provisions of about £1.5 billion.

The results will mark one of the lowest points in BT’s history since it was privatized in 1984. The share price has crashed to 81 pence, valuing the telecom company at £6.3 billion. It will also seriously damage the legacy of Ben Verwaayen, BT’s former chief executive, who left eight months ago and has since become chief executive at Alcatel-Lucent .

The dividend is likely to be cut by up to 60%, while profits will be further dented by a big contribution to address a pension deficit that will exceed £8 billion. The redundancies, which result from an improvement in BT’s efficiency, are in addition to the 10,000 job cuts made last year and will be spread around BT’s 160,000 workforce. There is no guarantee that this will mark the end of job losses. Some analysts believe next month’s figure could be higher than 12,000.

Agencies

Sustainable development index for India

BT announced that the launch of its “Sustainable Development Index – an assessment of business performance in India”. The SD index has been developed in partnership with GlobeScan, an independent public opinion and stakeholder research company. Through a survey of senior opinion leaders across India the index is a means to measure the performance of business in India in the progression towards sustainable development over time.

The initiative was officially launched by Dr. R. K. Pachauri, Director General, TERI and Allen Ma, President, BT Asia Pacific at a news conference in New Delhi, India.

The SD index report reveals that although Indian companies are taking positive steps towards sustainable development, the overall performance of the corporate sector is disappointing. 46 per cent of India's opinion leaders surveyed blame a lack of awareness around sustainable development issues as the main cause of inaction. Some 40 per cent of opinion leaders also cited a lack of political will as a major obstacle to making significant progress in this area.

According to the report, this lack of action means India lags behind China, Japan and the European Union when it comes to addressing key issues, such as tackling climate change, corporate governance practices and water resource management.

Interestingly, the country's largest cities were seen as making the strongest moves to improve sustainable development practices. Whilst there are negative views around India's progress, a majority of opinion leaders (57 per cent) feel that companies in India are now more active with regard to sustainable development compared to one year ago.

In fact, the corporate sector is considered to have made significantly stronger progress than either government or the general public. Allen Ma, President, BT Asia Pacific said: “At BT, we absolutely view sustainability as an international issue and businesses cannot succeed in societies that fail. India is rapidly becoming a global centre for information and communications technology development, and boasts a high economic growth rate. It is vital that this commercial success is matched by a commitment to, and leadership in, corporate responsibility. We are constantly looking at the impact of our core business activities across the spectrum of social, environmental and economic issues. Through the launch of the BT Sustainable Development Index we hope that other organisations in India will do the same.”

The most frequently mentioned corporate leaders in sustainable development in India are: TATA Group (named by 31 per cent of respondents), Reliance (13 per cent) and Infosys (10 per cent).

Nitin Desai, Former United Nations Under-Secretary-General for Economic and Social Affairs and Advisor to BT’s SD Index, said: “There are significant social, environmental and economic challenges facing the world’s second most populous country and India’s transition to sustainable development is in the world’s interest. Given the importance of the issues at stake, there is a clear need for initiatives such as BT’s to help channel corporate sustainability efforts to where they can have the most beneficial impact. We need to be able to carefully monitor where corporate successes are occurring and to learn from them. We also need to reliably know which aspects of sustainable development most urgently require corporate action"