Satyam Computer Services is on a 'losing spree', having so far lost outsourcing contracts from large customers to rivals such as IBM Corp., TCS, Infosys Technologies and Wipro Ltd. Now, a US property and casualty insurer is seeking to replace its outsourcing contract with Satyam.
US based Selective Insurance Co., which has reportedly outsourced about a quarter of its IT staffing requirements to Satyam, is said to be looking for alternate arrangement in light of Satyam latest woes.
In papers filed with the Securities and Exchange Commission (SEC) last month, Selective is quoted to have said: "We believe we would be able to manage an efficient transition to a new vendor and not experience a significant negative impact to our operations in the event that we no longer retain Satyam in their current capacity due to the financial issues they are currently experiencing."
Satyam chairman Ramalinga Raju on January 7 admitted falsifying the company's cash position by as much as $1 billion while overstating quarterly earnings and revenue by up to 28%. Sources indicate that Satyam may also have faked employee numbers and other data.
Since then increasingly nervous Satyam customers are looking for alternatives in case the scandal-scarred outsourcer is unable to restore internal stability or find a buyer with pockets deep enough to see the Indian company through its current crisis.
Many customers have either completely exited, or are in the process of moving their outsourcing contracts from Satyam to rival tech firms such as IBM, TCS, Wipro, Infosys and Accenture.
Some of the customers, including Telstra, Emerson, Nissan, State Farm Insurance, Applied Materials, Kansas State Bank, and Sony, have either moved out their projects completely, or are in the process of migrating current Satyam work to other outsourcing vendors.
iGATE, which was keenly bidding for the 51% stake of Satyam, has now pulled out from the bidding process mainly due to the loss of Satyam customers. Phaneesh Murthy, CEO of iGATE Corp, said, "We know that there are customer exits happening at Satyam. While the value erosion and the extent of liabilities were a concern, it was the totality of concerns that influenced our decision."
However, some large Indian players like BK Modi's Spice Telecom, Tech Mahindra, and L&T are among the companies to move to the second stage of bidding for the fraud-ridden IT outsourcer.
CXOtoday
Showing posts with label contracts. Show all posts
Showing posts with label contracts. Show all posts
Tuesday, March 24, 2009
Saturday, March 7, 2009
Have small IT firms outwit the big IT giants?
It is not a secret that are at the lower rung of the competition hierarchy in the European technology market. Indian firms still have a long way to go before they get lucrative contracts from that market. But, they seem to be gradually creeping into European market, with smaller firms taking a clear competitive edge than IT biggies like Infosys and TCS, reports CXO today.
"I find that the big Indian companies are too pragmatic. Not able to take my requests simply...CMM Level 5 etc is of no use to me... all I want is my requirement to be fulfilled," Paul Schewefer, Senior Vice President and Chief Information Officer, Continental AG.
It seems that a market like Europe demands a highly aggressive planning and quick implementation of strategies if one wants to make the cut. For small companies with lesser number of people, it is comparatively easier to implement changes without having to go through various processes, making it fast. And many small companies in this market have built capabilities in niche areas unlike some giants.
Moreover, Hannover, Germany, based Continental Group's technology expenditure for this year could be up to $500 million. And a lot of that could go to the smaller companies. "Partnering with smaller Indian firms helps them to invest in manpower and technologies, and that helps us as well," said Schewefer.
For the smaller firms, they are looking at the European market via the partnership model. For instance, Aakit Technologies has just sold 26 percent to Germany-based Aequitas Group. "The deal deepens our access to Europe, and also gives our German partner India capabilities," said Tayeb Barodawla, MD, Aakit Technologies.
Earlier, there were reports that Indian IT firms needed long-term deals if they are to make any gain in Europe. It is true that many Indian IT majors are still finding a major share of their revenue from European market through project services, while most of the MNCs drawing revenue from long-term outsourcing contracts.
IT analysts are still of the opinion that top Indian IT companies like TCS, Infosys and Wipro will have to shift focus on long-term outsourcing in order to make significant gains in the European market. These three companies derive around 25 percent of their revenue from European market.
Agencies
"I find that the big Indian companies are too pragmatic. Not able to take my requests simply...CMM Level 5 etc is of no use to me... all I want is my requirement to be fulfilled," Paul Schewefer, Senior Vice President and Chief Information Officer, Continental AG.
It seems that a market like Europe demands a highly aggressive planning and quick implementation of strategies if one wants to make the cut. For small companies with lesser number of people, it is comparatively easier to implement changes without having to go through various processes, making it fast. And many small companies in this market have built capabilities in niche areas unlike some giants.
Moreover, Hannover, Germany, based Continental Group's technology expenditure for this year could be up to $500 million. And a lot of that could go to the smaller companies. "Partnering with smaller Indian firms helps them to invest in manpower and technologies, and that helps us as well," said Schewefer.
For the smaller firms, they are looking at the European market via the partnership model. For instance, Aakit Technologies has just sold 26 percent to Germany-based Aequitas Group. "The deal deepens our access to Europe, and also gives our German partner India capabilities," said Tayeb Barodawla, MD, Aakit Technologies.
Earlier, there were reports that Indian IT firms needed long-term deals if they are to make any gain in Europe. It is true that many Indian IT majors are still finding a major share of their revenue from European market through project services, while most of the MNCs drawing revenue from long-term outsourcing contracts.
IT analysts are still of the opinion that top Indian IT companies like TCS, Infosys and Wipro will have to shift focus on long-term outsourcing in order to make significant gains in the European market. These three companies derive around 25 percent of their revenue from European market.
Agencies
Tuesday, December 2, 2008
Global recession; Wipro customers cancel contracts!
Indian IT outsourcing company Wipro is seeing a few customers cancel contracts and more delaying or downsizing deals as a result of deteriorating global economic conditions, its joint chief executive said.
Girish Paranjpe added that Wipro, India's third-biggest software services exporter, was feeling minimal impact from last week's attacks that killed almost 200 people in Mumbai, and reiterated that the company expects business to improve next year.
Referring to the Mumbai attacks, he told Reuters in an interview on Monday, "I don't see any operational impact of that ..."
When asked about cancellations by Wipro's customers -- who include Cicso, Credit Suisse and Nortel -- he said: "Some few, but much more delay, postponement, resizing -- a few cancellations."
Paranjpe said he remained hopeful that business would pick up in the company's first quarter beginning in April next year after a slowing that began about a quarter ago. Customers cannot sustain constrained spending indefinitely, he said.
"About six months you can manage with compression, three to six months you can manage with compression. Beyond that, you have to start thinking longer-term," he said.
"I'm still kind of optimistic that we would have gone past the bottom some time in the first fiscal quarter" next year, he added.
Sector leader Tata Consultancy Services and fellow large Indian outsourcer Infosys have recently expressed cautious optimism about the market, but like most peers they face at least short-term uncertainty.
Wipro makes about half its revenue in the Americas, and about a quarter globally from the financial services sector -- a fairly typical business split among Indian outsourcers, whose large English-speaking workforces gave them an early advantage.
Asked how tough price negotiations were becoming, Paranjpe said Wipro was trying to help customers cut costs in other ways than lowering prices. "There is a discussion about how we can alleviate the pain that they are going through. Our discussion has been about how we can help them with cost, rather than focused on price."
"That's what clients ultimately care about: Given the downturn, how much has my budget gone down and to what extent can you contribute to help me bridge the gap?" he said.
Paranjpe argued that big players like Wipro stood to gain market share as customers looked for reliable partners. "You want fewer people you can bet on, who are going to survive the downturn as well. So there is an almost automatic flight to size and quality," he said.
Although consolidation in the financial sector would undoubtedly make for a tougher market, Paranjpe said it would also bring opportunities in the medium term as customers would have to integrate and streamline their operations.
It would also bring chances to make acquisitions as valuations dropped -- possibly large ones, after last year's $600 million buy of Infocrossing -- and to make selective hires of personnel who might have been unaffordable in better times.
"I think we have gone past the small-budget acquisitions, which is not to say that we will never do a small one, but which is also to say that big dollar signs don't scare us," he said.
"We would like all the acquisitions to be made outside India so we can globalise our workforce."
Asked about the effect of the weakening rupee and stronger dollar on Wipro's results, Paranjpe said, "It's dizzying, actually. It's completely roller-coaster, on the currency side."
"So what we have decided is that we will simply go hedge, for a certain duration, and let our treasury worry about that, and the business will really focus on generating profits from operations," he said.
Wipro will be more cautious about spending but does not plan a hiring or travel freeze, Paranjpe said.
"Building our new facilities we're kind of watching more carefully, hiring lots more people. We're kind of being circumspect about spending on marketing ... being more cautious about travel."
"Full-page ads are out," he added. "Any business which has been in full growth mode for five years does accumulate a certain amount of excess baggage."
Source: Reuters
Girish Paranjpe added that Wipro, India's third-biggest software services exporter, was feeling minimal impact from last week's attacks that killed almost 200 people in Mumbai, and reiterated that the company expects business to improve next year.
Referring to the Mumbai attacks, he told Reuters in an interview on Monday, "I don't see any operational impact of that ..."
When asked about cancellations by Wipro's customers -- who include Cicso, Credit Suisse and Nortel -- he said: "Some few, but much more delay, postponement, resizing -- a few cancellations."
Paranjpe said he remained hopeful that business would pick up in the company's first quarter beginning in April next year after a slowing that began about a quarter ago. Customers cannot sustain constrained spending indefinitely, he said.
"About six months you can manage with compression, three to six months you can manage with compression. Beyond that, you have to start thinking longer-term," he said.
"I'm still kind of optimistic that we would have gone past the bottom some time in the first fiscal quarter" next year, he added.
Sector leader Tata Consultancy Services and fellow large Indian outsourcer Infosys have recently expressed cautious optimism about the market, but like most peers they face at least short-term uncertainty.
Wipro makes about half its revenue in the Americas, and about a quarter globally from the financial services sector -- a fairly typical business split among Indian outsourcers, whose large English-speaking workforces gave them an early advantage.
Asked how tough price negotiations were becoming, Paranjpe said Wipro was trying to help customers cut costs in other ways than lowering prices. "There is a discussion about how we can alleviate the pain that they are going through. Our discussion has been about how we can help them with cost, rather than focused on price."
"That's what clients ultimately care about: Given the downturn, how much has my budget gone down and to what extent can you contribute to help me bridge the gap?" he said.
Paranjpe argued that big players like Wipro stood to gain market share as customers looked for reliable partners. "You want fewer people you can bet on, who are going to survive the downturn as well. So there is an almost automatic flight to size and quality," he said.
Although consolidation in the financial sector would undoubtedly make for a tougher market, Paranjpe said it would also bring opportunities in the medium term as customers would have to integrate and streamline their operations.
It would also bring chances to make acquisitions as valuations dropped -- possibly large ones, after last year's $600 million buy of Infocrossing -- and to make selective hires of personnel who might have been unaffordable in better times.
"I think we have gone past the small-budget acquisitions, which is not to say that we will never do a small one, but which is also to say that big dollar signs don't scare us," he said.
"We would like all the acquisitions to be made outside India so we can globalise our workforce."
Asked about the effect of the weakening rupee and stronger dollar on Wipro's results, Paranjpe said, "It's dizzying, actually. It's completely roller-coaster, on the currency side."
"So what we have decided is that we will simply go hedge, for a certain duration, and let our treasury worry about that, and the business will really focus on generating profits from operations," he said.
Wipro will be more cautious about spending but does not plan a hiring or travel freeze, Paranjpe said.
"Building our new facilities we're kind of watching more carefully, hiring lots more people. We're kind of being circumspect about spending on marketing ... being more cautious about travel."
"Full-page ads are out," he added. "Any business which has been in full growth mode for five years does accumulate a certain amount of excess baggage."
Source: Reuters
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