Quatrro BPO buys out eIndia’s stake

Raman Roy’s Quatrro BPO Solutions has bought out Mauritius-based fund eIndia’s stake in Chennai-based Scope eKnowledge, a knowledge process outsourcing (KPO) firm. Through this acquisition, Quatrro has taken a ‘significant majority stake’ in the 500 people KPO.

This is Quatrro’s fourth big investment in the last 12-18 months. Others include 100% buyout of Flextronics BPO arm and investments in Annik Technology Services, an analytics firm and John Keells, a shipping and ports services company.

Simultaneously, Quatrro has also got an additional funding of $100 million from a bunch of VCs, taking the total VC investment in the company to over $200 million. Olympus Capital is one of the VCs which had invested about $90 million in Quatrro sometime back. Scope eKnowledge is a top-end KPO vendor with services spanning patent filing, knowledge extraction, legal processes and market research. Its clients include Thomson Scientific, Reed Business Information, London Business School and Fortune 100 companies.

Its 500 staff comprise engineers, doctors, radiologists, MBAs and other professionals. Raman Roy, CMD, Quatrro and V Balakrishnan, who spearheads Quatrro’s M&A effort, will be joining the eScope Knowledge board. Interestingly, Scope eKnowledge was set up back in 1987 as a business research organisation and made its foray into KPO space in 2001.

To Economic Times India, Mr Roy said,

``Scope eKnowledge is a top-end research and KPO firm. What excited us was the
kind of work they do and the fact that net margins in such business are almost double of what you can expect in BPO work. Our business model is to support management teams. We will supplement the management of Scope eKnowledge and will not replace it. We are already making joint calls to customers for new business.’’

Typically, for BPO work, the net margins are in the range of 12-15% while in KPO companies it can be double of that. Says R Sivadas, CEO, Scope eKnowledge,

We have a spectrum of clients including Fortune 10 companies and four of the top
10 global publishing companies. KPO business is still nascent in India but we see lot of potential. It is beginning to grow now. We have built a large, trained, qualified team and with Quatrro now we have access to significant domain expertise as well.’’

Besides English, Scope eKnowledge offers services in German, Spanish, French, Korean, Chinese, Russian and other languages. The delivery centre is in Chennai and it also has offices in China, New York, Chicago, Orlando, London, Brussels and Cologne.

With Scope eKnowledge, Quatrro now has 1,300 to 1,400 people and is looking at both organic and inorganic growth options.

source: EconomicTimes India

Outsourcing Deals’ TCV Declined to $17.6Bn in 1Q’07 – TPI

According to TPI Index report for 1Q 2007, about 68 outsourcing contracts having a total contract value (TCV) of USD 17.6 billion have been awarded in 1Q 2007 as compared to 99 contracts having a TCV of USD 25.6 billion in 1Q 2006. TCV recorded in 1Q 2007 was the lowest as compared to the corresponding first quarters in last five years. In addition, the annualized contract value declined from USD 4.3 billion in 1Q 2006 to USD 3 billion in 1Q 2007.

The total number as well as the total value of commercial contracts (above USD 50 million) awarded in 1Q 2007 in the Americas declined as compared to 1Q 2006 and 4Q 2006. About 27 contracts were awarded in the Americas; the number was lowest as compared to the number of contracts awarded in the corresponding quarters of the past five years.

Among the other key findings, the index revealed that information technology outsourcing (ITO) is increasing as compared to BPO. Managed network services (MNS) outsourcing witnessed better growth rate as compared to ITO in the Americas. However, the European outsourcing market is predicted to grow as large number of ITO deals is yet to be awarded.

According to TPI’s study, annualized revenue from the outsourcing industry is estimated to grow by 3.9 percent in 2007 over 2006. This increase can be attributed to a 4.4 percent year-on-year increase in ITO.

Biotech Firms Continue to Outsource Drug Development for Another 2 Yrs – E&Y

According to a survey published by Ernst & Young (E&Y), a UK-based professional services company, about 77 percent of companies have agreed that they will continue to outsource their key drug development activities for another 2 years. However, about 65 percent are still dependent on contract research organizations (CROs) to carry out such activities. The survey was conducted among 400 executives from biotech companies across the US, Canada, and Europe.

Improved efficiencies and reduced costs were identified as major factors driving biotech firms to outsource drug development functions. This will create huge opportunities for CROs.

Among the key findings, the percentage of biotech firms outsourcing this function will increase from about 16 percent at present to 36 percent over the next 2 years. In addition, it was evident from the survey that various biotech firms will continue to rely on contract sales organizations (CSOs) to outsource their sales force to achieve benefits, such as efficiency gains, expertise, speed, flexibility, and avoiding capital outlay.

According to another study conducted by HighTech Business Decisions, a US-based consulting firm, several pharma and biotech firms will continue to depend on contractors for assisting them in biomanufacturing processes, such as clinical, preclinical, and early-stage drug development functions.

Increased Technology Usage Among End Users Drives Firms to Outsource IT Functions – Unisys


According to a study conducted by Unisys, a US-based IT services company, the growing needs for increased IT support and productivity among end users and cost saving initiatives are the major drivers for firms outsourcing their IT functions, such as IT support. Employees have been relying heavily on technology such as PCs, laptops, PDAs, etc., which is driving the need for increased IT support among firms. However, the inability of the in-house IT staff to provide IT support to diverse end users primarily encourage outsourcing of IT functions.

The Unisys Trusted Enterprise Index revealed that about 60 percent of the business and IT professionals across the US and UK believe that outsourcing will affect their organizations’ image negatively among their customers. In addition, a recent IDG Research Services study commissioned by Unisys revealed that a majority of the respondents were unable to properly quantify the benefits out of outsourcing for their businesses.

Why Finance and Accounting Outsourcing deals never happen or go awry if they do?

It has recently been reported in the press that 30% of offers made to buy houses do not result in an exchange of contracts. Based on research this number is much higher for Outsourcing deals with an incredible 50% of all Outsourcing initiatives never getting to contract signature.
As with many other functions and processes, plans to outsource finance and accounting (F&A) can fail for many reasons. This paper explores some of the reasons why F&A Outsourcing deals can fail and provides you with insight into how to avoid making these mistakes.

An Incredible 50% of Outsourcing contracts never get to contract signature!

Find out all Morgan Chamber thoughts on F&A Outsourcing here [free subscription]

Citigroup Plans to cut 17,000 Jobs, Revamp IT

Citigroup, a New York-headquartered financial services company, has announced its plans to cut about 17,000 jobs and revamp its entire IT operations. The move is in line with the company’s restructuring plan aimed at achieving cost savings of over USD 10 billion by 2009. About 8 percent of the group’s employees will be affected by the company’s plans of restructuring its operations.

In order to modernize the group’s IT operations, various activities, such as consolidating its data centers, standardizing application development, and modernization of voice and data networks will be performed for its operations across the world. In addition, the company plans to offshore/outsource part of its back-office operations affecting about 9,500 employees to low-cost destinations. The company is also considering increasing the usage of shared legal, human resources, risk management, financial operations, and back-office functions and plans to centralize its entire purchase functions by 2009.

According to Guillermo Kopp, an analyst at US-based research and consulting firm TowerGroup, the group is cutting large number of jobs from non-growth areas and aims to retain employees from high growth areas including global wealth management in the US and corporate banking in Europe.


source: globalservicesnow

Capgemini plans to open an information technology outsourcing (ITO) center in Katowice, Poland ,with an investment of about EUR 2.3 million. The company has been serving the Polish market since 1996 and employs about 2,000 professionals across the country.

Initially, the center will employ about 135 professionals in 2007, and the company plans to increase the headcount to 410 in the near future. The company aims to offer various ITO services, such as helpdesk, IT infrastructure management, and monitoring of IT system operations, to its clients across the country through the center.

First Tennessee plans to outsource some of its processing services including checks, statements, mail processing, and its back-office operations of Prescott-based operations center to WNS. The move is likely to affect the bank's 44 employees in its Prescott (Arizona) center and aims at achieving significant costs savings. About 76 employees of the bank will be affected from the bank's operations in Tennessee and Kentucky. Moreover, some of the affected employees are likely to be placed within the bank.

Revenues from Top 5 European IT Providers to Reach EUR 5Bn in ’08 – Value Leadership

According to Value Leadership Group, a New York-headquartered management consulting firm, revenues from the top five European IT companies (Capgemini, LogicaCMG, Atos Origin, Indra, and Tietoenator) are expected to increase from EUR 2 billion in 2006 to EUR 5 billion in 2008.

Among the key findings, India’s top two IT companies – Tata Consultancy Services (TCS) and Infosys – collectively generated net profit of about USD 1.7 billion in 2006, while the entire European IT industry generated net profit less than this figure of USD 1.7 billion. In addition, the combined market capitalization of the top five IT companies in Europe was USD 23 billion last month as compared to USD 100 billion among the top five Indian IT services firms including Infosys, TCS, Satyam, Wipro, and Cognizant (a US-based company having India-centric operations). However, the European IT market is expected to display various fluctuations by 2009 to compete with their Indian counterparts.

About 92 percent of the German firms are yet to realize the need for establishing offshore operations in India. However, some European big IT firms such as Capgemini have established their presence in India (Capgemini acquired Kanbay in 2006 to access Indian professionals).

Among the other key findings, Infosys’s revenues from Europe are expected to increase from EUR 950 million in 2007 to EUR 1.4 billion in 2008, reflecting a CAGR of 62 percent for the next decade. Even Wipro acquired few niche companies in Europe.

Hosting IT Infra Benefited SMBs

According to a study titled ‘The Small Business Transition to Hosted Technology: Costs vs Benefits’ conducted by BizTechReports.Com, a US-based reporting agency, small and medium businesses (SMBs) that outsource their IT infrastructure are benefited more than those that maintain their in-house IT department. About 54 percent of SMBs (those who outsource their IT infrastructure) revealed that they spent less than 5 percent of their revenues to upgrade IT infrastructure, while about 64 percent of the organizations (those who do not outsource) revealed that they spent more than 10 percent of their revenues on IT infrastructure.

Among the key findings, companies outsourcing their IT infrastructure are better in terms of frequency of security incidents or incidents of technical failures as compared to the companies who do not outsource their IT infrastructure. In addition, the outsourcing organizations gain exposure to cutting-edge technologies and approaches such as Software as a Service (SaaS) much ahead than their non-outsourcing counterparts.
According to Lane Cooper, the CEO of BizTech Reports.Com, outsourcing IT operations allows companies to focus on their core businesses and to achieve business objectives.

Firms in Automotive, Manufacturing, and High-tech Industries to Outsource IT and BPO Back-office Functions – EquaTerra

According to a study conducted by EquaTerra, firms across various industries including automotive, manufacturing, and high-tech in North America have been increasingly outsourcing their back-office IT and business processes functions to external vendors to remain globally competitive. In addition, reduced cost, improved customer satisfaction levels, and enhanced performance are the major factors driving the need for outsourcing such functions.

It has been discovered that firms across the three industries have been outsourcing their IT, call centers and CRM, finance and accounting, contract manufacturing, logistics, application development, and engineering functions for a long time. At present, they need to focus on outsourcing back-office IT and BPO.

Among the key findings, about 32 percent of firms revealed that they outsourced at least 1 process and are expecting to outsource few more processes in the future. About 38 percent of firms are expected to outsource their functions to new geographies or business units while about 29 percent are expected to expand their existing outsourced process areas.

According to EquaTerra, big outsourcing vendors are expected to offer a wide range of services in other areas, such as R&D, logistics services, document services, warranty, and after-sales services. However, the number of vendors offering multiple services across various geographies will not be substantial. In addition, it is expected that organizations will outsource their back-office BPO functions to low-cost destinations, such as India or China, and leverage those markets as well. However, Central and Eastern Europe will remain the preferred destination among buyers.

About 72% of Irish Firms Prefer IT Outsourcing – ICS


According to a study by the Irish Computer Society (ICS), the national body for ICT professionals in Ireland, about 72 percent of the Irish organizations outsource their IT operations, while the remaining 28 percent do not outsource their IT functions due to factors such as uncertainty regarding providers’ ability to supply the required level of service, apprehension about the realization of outsourcing benefits and goals, and concerns over the management of the outsourcing providers.

In addition, hardware maintenance, application development, application support, website development, and consultancy were cited as the most frequently outsourced IT functions. In terms of sectors, public sector organizations prefer to outsource application development and hire consultants, while private sector organizations outsource hardware maintenance.

The study estimated that although the smaller organizations do not have appropriate IT infrastructure and human resources, they outsource less as compared to large organizations. Only 4 percent of the organizations outsource the entire IT functions to external vendors.
The study revealed that the IT outsourcing among the various Irish firms was driven by the provision of additional IT services and not cost reduction.

Delphi has announced its plans to offshore about 650 finance jobs from its worldwide operations to Genpact. The move is in line with the company's plans to restructure its operations and exit court protection.

According to the papers filed by Delphi with the US Bankruptcy Court in Manhattan, the company has signed a deal with Genpact under which Genpact will provide finance-related functions, such as bills and receipts processing, travel and expense reporting, accounts receivable, and accounts payable. Through the deal, Delphi is likely to save about USD 150 million over the 88-months term of the deal. The company is expected to spend USD 220 million (including payments to Genpact) to shift its finance-related functions to Genpact.

IBM has expanded its presence in India by opening a new Autonomic Computing Technology Center in Bangalore, India, to cater to the needs of self-managed autonomic technology and systems among its Indian business partners and clients. The facility will primarily aim to focus on IBM's global Autonomic Computing initiative and will enable IBM to create and provide systems equipped with in-built intelligence to the Indian market and will help in simplifying IT complexity for clients. Employees in the center will work in association with various other software development centers of IBM, including IBM India Research Laboratory, across the globe to develop autonomic solutions.

According to a study conducted by Frost & Sullivan, although healthcare information technology (HIT) market in the US is currently in its early stages, the market is expected to offer considerable growth opportunities for HIT vendors in the near future.

The federal government has been significantly focusing on electronic health records, which is driving growth opportunities for the HIT industry. The study also revealed that vendors must focus on educating third-party payers about various benefits of HIT solutions. In addition, vendors should also educate insurance companies and other organizations about benefits derived from implementing HIT systems. Among the other key findings, reasons, such as lack of technical expertise and professionals, need for workflow changes, and lack of awareness on HIT are major factors hampering the adoption of HIT by various physicians. However, independent physicians are more reluctant to HIT adoption than salaried physicians.

According to recent 4Q 2006 Outsourcing Pulse Surveys conducted by EquaTerra, the demand for outsourcing in the overall BPO and IT outsourcing markets has grown at a slower rate in 4Q 2006 as compared to 3Q 2006 and 4Q 2005.

The number of expected deals grew to 61 percent in 4Q 2006 as compared to 48 percent in 3Q 2006 and 67 percent in 4Q 2005. The study also anticipated a low growth in the outsourcing market during 1H 2007. This slow growth is primarily driven by multisourcing and capacity constraints among BPO service providers. The study also revealed that outsourcing of non-traditional functions, such as document and imaging services, legal processing, knowledge process outsourcing, and logistics services are expected to grow significantly in terms of demand as well as supply in 2007. The existing renegotiations for outsourcing deals among buyers and suppliers were not the main reasons for slow growth in the outsourcing industry. However, it has been predicted that large outsourcing vendors will be able to retain a majority of their business with their existing buyers.



According to a recent study by AT Kearney, the US firms will not be benefited (in terms of cost savings) by offshoring their IT and back-office work to destinations, including India and China, in the next 20 years due to rising wages and price inflation in such countries. Among the key findings, the average wages for the programmers in India, China, and Eastern Europe grew by up to 40 percent in 2006 as compared to up to 10 percent for their US counterparts. Despite this fact, majority of US-based companies, such as Accenture and IBM, are establishing/expanding their offshore units in countries such as India and China, in order to leverage the low-cost labor market in such countries.

It is evident that Indian professionals' wages are 40-60 percent less as compared to their US counterparts.

Indian Salaries Saw Highest Growth in A-Pac in 2006

Working in India could not have been better at any other time considering the salaries that the market is offering. Employees across industries in India saw their salaries increase between 11.9% and 16% (average 14.4% increase) in 2006 over the previous year, according to Hewitt Associate’s 11th annual Salary Increase Survey released a few days ago. This makes 2006 the fourth consecutive year in which salaries grew by double digits.

India’s salary increase was the highest in the Asia Pacific region. Not surprisingly, China came second to India; but at 8.3% average increase in 2006 over the previous year, its percentage increase still quite behind India.

While forecasts for 2007 are more or less along the same lines as 2006, the numbers for Singapore make one sit up. From an average salary increase of 4.6% in 2006, it is expected to see an increase of 8.9% this year. The Philippines, too, which is seeing increasing international investment, will see a much higher increase in 2007 (8.9%) than in 2006 (8.2%).

Average Salary Increases in Asia Pacific :

Country Year 2006 (%) 2007 (expected) (%)

India 14.4 14.5
China 8.3 8.2
Philippines 8.2 8.9
Korea 7.4 7.4
Thailand 6.5 6.6
Malaysia 6.2 5.9
Australia 4.8 4.4
Singapore 4.6 8.9
Taiwan 4.3 4.4
Hong Kong 4.0 3.9
Japan 2.6 2.7

While salary hikes may be good news for employees in India and other Asia Pacific countries, it may not be so for Western companies that have taken to increasingly source IT and business services from the Eastern hemisphere. Salaries comprise a large component of the total cost of offshoring incurred by customer companies.

Yet, a recent McKisney studies argues that rising wages in India do not impact the overall cost. It presents data to show that other costs — technology, infrastructure, staff productivity, shift utilization — if managed efficiently keep the fully loaded cost of offshoring low.

Yet, India’s offshore market is likely to maintain its low-cost labor advantage over countries such as the U.S.A. and U.K. for at least the next two decades, according to Everest Research Institute’s 2006 Global Sourcing Market Update.

source: GlobalservicesMedia, Everest Research Institute

No Plans to Divest Indian BPO Unit: HP

Hewlett-Packard (HP), the U।S.-based PC giant, has no plans to sell its Business Process Outsourcing (BPO) business in India, according to media sources. The firm’s Business Development and Communications Head in India Arundhati Chakraborty confirmed the information. In fact, the company is planning to increase headcount in its Indian BPO unit 20% from the current strength of 6,500 employees to 7,800 employees over the next one year.

The company is also planning to ramp up its operations with headcount and infrastructure additions as well as new contract wins.


via: globalservice media

According to a study conducted by IDC, the Philippines IT and telecom spending is expected to grow by 10 percent during 2007. About 67 percent of the IT spending is expected to be contributed by hardware, while about 68 percent of the total telecom spending will be contributed by wireless services. The Philippines IT industry is expected to witness a shortage of human resources in 2007 due to the widespread outsourcing of the Philippine IT professionals to ASEAN countries. The study also predicted that the Philippine BPO industry will try to reposition itself as a quality-of-service destination rather than a cost-reducing destination in order to compete with various emerging countries such as China, Vietnam and Eastern European countries in the BPO space.

According to the recently released Indian budget, all the services carried out in the contract research and clinical trials industry was proposed to be exempted from the services tax of 12.24 percent. The proposal has been approved by the Indian Parliament and the exemption will be enforced from April 1, 2007, in India. The move will help to boost the growth of contract research organizations (CROs) as well as encourage international pharmaceutical firms to establish their CROs and outsource clinical trials to India.

Annual Banking IT Budget to Increase by 30% by ’10 – Deloitte

According to the latest study by Deloitte, the annual IT budget of the banking industry is expected to increase from 6 percent in 2006 to 30 percent in 2010. Several banking organizations around the world will increase the percentage in their IT budget to secure technology services from various offshore providers operating from low labor cost countries, such as India and China, in the next three years.

The study also reported that the banks have started relying on offshore service providers, as they have moved away from outsourcing low-level work. At present, banks consider offshoring as a basic necessity and not just a cost-cutting strategy. Also, offshoring of technology workers help in savings as the Indian programmers receive 40-80 percent less than their US competitors.

According to the study, shifting bank’s IT projects to an offshore service provider could save about 40 percent in their IT budgets. It also claimed that extensive salary hike reduces the cost savings offered by offshore outsourcing. About 55 percent of the banking IT executives expect offshoring costs to increase by about 10 percent in 2007, while 36 percent expect a decline in the costs.