According to Everest Research Group, software- and BPO-related functions worth about USD 9 billion were outsourced by big North American and European firms (primarily financial service firms) to their Indian captive centers in 2006. General Motors, Deutsche Bank, JP Morgan Chase, etc., are expanding their Indian offshore operations instead of outsourcing their software and back-office operations to Indian third-party service providers, such as Infosys Technologies, Tata Consultancy Services, and Wipro Technologies.

More than 50 centers have been set up over the past three years by such international firms in India and a majority of them plan to expand their operations two-fold over the next two years as the country offers a huge market. Moreover, such companies plan to conduct important businesses through these offshore centers. However, smaller US-based banks continue to outsource their operations to third-party vendors, such as Infosys, Genpact, and Cognizant Solutions, rather than establishing their offshore captives in India. According to Indian third-party vendors, international companies are also adopting a hybrid model under which work is divided between third-party vendors and company-owned offshore operations. Captive centers are growing at 30 percent annually and have employed more than 200,000 full-time employees for software development, back-office operations, high-end research, and product engineering.

Offshore Headcount Increases 18-fold in Financial Institutions – Deloitte

According to a study conducted by Deloitte, the number of jobs going offshore in the financial services sector has increased 18-fold over the past four years. It has been estimated that financial service firms across the globe have been saving about GBP 4.5 billion annually at present by offshoring to low-cost countries as compared to GBP 2.5 billion in 2003.

Currently, the British financial service industry has been saving GBP 1.5 billion annually by offshoring. The study also cited that the US- and UK-based financial service firms are increasingly offshoring their business processes. By 2006, about 75 percent of financial institutions were offshoring, while even less than 10 percent of financial institutions had offshore operations in 2001.

According to other key findings, the average offshore headcount has increased from 150 in 2003 to 2,700 in 2006. It has been found that offshoring has spanned across all business functions. However, functions, such as transaction processing, finance, and HR, are witnessing increase in growth. Firms that are offshoring one or two business processes are saving about 20 percent less on an average as compared to those offshoring over five business processes.

A study conducted by Deloitte cited that the number of jobs going offshore in the financial services sector has increased 18-fold over the past four years. It has been estimated that financial service firms have been saving about GBP 4.5 billion annually at present by offshoring to low-cost countries as compared to GBP 2.5 billion last year. The study also revealed that the US- and UK-based financial service firms are increasingly offshoring their business processes. By 2006, about 75 percent of financial institutions were offshoring, while even less than 10 percent of financial institutions had offshore operations in 2001. Among other key findings, the average offshore headcount has increased from 150 in 2003 to 2,700 in 2006. in addition, firms that are offshoring one or two business processes are saving about 20 percent less on an average as compared to those offshoring over five business processes.

In contrast, according to another study conducted by Compass Management Consulting, the UK-based financial service organizations are not benefiting from offshoring their call center operations to countries, such as India and China. This is because the cost saving benefits that are generally achieved by offshoring to low-cost destinations are diminishing due to increase in wages (by up to 15 percent annually) in such countries. In addition, communication inefficiencies (due to differences in speaking the English language) between the UK customers and offshore call center agents have also led to a decrease in productivity. It is evident that often offshore agents take twice the time as taken to handle a customer query call as compared to UK-based agents. Productivity is measured in terms of sales closed and new accounts opened. The study also cited that operating an onshore call center by financial service firms is capable of generating 10 sales (on an average) per month as compared to an offshore call center that is capable of generating only 4 sales per month. The study suggested that financial firms should focus on enhancing their onshore capabilities and adopt a 'fix and mix' approach towards call centers (having both onshore and offshore call center operations) as compared to a 'lift and shift' model (shutting down domestic operations and moving to offshore).

A recent study by Everest Research Institute cited that an increasing number of human resources outsourcing (HRO) buyers are focusing on accessing the best technologies and improved business process functions at present, rather than focusing on achieving cost savings. According to a company spokesperson, some HRO buyers are even ready to achieve cost savings of less than 10 percent or even zero percent as they are more inclined to access latest technologies and value-based functions; however, HRO buyers' major focus was on cost savings five years ago.

Among the key findings, about 54 percent of HRO buyers have outsourced about 10-12 HR processes out of 12 processes, with transaction-intensive and support HR processes being outsourced more frequently as compared to judgment-intensive processes. Other key findings cited that about 22 percent of HRO buyers did not outsource their HR training function, while about 45 percent revealed that they outsourced 1-5 training activities. However, about 22 percent of HRO buyers revealed that they have offshore operations.

According to the White Paper, titled 'Building a World-Class IT Services Outsourcing Industry in China' by EDS, the Chinese ITO industry is expected to generate revenues worth USD 18 billion by 2010 and USD 56 billion by 2015. The industry is also expected to create job opportunities for about 4 million professionals by 2015. In addition, the paper boasts of abundant supply of workforce, excellent infrastructure, and low-cost advantage in the country. The Chinese Information Industry Ministry estimated that the country's software outsourcing industry revenues grew by over 40 percent year-on-year to reach USD 1.4 billion in 2006. The ministry also expected the Chinese software and information services market to reach about USD 131.32 billion (CNY 1 trillion) by 2010. In addition, some newspapers sources cited that various Chinese provinces are offering tax rebates and have implemented favorable policies to facilitate the country's outsourcing industry and allow international companies to expand/open their offshore operations or set up joint ventures in the country.

NASSCOM, DRDO Collaborate to Develop Innovative Technologies

National Association of Software and Services Industry (NASSCOM), the Indian IT industry lobby, has signed a deal with the Indian Defence Research and Development Organisation (DRDO) to focus on developing innovative technologies.

Under the terms of the memorandum of understanding, NASSCOM’s expertise will complement DRDO’s capabilities to develop advanced projects for the IT industry. In addition, the agreement will enhance the involvement of the IT software companies for DRDO’s development projects.

DRDO’s advanced military systems projects are increasingly relying on software, thus, its partnership with NASSCOM is essential for the development of its software projects related to radars, electronic warfare systems, flight control systems, avionics, missile systems, and command, control, and communication systems.

According to Kiran Karnik, the President of NASSCOM, the partnership with the Indian R&D agency will allow NASSCOM to focus on creating an innovative ecosystem.

DRDO has been successful in developing various innovative technologies across areas, such as aerospace, control systems, communication, etc. This was the prime reason for NASSCOM to choose DRDO as its partner. In addition, the Indian IT industry is moving up the value chain in these areas, and thus, DRDO’s expertise is very relevant and of interest to the industry.

Another Captive on Sale!

The first round of bids for Citi’s business process outsourcing operations — Citigroup Global Services (formerly known as e-Serve) — is likely to be completed this week. A host of global IT companies and also private equity firms are said to be in the initial race. However, Citi is likely to look at selling part of its operations only to a strategic partner, given the sensitivities involved in the deal. According to sources, IBM, Automatic Data Processing (ADP), Genpact, Infosys and private equity firms such as Blackstone and General Atlantic are in the race for Citi’s BPO business.

Citi is likely to follow the Genpact model, where it is likely to sell off over 50% stake in the BPO firm. It is, however, likely to retain a part of the stake in the firm so that they can not only get the benefits in case of a future listing but would also handhold the firm.

According to sources, one of the main reasons that the group is looking at bringing in a strategic partner is to bring down the overall costs and not monetising the stake.

“Though there is interest from a host of firms, the group is most likely to sell the operations to someone who has experience in the field. They would want a strategic partner in the firm. It’s a core asset and they would not like to have any issues post a sell off,”

said a senior private equity official of a leading firm. ADP and Genpact are said to be the front runners for the deal.

Citi officials declined to comment. When contacted Genpact president and CEO Pramod Bhasin declined to comment while Infosys BPO’s officials were unavailable for comment. However, experts believe that Genpact has more synergies with Citi’s BPO unit because it has the experience of working out of a captive shell. Genpact had started off as a captive for GE in 1997.

GE had in 2004 sold 60% of its stake to Oak Hill Capital Partners and General Atlantic Partners. It was then renamed as Genpact. Citi had delisted Citigroup Global services in 2004. Citi held 44.4% stake in the BPO company. It had accepted an exit price of Rs 975 per share while delisting the firm. At that price the company was valued at around Rs 1,200 crore. According to i-bankers the value of the company now would be at around $700 million.

According to Forrester Research, nearly 60% of the captives in India are struggling due to spiralling costs, high attrition and lack of integration and management support. “Nearly, 10% of these struggling captive BPOs are most likely to sell off and go the outsourcing way,” a recent Forrester study says. Another Mumbai-based analyst voiced similar views about Citi’s BPO stake sale. “It is simply following the trend set by the likes of GE and Deutche Bank,” he added.

Deutsche Bank later sold off its stake to the Delhi based HCL Technologies. Citi globally has been on a major cost cutting spree. It had recently announced that it would cut 17,000 jobs on the back of a restructuring plan that is targeting billions of dollars in cost savings over the next few years. It is also looking at moving out 9,500 jobs overseas and to smaller American cities. Citi’s BPO operations have over 9,000 employees with nearly 4,000 servicing its international businesses.

from ET

Australian BPO to Grow by 60% to Reach $3.84Bn in 2010 – IDC

According to a white paper released by IDC for Accenture, business process outsourcing (BPO) in Australia is expected to increase by about 60 percent from USD 2.387 billion in 2006 to USD 3.84 billion in 2010, reflecting a CAGR of 12.4 percent. This growth is likely to be attributed to the increase in outsourcing in the areas of HR and training, finance and accounting, procurement, and customer care.

Among the key findings, the HR services market in Australia is estimated to grow at a CAGR of 9 percent to reach USD 1.591 billion by 2010, while finance and administration outsourcing will grow at a CAGR of 12 percent to reach USD 2.47 billion in 2010. In addition, the customer care segment is expected to grow at a CAGR of 15 percent to reach USD 833 million by 2010. However, procurement outsourcing by Australian firms is expected to grow at a CAGR of 18 percent to reach USD 354 million by 2010.

HR BPO in Australia has become mature as many HR BPO deals encompass high-end services including recruitment, workforce management, and learning. Growth in finance and administration outsourcing in Australia will primarily be driven by compliance and regulatory mandates.

The study also cited that BPO in Australia is still not mature as compared to the American and European countries. According to Aprajita Sharma, an outsourcing and BPO research manager at IDC Australia, a majority of BPO deals in Australia pertain to single function arrangements rather than complex end-to-end process deals. Sophisticated deals are, however, more prevalent in the overseas locations.

source: globalsourcingnow

Genpact CEO Pramod Bhasin took home $2.8m in ’06

In what could be one of the highest paid salaries to a professional CEO in India, Pramod Bhasin, 55, president and CEO of Genpact, earned an annual salary of $2.8 million in 2006. Bhasin’s compensation includes a salary of $610,000, annual bonus of $100,000, stock option awards of $ 971,123 and the rest in pension and retirement benefits and other benefits like housing, security and so on.

Bhasin is one of the founders of Genpact when GE started the company in India and serves as director on the company’s board. “This package would easily put Mr Bhasin amongst the top 5 highest paid investor-backed professional CEOs in the country” says Priya Chetty Rajagopal , VP, Stanton Chase International, an executive search firm.

Genpact’s next highest earning official is V N Tyagarajan, executive VP, business development and head of sales, who earned $1.2 million followed by Mitsuru Maekawa, CEO of Genpact Asia, whose total package was $844,065. Genpact disclosed the information in a preliminary prospectus filed by the company with the US Securities and Exchange Commission on May 11, 2007.
In what is reflective of the growing importance of India in global markets, CEO salaries in India have gone up sharply in the last few years. “There are at least a hundred CEOs earning $1 million in salary in India today,” says managing partner of EMA Partners International K Sudarshan.

Close to half of this salary includes performance-linked bonuses as well as stock options. Some of the highest paying executives are found in industries like large investment banks, telecom companies and banks. Search executives say that CEOs in companies such as IBM, Bharti, Reliance Retail, HSBC, Cairn and Walmart India are earning salaries in the range of $1 million and above. In 2006, India reported the highest salary increase in the Asia Pacific region.
Genpact began as an India-based captive BPO arm of GE Capital. In 2005, GE spun it off as an independent business and renamed it Genpact. The company has 28,000 employees and earned revenue of $613 million in 2006 with a profit of $39.8 million. It’s attrition stood at 32% last year.

Genpact filed a preliminary prospectus on May 11, 2007 for a listing on the NYSE. The company has not disclosed how many shares it will offer for sale and at what price. GE owns about 29% of the company.

source copy+paste: EconomicTimes

Mergers and Acquisitions:

Northgate Information Solutions has entered into an agreement with ARINSO International to acquire a 60.43 percent stake in ARINSO from Jos Sluys, the company's Founder and CEO, for about EUR 375 million. The acquisition has been approved by the management of both the companies and is subject to approval from Northgate's shareholders. Post-acquisition, Northgate is likely to make a public offer to buy the remaining stake in ARINSO. The deal will allow the two companies to strengthen their position in the HR and payroll service market across Europe, the Americas, and Asia Pacific. The combined entity is likely to have an employee base of 6,000 people and will generate revenues worth EUR 700 million.

Dimension Data has acquired an additional 40.1 percent stake in Datacraft Americas Holdings (DCAH), the wholly owned holding company of Datacraft do Brazil, increasing the company's stake to 50.1 percent. Post-acquisition, Datacraft do Brazil will be known as Dimension Data Brazil. The acquisition will enable the company to strengthen its position in the technology markets. The company can benefit from DCAH's expertise in the areas of networking, converged communications, and security in Latin America. The company also aims to enhance its association with Cisco in Brazil through this acquisition.

HCL Technologies has formed an IT alliance with Saba allowing both companies to expand and enhance their offerings across Asia Pacific, Europe, and North America. The alliance aims to offer IT as well as software services to the companies' common customers across various markets, such as media and entertainment, healthcare, financial services, retail, hi-technology, and manufacturing. HCL's back-end IT services combined with Saba's technology will allow the companies to offer a comprehensive package of IT services to their customers.

CDC Software has acquired a majority stake in Vectra Corporation for an undisclosed amount. The acquisition will allow CDC Software to expand its portfolio of offerings in the IT security and service market and strengthen its operations in the APAC region (primarily in Australia). In addition, the acquisition will support the company's consulting and professional services division (Praxa Australia) in Australia.

Fiserv unveiled its plans to expand its Indian operations by increasing the company's headcount to 5,000 by 2009. Fiserv's Indian subsidiary Fiserv India, has recruited about 1,000 employees since its establishment in 2005. Fiserv India has been offering information management systems and services for the financial and insurance service industries. It specializes in offering various services, such as transaction processing, outsourcing, BPO, software, and systems solutions, to its parent company. Recently, the company has opened a Center of Excellence in India.

Fidelity International has expanded its offshore operations in China by setting up a back-office center in the North-Eastern port of Dalian. The facility is expected to cater to the company's mutual funds and pension business operations in Japan. The center is likely to prove competitive to the company's Indian operations (employing about 9,000 professionals).

The Securities and Exchange Board of India (SEBI), a regulator of securities markets in India, has intervened in the plans of Unit Trust of India (UTI) to acquire a BPO firm. The acquisition aimed at supporting UTI's mutual fund (UTI MF) operations. According to SEBI, an AMC is only allowed to cater fund management, portfolio management services (PMS), offshore fund management, and venture equities companies; however, AMCs are restricted to enter into any other business domains such as BPO.

Oracle is planning to establish a business services division headquartered in New York, which will cater to the financial services industry. The new division will be headed by Rajesh Hukku, the current Chairman and Managing Director of i-flex Solutions. The new division will integrate i-flex's products, such as Flexcube, Reveleus, Mantas, DayBreak, and Insure3, with Oralce's product portfolio. It will also consolidate and manage the financial services software while serving as a vehicle for future acquisitions. Other executives of i-flex who will join the management of Oracle's new division include R Ravisankar and Deepak Ghaisas who will join the team as Vice Chairmen.

M& A Roundup

Citigroup has entered into a definitive agreement to purchase the outstanding shares of BISYS for about USD 1.47 billion. Post-acquisition, BISYS Fund Services and Alternative Investment Services division will be integrated with Citigroup's operations to create a globally competitive entity in the investment servicing industry and allow it to offer a wide range of product offerings. Subsequent to the acquisition, JC Flowers will acquire BISYS' Insurance Services Group and Retirement Service business from Citigroup. Citigroup is likely to gain USD 645 million from this transaction. JC Flowers also plans to merge Crump, the insurance business of JC Flowers, with BISYS's Commercial Insurance Services to create a leading provider of wholesale insurance brokerage and retirement service solutions.



Fidelity National Information Services (FIS) has purchased Marketing Solutions for an undisclosed amount. The executive team of Marketing Solutions headed by Neal Packard will also join FIS. Marketing Solutions offers Web-based technology products which allow financial organizations to modify offerings, cross-sell products, and maximize client relationships. As a result of the acquisition, Marketing's CRM capabilities, profitability solutions, and relationship pricing structure will be merged with FIS solutions. The transaction will also increase FIS' potential, which in turn, will help the company's clients to make more informed decisions.

PwC finds fault in Swansea's outsourcing

Big 4 firm PricewaterhouseCoopers (PwC) has found fault with Swansea City Council's £83 million outsourcing deal.

A PwC audit found that the council failed to apply important principles of IT management in the deal, reports Computer Weekly.

PwC's report said that the council failed to check whether the savings Capgemini predicted were accurate.Capgemini was enlisted by the council to replace back-office systems and claimed that the council would save £26 million over two years.

The council stated:

"The PwC report clearly outlines a series of serious weaknesses associated with the development of the e-government programme. As a council we need to frankly admit to the weaknesses and set about creating a sure strategy for ensuring no repetition."

An integral mistake of the council was the failure to benchmark the project against the performance of other councils and their suppliers.Based in Paris, Capgemini operates in over 30 countries around the globe.

via: GAAPweb

Pharma offshoring will present a $7 billion opportunity by 2013

Outsourcing of drug discovery research is slated to show the highest growth of 26% a year, according to the report by the Pune-based Value Notes

The pharma outsourcing business in India will grow to around $7 billion (Rs28,700 crore) by 2013, as global firms seek to leverage advantages related to cost and quality the country possesses, said a report by research firm Frost & Sullivan.

Another report, by Pune-based research firm Value Notes, forecasts a growth of 23.6% a year for the industry up to 2010.

India is a preferred destination for pharma outsourcing because of the low cost of research but manufacturing in the country and tapping opportunities in contract manufacturing and research is still a relatively new strategy for Indian firms that have traditionally focused on manufacturing and marketing drugs.

The Frost & Sullivan study, titled The Indian Contract Research and Manufacturing Services Market, said the pharma services outsourcing market in India (also known as contract research and manufacturing services or CRAMS) was valued at $895 million in 2006.

Making raw material for medicines (known as active pharma ingredients or APIs) and oral solid formulations (tablets and capsules) continue to be the major sources of revenue for India’s contract manufacturing industry. And of the various segments in contract research, outsourcing of drug discovery research is slated to show the highest growth of 26% a year, according to the Value Notes report, titled Contract Research Opportunity for the Indian Pharmaceuticals Industry.

“These estimates too are conservative, as several of the top Indian outsourcing vendors are pursuing some combination of international expansion and investment in new drug discovery programmes in the product patent regime,” said Suchita Chaudhari, an analyst at Value Notes and co-author of the report .

The key players in the Indian CRAMS space are
Nicholas Piramal India Ltd,
Divis Laboratories Ltd,
Dishman Pharmaceuticals Ltd,
Dr Reddy’s Laboratories Ltd, and
Shasun Chemicals and Pharmaceuticals Ltd (in the contract-manufacturing sector);

Syngene (Pvt) Ltd,
Jubilant Biosys Ltd,
Suven Life Sciences Ltd,
GVK Bio Ltd, Chembiotech (Pvt.) Ltd,
Quintiles Transnational Corp.,
Vimta Labs Ltd,
Lamda Therapeutics Ltd,
Lotus Labs Ltd, and
Siro Clinpharm Pvt. Ltd are the majors players in contract research and clinical research space.

And multinational companies such as Pfizer Inc., GSK Plc., Novartis AG, Eli Lilly and Co., Bristol-Meyer Squibb Co., Teva Pharmaceutical Industries Ltd, etc. have already tied up with Indian companies for both drug development and manufacturing services.

“While (traditional) contract manufacturing, consisting of (manufacturing) API and formulations, has been growing at a phenomenal pace of close to 35%, there are (other) emerging areas (in it) that are also picking up pace,” said Mahesh Sawant, programme manager, biotechnology and life sciences, healthcare practices, Frost & Sullivan.


According to the Value Notes report, global pharmaceutical companies are increasingly turning to Indian vendors offering drug discovery research using newer techniques at much lower costs. Major drug discovery companies are realizing that the question is no longer whether to outsource or not, but one of finding the right partners.

Drug discovery is the process by which molecules are identified for their therapeutic efficacy and can take up to several years. Companies are now finding that improving the hit-to-lead conversion and early identification of unsuccessful compounds can accelerate the process.
While India has enough expertise in areas such as chemistry and drug delivery systems, it doesn’t have enough expertise and enough trained manpower in biological services such as protein structural analysis or expression profiling. This is one of the main challenges facing Indian companies.

The Value Notes report said that Indian firms would enter into various strategic alliances and also acquire companies in India and abroad to build on capabilities to leverage the opportunity.
“There is an increasing trend among Indian contract research organizations to move up the value chain by becoming preferred vendors of a few global outsourcers rather than serving as jack-of-all trades. Preferred vendors often land up with high-margin contracts such as researching and/or developing proprietary technologies for the client,” said Chaudhari.

Source: Mint-WSJ / LiveMint (Plus) Microsoft Corporation for Copy+Paste commnad

Vertex announces exclusive contract with HSBC

Vertex Financial Services (VFS) today announced that it has signed a new services contract with HSBC Life (UK) Limited for several new protection and life investment products. This is an exclusive contract over the next five years which is expected to generate significant value for both companies.The first phase of the contract is for VFS to deploy its Bond Services solution to provide administration for a new Guaranteed Income Bond (GIB) product range.

Further life investment and protection products for various distribution channels, including IFAs, are also planned.The services provided by Vertex will include:

• Quotations
• New Business
• Policy servicing
• Claims administration

David Child, managing director, Vertex Life, Pensions and Distribution, comments

:"Winning this services contract is a clear demonstration of our market-leading capability in the life, pensions and STP arenas. We are very pleased to work with HSBC Life to help develop and support their insurance growth into new channels and I am confident we will add value as a key partner."

Craig Colton, director, HSBC Life comments:

"HSBC Life is delighted to enter into this new agreement with Vertex, which will give us a really solid foundation to take forward our development plans. Part of HSBC’s insurance growth strategy is to increase the market share of our bonds business and the launch of the GIB and other products with Vertex’s support will be crucial to achieving this."

HSBC Life's new dedicated administration services will be based in Cheltenham.

The new HSBC Life contract for Vertex Life, Pensions and Distribution follows other contract wins in 2006 including AIG/Living Time and Gartmore (Jessop Fund Managers).

ISG to Acquire TPI for $280Mn

Information Services Group (ISG), a Connecticut-headquartered acquisition company created in 2006 to build a high-growth, industry-leading information service company, has entered into an agreement to acquire TPI, a US-based sourcing advisory firm, for USD 280 million (in cash). The acquisition is subject to the approvals of ISG shareholders and customary regulatory. The transaction is likely to be completed in 4Q 2007.

Post-acquisition, ISG aims to repurchase TPI’s common stock and/or warrants worth USD 40 million, while the founder and members of the management of TPI are likely to invest about 30 percent of their proceeds from the acquisition in ISG stock at closing price.

ISG’s financial and legal advisors for the transaction were Evercore Partners and Simpson Thacher & Bartlett, respectively, whereas TPI’s financial and legal advisors were Deutsche Bank Securities and Ropes & Gray, respectively.

TPI registered revenues of USD 147 million in FY 2006 and expects its FY 2007 revenues to increase by about 15 percent. The company’s headquarters are located in Texas, the US. The company also has operations across Australia, France, Germany, India, Japan, the Netherlands, New Zealand, Singapore, Sweden, and the UK.

It serves several clients, such as AT&T, Bombardier, ChevronTexaco, Diageo, Goodyear, P&G, Pfizer, Singapore Airlines, Volvo, etc., from diversified sectors including energy, financial services, healthcare, manufacturers, pharmaceuticals, restaurants, retail, etc.

Atos to Provide IT Services for Olympic Games

Atos Origin, a French IT services provider, has won an information technology outsourcing (ITO) deal from the Beijing Organizing Committee for the Games of the XXIX Olympiad (BOCOG). The financial terms of the deal were not disclosed.

The deal entails Atos to offer IT support services including provision of IT products and services for the Beijing 2008 Paralympics Games. In addition, the company will provide system customization, integration, and operations services to the committee for its two information systems – the Games Management System (GMS) and the Information Diffusion System (IDS). Atos will be responsible for designing, developing, and testing these two systems.

In addition, Atos will develop an information system catering to the special requirements of the Paralympic sports. It will also customize existing applications to make them more user-friendly and offer support in Chinese. Atos will also be a sponsor for Beijing 2008 Paralympic Games.

CSC to Buy Covansys for $1.3Bn

CSC, a California-headquartered IT services company, has entered into a definitive agreement to buy Covansys, a Michigan-headquartered IT services company, for about USD 1.3 billion in cash. The acquisition is likely to be completed by 2Q 2008. The transaction is approved by the Board of Directors of CSC and Covansys. The directors at Covansys have recommended that the company’s shareholders to approve the acquisition.

The acquisition is also subject to customary approvals, such as expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act. CSC’s financial and legal advisors for the transaction were UBS Securities and Gibson Dunn & Crutcher, respectively, while Covansys’s financial and legal advisors were Credit Suisse and Butzel Long, respectively. In addition, special legal advisor for the transaction comprised the Board of Directors of Covansys and Katten Muchin Rosenman (a US-based law firm).

Through the acquisition, CSC will nearly double its Indian headcount to about 14,000 employees, thereby strengthening its position in the Indian market.

About 65% Outsourcing Contracts Ended Before Actual Termination – Compass

According to a study conducted by Compass Management Consulting, a UK-based business and IT consulting company, about 65 percent of outsourcing contracts terminated before the actual date of termination over the past two years. The move was primarily driven by increasing costs charged by vendors as well as distrust among the outsourcing buyers and vendors.

These findings came after the company examined a total of 240 outsourcing contracts worth GBP 3.3 billion awarded over the last 2 years. Among the key findings, outsourcing deals costs about 20 percent more as compared to the cost involved in maintaining a comparable in-house department providing the same functions/services. However, vendors claimed to reduce the cost of maintaining an in-house department by up to 18 percent.

KPO to Generate Employment for 280,000 People by ’10 – Evalueserve


According to a white paper published by Evalueserve, an Indian KPO company, the Indian KPO industry is expected to generate employment for about 280,000 professionals and earn revenues of USD 11-12 billion by 2010. The industry recruited about 75,000 professionals and earned revenues of USD 3 billion in 2006. The increasing demand for KPO services from small- and medium-sized enterprise (SME) segment and the acceptance of the KPO model are major forces driving this growth.

Among the key findings, the number of SMEs depending on captives or third-party KPO service providers is likely to increase from 900 in 2006 to 5,000 by 2010. In addition, KPO service providers are expected to increase their capacity by 55 percent, while capacity in the captives is likely to increase by 45 percent by 2010.

Vendor model (buy model) is likely to outgrow the captive model (make model) by 2010. The cost and time involved in implementing a third-party vendor solution is less as compared to the time and cost involved in establishing captives. These advantages will encourage SMEs and other big companies to opt for the buy model as compared to make model; about 90 percent of centers are expected to be built on the buy model by 2010.

In addition, KPO vendors have been expanding their operations in Latin America and China to offer their services in multiple languages. About 5-10 percent of the US and European SMEs are expected to benefit from KPO. Dual-sourcing (outsourcing work to their captive and external vendors simultaneously) will be an emerging trend among large companies having captives.