Wipro Increases 21% in third quarter of 2009-10

If you know about Indian economy then perhaps you already know that the fiscal year is counted from 1 April to 30 March. Thus, we are getting the results of 3^rd quarters for the major companies. Earlier today, Wipro announced that its profit increased by 21% compared to the same time of last fiscal year. It is an IT outsourcing company and perhaps the good gain happened because of improving condition in countries like USA. A year ago, in the 3^rd quarter of the previous fiscal year, the global economy was suffering from recession. So, things are getting better for the company.

Hindustan Times reported:

It painted an optimistic outlook for the quarters ahead, aided by new markets and more hiring.

“We have seen a positive demand environment which has driven broad based sequential growth across all verticals, service lines and geographies,” Wipro chairman Azim Premji said.

He said the company expects IT budgets among customers to remain marginally positive to flat.

Wipro expects its IT services revenue to rise 3.6-5.4 per cent in January-March from the previous quarter to $1.16-$1.18 billion.

This results of Wipro are perhaps an indication that things may get better for the outsourcing industry of India in 2010. In the next 2-3 days, there will be announcements from other major companies in IT and mobile phone sectors. 

Will there be a Backlash in 2010 in USA against Outsourcing jobs to India?

For Indian outsourcing industry, 2009 was not a great year and it is perhaps understandable. The global economy suffered from severe recession. The US and European companies themselves suffered and it is natural that the impact was felt in the outsourcing industry in India.

How was 2009?

President Obama even before 2008 election did not hide his anti-outsourcing feeling. However, his anti-outsourcing stance was more rhetorical than practical and in the last one year, he did not take any deceive action to create any major obstacle. In fact, the Satyam Computer Scandal brought more worry than Obama being elected as the US president. Another problem was BBC reporting of Credit Card Fraud that created some media storm but did down quickly. In the end, recession was the main problem that did a lot of damage to the Indian outsourcing industry.

Economic Recession gone but where are the jobs?

Now, most experts would agree that the worst of the economic recession is gone in USA. At least, the stock exchange indicates that the worst is over. Large companies are not suffering the risk of bankruptcies. Rather, some large banks are paying back the bailout money to the US government. However, there is one big problem. Unemployment rate is still very high and there is no sign of job creation in the US economy at this moment. Thousands of people lost jobs in the 12 months of 2009 and there is hardly any indication that even half of the jobs will come back in 2010. Thus, at this moment, the economic recovery is perhaps more limited to the big companies than individuals.

High Unemployment Means Low Consumption

You don’t have to be a rocket scientist to realize that high unemployment figures in USA means that consumption will not increase significantly. US economy is based on consumerism. As long as the jobs are not coming back, people will be afraid to buy things like past. Now, there is some kind of grievance among US workers about outsourcing to India. It is nothing new but in a time of high unemployment, it is natural that more people think that outsourcing is the main villain. Such an attitude is surely a bad thing for the outsourcing industry of India.

It is not god even for US politicians either. They are under pressure to create jobs. Some politicians have found a new way to show that they are doing something. Ohio Governor Ted Strickland is one of them. He is trying to convince Tata Consultancy Services to create jobs in his state. The idea is that Tata needs to have some offices in the US and Ted Strickland is trying to act TCS to recruit more American workers instead of either sending the jobs to India or bringing workers from India under temporary Visa. Some other US politicians are trying the same formula. The catch word is ‘creating jobs’ for American people. If Ted Strickland becomes successful, then 1,000 jobs can be created by TCS in Ohio. I mean these 1,000 workers will be US citizens.

Indian companies recruiting in USA: Just eyewash?

Critics would say that it is nothing but eyewash. Creating several thousand jobs in a country like USA is literally a drop of water in a sandy desert. Perhaps they are right. However, you have to understand one thing. Companies like TCS or Wipro are much smaller compared to IBM and Accenture when you think of revenue and asset. IBM and Accenture are US companies that are rivals of Indian outsourcing companies.

Should Temporary Visas be reduced?

A very serious bone of contention in USA these days is temporary visas (like H-1B) granted to foreign skilled workers. The recession has made many skilled workers in USA unemployed. So, naturally, there is a growing call for reduction of temporary visas. Large companies like Microsoft are in favor of increasing visa caps but at a time of high unemployment, US politicians are coming under a lot of pressure to decrease H1-B visa cap. Now, perhaps the question is not whether temporary visas to skilled foreign workers be reduced or not. Instead, most people are perhaps thinking how and when to reduce it.

What about Globalization?

It is the Americans who for decades advocated for globalization, free market economy and capitalism. Now, they have to face the bad side of globalization. US politicians have to do a balancing act because US companies are getting big contracts in India. India is also a very attractive flourishing market for American companies. For example, right now, India is the largest market for small cars.

Indian companies unfairly criticized?

US companies send jobs to Indian workers to save money not to save Indian economy or create jobs. This is the thing that most critics of outsourcing forget. Indian companies are just like cheap contractors and because US companies want to save money they outsource jobs to Indian companies. That is why, it is really unfair to criticize Indian outsourcing companies. If any backlash happens in 2010 then it will be even more unfair.  

Cheap Products vs US jobs

This is the dilemma that US consumers don’t want to realize. They want very cheap products and services and then they complain about ‘lousy customer services’. One of the common complains against Indian workers is they don’t understand American accent that well. You cannot get cheap products and US jobs at the same time- this is the thing that US consumers have to realize.

In the end, I think that there would be some kind of backlash against Indian outsourcing sector. However, any action will become useless because in the end, it is the US consumers who are the root problem not cheap Indian workers. 

Satyam Computer Scandal: Danger Sign for Indian Outsourcing Sector?

For the last few days, Indian media has remained very busy with covering Satyam Computer scandal involving the accounting fraud of Ramalinga Raju. It has really rocked the image of Indian outsourcing industry as Satyam Computer was considered to be one of the most success stories of outsourcing sector. This scandal has again raised some serious questions about outsourcing to India. You know that, many companies of America, Europe and Australia are now outsourcing their works to Indian companies and in fact, many Fortune 500 companies were clients of Satyam Computer. This shows the extent that richest companies in USA are getting dependent on outsourcing.

The main concern related to this scandal is the level of corporate governance inIndia. Thanks to high economic growth in the last one decade, some Indian companies have really become large and are employing thousands of employees. Information technology related outsourcing projects have made them even bigger and they have grown in size a lot in the last one decade. Growth in size did not necessarily all the time match with improvement in corporate government. The example of Ramalinga Raju is perhaps not enough to reach into a conclusion that the corporate governance in India is not up to the mark of international standard, but it is something that has seriously shaken the positive image of large Indian companies. Some people are asking a serious question that how could just one man do all the accounting fraud and keep accounting fraud of over 1 billion dollar out of everyone’s eyes. So, it has really put some serious questions about the level of corporate governance in India. If the business community in India is afraid about this scandal then we have to understand that American companies are even more worried about this scandal. American companies specially Silicon Valley are worried because they have outsourced a lot of jobs to the companies like Satyam Computer in the last one decade and now, they are becoming concerned whether it is the beginning of a meltdown in large companies of India. If large companies in India suffer a meltdown because of some more serious frauds like Satyam Computer then it will seriously and adversely affect Indian business. For example, I am not sure if any American company will be directed affected by the scandal, but they are now very worried whether their project will be completed in due time. They have adequate reason to be worried because in American, time is really money.

The American and European companies have more reason to fear than just accounting fraud. In 2006, we saw an incident of the arrest of an Indian call centre worker for alleged data theft. No only that, Channel 4 of UK carried out a controversial documentary on data theft in the call centers. This thing created some negative publicity in England about outsourcing. At that time, Indian companies could easily say that the arrest of the man for data theft was just an isolated incident and the documentary of Channel 4 was blown out of proportion. I do not know if they were write or wrong that time, but there is no doubt that there are enough reasons to be worried about the Satyam Computer scandal.

More than data theft, there is some serious concern about call center workers becoming affected with HIV Aids. In 2008, there was a report that many call centre workers were suffering from pressure of working whole night at call centers and to get relief from such pressure, they were getting involved in physical relationship and this way, they were running the risk of having HIV Aids. This report came in September 2008 and generated some media attention, but after that there was no follow-up report about it. If in the coming months we can see serious problem about HIV Aids infecting call center and outsourcing workers then it will bring even more negative publicity for the sector.

Two days ago, BCC published a shocking report about an Indian call center male worker sending unwanted love messages to a woman in England. Many of us know that British companies like British Telecom have outsourced many of their jobs to India and what happened was that an Indian man talked to a customer of British Telecom in England for a service related matter. He talked to the British girl and got personal information like the email and then started sending emails and text love messages. This created a lot of annoyed felling in the girl and, she complained to police and it created a lot of bad publicity in England about outsourcing workers of India. British Telecom has confirmed that they have taken appropriate action about this matter, but we are yet to know what appropriate action has been taken. I like to believe and I do believe that it is just an isolated incident, but you have to remember that when British Telecom opened a call center five years ago, that time it was a very unpopular move among trade union leaders in UK. So, any kind of negative publicity will surely have very bad indication on the outsourcing industry in India.

One positive thing about the whole problem is that Indian government has so far acted wisely. Yes, some people have tried to say that these things were small issues were isolated incidents and some people in India have also this feeling that often incidents are blown out of proportion and Indian outsourcing field gets too much undue negative publicity in the western media. However, one thing that we have to remember is that accepting the problem is necessary because the problem exists. Until now, the western companies were only concerned about data theft and the protection of their data. Now, they have something more to be worried about and it is the level of corporate governance in India. This time, the Satyam Computer scandal is getting a lot of media coverage inside and outside of India. So, there is no scope to put it aside. The Indian companies have to assure the Western investors that they are trying their best to minimize this kind of incident. Of course, in any country, we can never expect perfect business environment and data theft and mismanagement of top officials of large companies happen everywhere in the world. These things happened in USA too in the past. So, it is natural that it will happen in India in future too. What is important is that Indian government officials learnt to deal with them in a natural manner and Indian business leaders also leant to deal with these kinds of issues.

(This entry was first published in January 2009. Because of a technical problem, the entry had to be deleted and I am reposting again now.)

British Council outsourcing to India

British council is one of the things that are considered to be a symbol of British nationalism or it gives an identity to the country of Great Britain. It has branches in many countries of the world and the news that it may outsource some jobs to India or another country has made many workers very angry. It has also made many trade union leaders angry because they feel that it is a betrayal of Prime Minister’s policy to keep British job within England.

However, I think that it is an inevitable because all the companies in the world are now trying to save their operating cost. Of course British council gets the money from British government and it is not a company but we have to remember that they have to work within their budget and whatever they can save is good for them. So, I am not surprised with this outsourcing news. However, I wish that a thorough study is done about outsourcing because when British workers will loss job in large number that can cause damage to the British economy and cause social unrest.

Related Article:

THE HINDU

IBM to Slash 5000 American Jobs: Does it Make Business Sense?

It is not a rumor anymore. IBM is indeed going to cut 5,000 jobs in USA. It is not a shocking news because at the time of economic recession, it makes a lot of sense to cut back on costs and one of the best ways to cut on costs is to outsource jobs to developing countries like India and China. It is not clear yet whether all of these 5,000 jobs would go to India or not. However, I will not be surprised to see that a signification portion goes to India. There is no doubt that this move by IBM would create a lot of debate in USA in the next few days.

You can blame the recession but I would like to state that the company had this kind of policy even before economic recession. In fact, in 2006 and 2007, there was a lot of discussion about IBM’s increasing presence outside of USA. Here are just a few to read:

Will IBM shift to Asia?

IBM mass lay-off rumoured

Report says 150,000 jobs at risk in move to Asia.

So, if you read these reports then you will realize that IBM has been planning to move more jobs to India even before the economic recession. May be, it is the right thing to do for the company because at the end of the day, all the companies want to decrease their cost and increase their profit. Not only that, the company now earns significant amount of revenue from non-US markets. In fact, it gets a lot of revenue from Asia. In fact, Asia is still largely an untapped market for the company. IBM gets around $1 billion revenue from Indian market and China is also a significant market. So, to me, it makes a lot of business sense to see that the company is going to cut 5,000 jobs in USA and will perhaps send it to Asia.

There is no doubt that this news will trigger a lot of criticism in America because the US economy has been suffering a lot in the last few months. There is no respite from job loss news items every month. IBM’s announcement of cutting 5,000 jobs will just add to the existing misery. Just look at the titles of the two articles:

IBM Cuts Jobs as It Seeks Stimulus Money (Business Week)

IBM and the Rebirth of Outsourcing (Time)

From the titles, it is clear that the company will receive a lot of negative publicity in the US media because of this decision. A lot of jobs have already been lost in tech sector in USA and no one knows when these jobs will again come back.

It can be assumed that Indian media will welcome this decision. Indian companies and job seekers will perhaps take this news like a divine intervention. The big companies related to the outsourcing sector are suffering from the economic recession. So, any news is good news for them at this moment. Indian job seekers will also be happy and pray that more US companies follow IBM.

(This entry was originally published in March 2009 and it is in the context of that time. For technical problem it got deleted and I am again putting it now.)

Credit Card Fraud in India Reported by BBC: Some Observations

I find it sometimes confusing to understand the obsession of British media about reporting of call center frauds in India. In the past, Channel 4 did it and also The Sun newspaper. This time, it is BBC whose reporters carried out a sting operation to find credit card details from a man in India named Saurabh Sachar. They paid this man some money and in return he gave them some credit card information of some British citizens. Now, it has become a big news in BBC and some other British Media. Now, you can expect to find a healthy amount of discussion in the British media about the safety of their credit card details and then the issue will be out of the public horizon. In fact, England football team will play against Slovakia next week. So, people will have no problem to forget this sting report of BBC.

The same thing will happen in Indian media too. NASSCOM leaders will talk about taking extra security measures and then Indian media will busy with Indian Premier League and the upcoming general election. I am confident that there will be no follow up from either side. Outsourcing is a win-win situation for both India and UK. UK consumers want inexpensive solution for everything. The shareholders want more profit and the best way the companies can cut cost is to outsource as many jobs as possible to India. This way, the companies would need to pay a fraction of the money that they used to pay their workers in UK. On the other hand, outsourcing is now the most important export sector for India. They have a huge pool of educated workers who are skilled in English language.

It is natural that British companies and consumers and Indian companies and workers enjoy the benefit of outsourcing. So, outsourcing is here to stay. The British consumers do not mind a security glitch of few credit cards every year as long as they can get the service without spending a lot of money. On the other hand, Indian workers in the outsourcing field do not get a very lucrative salary that you can expect highest level of professionalism from them. In fact, looking at their salary, I have to praise their level of honesty.

This BBC sting operation has perhaps come at a bad time for the outsourcing sector of India. The outsourcing industry is yet to recover completely from the negative publicity that it received as a result of Satyam Computer scandal. BBC sting operation will also bring more negative publicity. BBC has done its work and I have no problem with it. However, what I want to see from BBC is that it gives regular updates about this matter. BBC should also depict the condition of workers working in call centers. It should try to educate the British consumers about call centers in India.

I feel that the salary and other facilities of call center workers in India should be increased significantly. Some are calling for tougher legislation in India against data theft and call center fraud. I agree with this call and I feel that Indian government should do it. However, you have to understand that as long as the workers in India get poor salary, the risk will not be minimized. In fact, according to BBC sting report, Saurabh Sachar offered to pay the details of credit cards at the rate of just $10 dollars a card. It shows that the call center worker who took this risk and broke the law and gave the information to Saurabh Sachar did it for a very small amount of money. I mean, he got a percentage of money from $10 a card.

Don’t get me wrong. I am not supporting credit card fraud or I am not even suggesting that Saurabh Sachar and the unknown call center worker who did the crime should not be punished because they do not earn a lot of money. I want both of them to be punished if found guilty by a law court. All I am trying to say is that as long as the call center workers do not get good salary and they have to deal with such sensitive information, there will be many more incidents of call center fraud activities. Media organizations like BBC should not only just carry out some sting operations but also should do some more investigative reports about the condition of call center workers in India.

Related Article

Credit card details of Britons sold at $10 each

Indian call centre credit card ’scam’ exposed

Economic Recession: Indian Students Worried about Jobs

Just 6-7 months ago, some people in India thought that the country will be free from the negative impact of on going global economic recession. However, it is now clear that India is suffering from the same problem too. In fact, the export sector has been the hardest for the country. According to some reports, the export sector is going to lose 1.5 million jobs by March 2009. So, many fresh graduates or even highly skilled and experienced educated workers are worried about their future prospects.

Falling Demand both in India

I have just mentioned that the export sector has been badly affected by the global economic recession. Another problem is that things are not getting better in other countries. India received a lot of money in foreign exchange through the remittance sent by NRIs. Weaker global economy means that there will be fewer opportunities to work in other countries. In India too, big companies are trying to cut their expenses and they are a bit reluctant to go for any expansion activities. I remember that in 2007 and in the first few months of 2008, we saw a lot of reports about the expansion of Indian companies like Tata in other countries.

H1B Visa Scare

The most worrying news for Indian educated workers is that there is now strong political move in the US senate to cut back H1B Visa and number of foreign workers in USA. For example, there has been demand that big companies like Microsoft first fire their foreign workers so that more American workers can be in job.

Jagdish Bhagwati, Professor of Economics at the Columbia University, felt that it wasnot a wise thing to do:

“The people whom you’re hiring from India and from, you know, China and from — the top universities, they’re the smart lot, they’re not really substitutes for guys who can’t get jobs.”

“In terms of broader considerations like the people who are coming in on H1B visas — they’re frequently highly trained and talented people and… a lot of our progress and prosperity depend on having such people.”

Well, it does not matter what is good or bad for the US economy. What matters to most US families is to see that they do not lose more jobs. It is obvious this kind of call for reduction in the number of H1B Visas will receive a lot of support among the politicians, media and mass people.

The Economic Boom is Over?

A very bad news for Indian highly educated job seekers is that

India’s own economic boom is coming to a halt. Yes, I clearly remember that in 2006 and 2007, many people used to think that it was just a matter of time that Indian economy achieved double digit growth. Many observers like me, used to say that the high economic growth would continue for a long time in India. However, now a days, hardly anyone I the country is concerned about high economic growth.

Future Looks Bleak

In January 2009, around 80,000 jobs were lost in US tech companies. Indian companies became specialized in serving US tech companies through outsourcing. That means that any significant fall of revenue among large US companies like Microsoft can cost many jobs in India. An interesting report: Lose Your Job At IBM? Reclaim It In India . IBM has offered its US workers they could go to India if they liked and take up jobs in IBM India under local salary and local terms and conditions. This may bring more anxiety for fresh graduates in India as if some American workers really come to India for doing jobs then, it will result in having fewer opportunities for Indian students.

Students are less selective now

Perhaps the only good thing that is coming from the economic recession is that Indian students and workers are becoming less selective. Gone are the days that big companies would go after the students for getting them in their offices. Now, officials of big local and multinational companies have to started feel nervous about the future. So, fresh graduates are now trying to pursue the companies. It is natural that the students will be less choosy about the companies, salary and even the nature of jobs. Well, just 2 years ago, the companies were in a rat race to attract students from top universities. Now, it is just the opposite.

Lack of entrepreneurship

One of the things that is absent among most students and educated people in India is lack of entrepreneurship mentality. They are too obsessed with doing jobs rather than taking a risk and setting up a venture. I think that this is a very good time for Indian government to address this issue. It will not change overnight but there should be a concerted effort among the government, universities and the media to motivate fresh graduates about this matter.

Finally, I just want to say that Indian government should take this matter very seriously. The students need to have a change in mind set too.

(This entry was originally posed in February 2009. It got deleted for technical problem. Now, I am again posting it today).

Economic Recession and Outsourcing Industry of India

The current economic recession has hardly spared any country on earth. Rich countries like USA, UK, Germany, Australia, Japan, Canada- almost all the rich countries have got badly hurt from the recession. Even a living legend like Tiger Woods has lost his sponsorship deal with General Motors. So, there is no reason to be surprised to know that Indian economy is also getting hurt from the global economic recession. For India, it is even a bigger problem because India is the land of IT outsourcing and a lot of large western companies outsource their IT services to Indian companies. So, it is obvious that the supply of works for Indian outsourcing companies will suffer in 2009. If the global economic recession continues then Indian companies may really suffer even in 2010.

Against this background, 17th edition of NASSCOM India Leadership Forum (NILF) took place recently. There most of the big names of Indian IT industry joined and discussed what should be done at this moment. There is hardly any difference among the industry leaders that recession is really hurting the industry. The main reason behind this bad impact is that in rich and developed countries, big companies are decreasing their IT budget and investment. This scenario will not change unless the condition of those countries improves.

In the meeting, the industry leaders also discussed about Satyam Computer Scandal and they are keen to find a way that would ensure that the repetition of this kind of scandal does not happen in future. I feel that Satyam Scandal came at the worst possible time. It happened at a time when Indian government and NASSCOM should have been very busy about dealing with the global economic recession. In stead, they had to spend a lot of time and energy after the Satyam Scandal. Satyam Scandal showed the world that India has some serious problem about corporate governance. It seriously cast a dark shadow in the outsourcing sector of the country. The worst part is that it received a lot of negative coverage in Western media.

Some Indian companies are taking a serious look on the domestic IT market of India. India may be the no. 1 player in the outsourcing field, but the reality is that more than 90% people still do not own a computer in the country. So, it is true that there is enormous room for growth in the domestic market, but at the same time, you have to remember that India is still a poor country and Indian government is not so much willing to spend a lot of money in the technology sector. For example, Indian decision makers did not join the OLPC initiative. So, most children in India still do not have any idea about information technology. E-commerce is yet to take off seriously in the country. Almost all the people living in the rural areas still do not have any idea about internet technology. So, yes it is a good thing to think about Indian government investing in information technology, but it is still a dream that has not come true.

With the condition of global economy becoming worse day by day, many other countries (involved in the outsourcing sector) will have to fight harder with India for getting projects from western companies. I am afraid that there will be more competition for less amount of money. At this moment, China and Philippines are the two major rivals of India in outsourcing industry. If the economic recession continues for a longer duration then it is obvious that outsourcing companies from some East-European countries will be forced to lower their prices and attract Western companies. If that happens then it may bring more disasters for Indian companies.

NASSCOM leaders are still optimistic and confident that Indian outsourcing industry is strong enough to survive the tough time. I have no doubt about it too. However, I feel that more funds should be invested for carrying out high quality research in Indian universities. Yes, it is correct that Indian companies are doing very well when it comes to outsourcing of software services or call centre. However, if you take a look at your PC then can you find even one computer program (software) that is made by an Indian company?

GM Bankruptcy: What does it Mean for South Asia?

Today, I spent many hours watching CNN and BBC. Well, yesterday, there were many reports indicating that General Motors would file for bankruptcy today. The accident of a French plane perhaps took away much of the attention from the GM event in these two channels. This bankruptcy is certainly a very big news for USA and even some European countries. Naturally, some plants will be shut down and many jobs will be lost. However, for South Asia, this is a different story.

First of all, General Motors is not a very big player in the Indian auto market. The good thing is that GM India: Not Included In Parent’s Chapter 11 Filing. So, it seems to me that GM India will not be in a bad position. However, there some concerns may arise among the consumers about buying General Motors car in India. They may be worried whether after buying cars they can have good customer service as GM has become bankrupt in USA.

Economic Times reported:

To address concerns related to spare parts, investments, new launches and service networks in the country, the company is launching a new marketing campaign called “there for you, there for India”. “We are not cutting back on investments, or stopping production of any model,” said Ankush Arora, GM India V-P, marketing and sales. In fact the US auto maker is going ahead with its new launches in the country. In a few days, it will launch the LPG variant of the Spark followed by the Chevrolet Cruze in September and the mini car early next year.

The bankruptcy may also cause some concern in the Information Technology industry in India. Tata Consultancy Services (TCS), Wipro and Satyam have multi million dollar outsourcing deals with GM. So, these companies are likely to suffer. As for the other countries in the region, I don’t think that this fallout of America’s largest automaker will make any significant impact.

(This entry was first published a few days ago but then it got deleted because of technical problems. So, I have uploaded it again now)

Outsourcing: From India to Ireland and Australia?

It is not that I am an expert on outsourcing but I have been covering this topic for 3 years and thus, I feel that I have some knowledge about this topic. That is why, I really get shocked when I see this kind of media headlines: Outsourcing: Bye bye Chennai, g’day Brisbane

From the title, you can understand that the report stated that India will have bad time for outsourcing while cities like Brisbane will be ideal place for it in future. Another city that will shine a lot is Belfast of Northern Ireland. KPMG has listed 31 cities that will shine in future as potential outsourcing hubs of tomorrow. Some of the cities are situated in India: Nagpur, Jaipur and Ahmedabad. I find it almost impossible to believe that Brisbane and Belfast will become more lucrative destinations for outsourcing compared to Mumbai and Chennai. I find it difficult to accept because do some search in Google and try to find out the expense of living in cities like Mumbai and Chennai and then compare it with living expense of cities like Brisbane and Belfast.

US and European companies came to outsourcing because of cutting cost by sending jobs in cheap Indian cities.

(This entry was first published in February 2009. Because of a technical problem, the entry had to be deleted and I am reposting again now.)

The charm of outsourcing is eroding in USA

Kristie Kelly, a Los Angeles based wedding gown designer, removed 40% of her business operations from mainland China to USA in the last four months. Kelly also teamed up with Walt Disney to promote and sale her low priced gowns. She is selling her products through the Disney Fairy Tale Weddings Collection. The gowns sold in these stores cost $3,800.

A famous wedding-gown designer, Kristy Kelly, used to produce her high-end gowns in USA and outsourced the low-end gowns to mainland China. Now, 40% of that production work is done in a factory based in Nashville, Tennessee. By the middle of this year, Kristy would remove another 40% of her operation in USA.

Outsourcing has certain advantages but it has its disadvantages as well. Very often due to large distance, the company that placed orders can not keep an eye on the production process. Then there is the rising shipment cost and language barrier which makes outsourcing quite complicated especially, for mid-size and small business owners like Kristie Kelly. Kelly is happy with the present arrangement. The manufacturing facility is at a short distance which makes it easy for her to keep track of her production and it would also cut down the shipping cost.

Saving the economy is not only the top priority of the US government but also business owners like Kristie Kelly who previously resorted to outsourcing to gain competitive advantage in the market. As more and more small and mid-size business owners like Kristie Kelly would remove their businesses in near future, does this mean that the high point of outsourcing is over?

Related articles:

Forbes.com

(This entry was first published in February 2009. Because of a technical problem, the entry had to be deleted and I am reposting again now.)

Barack Obama’s anti-outsourcing stance concerns India

American President, Barack Obama’s anti-outsourcing movement came as a big blow to the Indian IT Industry. Of the total foreign currency earned by the Indian IT sector, 60% ($64 billion) comes from outsourcing. At present, about 1,000 American companies have shifted their jobs in abroad. Barack Obama, in his first US Congress session on February 25, 2009, said that his government would give tax breaks to companies that would retain jobs in US and vice versa. This would badly hit the American companies that have outsourced jobs in abroad.

Kamal Nath, India’s Minister of Commerce and Industry, said that he will clarify this issue with Washington. Indian government will also discuss this anti-outsourcing movement in the World Trade Organization. Mr. Nath said that his government would make sure that America’s movement is compatible with WTO when they had been talking about bi-lateral trade and movements of goods, people and services. He also said that one has to see how the US companies are using India as a base for technological development. It can not shutdown instantly.

Moreover, the US companies that are receiving bail out money would not be able to hire employees through the H-1B visa which is another major blow to the thriving Indian IT industry. As per his election agenda, Obama started this outsourcing movement to retain jobs in USA. The US President has also set goals to creat 3.5 million jobs in the country.

Obama’s decision upset the heads IT companies in India. Kris Gopalakrishnan, CEO, Infosys, said that outsourcing increased the competitiveness of US companies and it created more jobs inside the country. Ashok Soota, CMD, MindTree, said that Obama’s speech was an extension of what he had said in his campaigns. Sujata Rakhra, Vice President, Marketing and Communication, APAC, Perot Systems said that businesses today are truly global than ever before and such protectionalist measures would not only restrict innovation but would also hamper the progress of globalization. Along with Indian IT companies, this new decision also upset many US companies that are saying that such a move would hurt US.

Related articles:

IBN Live

The Economic Times

(This entry was first published in February 2009. Because of a technical problem, the entry had to be deleted and I am reposting again now.)

Challenges for Outsourcing Sector of India in 2009

2009 is perhaps a very challenging year for the global economy. The only good thing is that the price of oil is very low. The bad thing is that we are in the midst of economic recession. Satyam Scandal has come at a time when in the USA, a president who has talked a lot against outsourcing jobs to India has taken oath. Some other countries like Philippines, China and Russia are determined to take larger pies from the outsourcing revenue. Here, in this entry, I have analyzed some about the challenges that the Indian outsourcing industry may face in 2009.

Economic Recession

Indian outsourcing industry is almost solely dependent on American market and American companies. As you know, the condition of American economy at this moment is not good at all because of the ongoing economic recession. So, there is a lot of worry among Indian technology companies about the possible impact or negative impact on the outsourcing sector of the recession. I thing that it is a very big challenge but economic recession in America can have a positive impact too. Now, American companies feel the need of cutting cost more than ever before and what can be a better way to cut costs than outsourcing the jobs to India?

Satyam Scandal and Corporate Governance

It has been almost three weeks since Satyam Scandal then to the media and that people could know about it. Still, it seems that there is no end to the media coverage of this scandal. Every day, we can find new news items and reports about it and this has seriously put some questions about the level and quality of corporate governance in India. Today, “Nasscom requests members not to poach Satyam staff”.

Nasscom President Som Mittal said in an interview:

“It was decided in our executive committee meeting that other companies should not try to take over Satyam’s staff and clients, as this would affect the business continuity of the company. The employees of the company are working on different projects and it’s necessary to complete all these projects, …… “The association had put in a request to all our members, and the companies are maintaining a self-imposed restraint,”

The employees of Satyam a tough raid and frustrated and are desperate to go to other companies because they feel that they have a bleak prospect in Satyam.

Philippines

You may think that there can be no comparison between Philippines and India in outsourcing as Philippines is a poor country with all the political instability. Well, the decision makers in the country have realized the potential of outsourcing and that is why, they are doing everything they can to get more American companies outsource to the Philippines. According to a research of Everest Research Institute, Philippines expected to emerge as premier non-voice outsourcing hub. If there are few more stories like Satyam Scandal in 2009 then in 2010, we may find a significant shift in outsourcing projects to Philippines from India.

China, Nigeria and East Europe?

Eastern Europe countries and Russia have already started to compete with Indian companies in this field. Just take a look at Odesk and you will find that a large number of service providers are from Russia and they are ready to work at a competitive rate. You can find detailed information here:

2008 oDesk Russia Offshore Outsourcing Statistics Data Report

China has been trying a lot to emerge as the market leader in this field and is now in second position after India. Well, China surely has some good sides but the main problem is still the lack of large pool of workers skilled in English language. Chinese government is serious to fill up this gap and I have a feeling that China may have some big success stories in the next few years.

What about Nigeria? Nigeria is famous for online scams of sending all kinds of emails. Did you ever think that why Nigerians are related to online scams in such a large scale? Well, the reason is very simple: Nigeria has a large population with good skill of English language and some skill of Internet and then they are poor and unemployed. They are ready to work hard if they can get the taste of earning American dollar or British Pound by the outsourcing sector. I like to think that Nigeria can be a very big challenge for India in the next one decade provided that Nigerian decision makers have the same attitude and wisdom like the decision makers of the Philippines.

Read more: ‘Nigeria has great potential in outsourcing’

Obama and American Public Opinion

Just a week ago, Barack Obama took oath as the new president of United States of America. During his campaign for presidency, Obama several times said that he was not happy with outsourcing of American jobs and he would try his best to support those American companies who keep the jobs inside USA. In the last one week, I have not seen similar rhetoric from him but I think that it will be difficult for him to do a u-turn to his campaign against outsourcing. There is another factor that he has to take into account. In 2008, 2.6 million American people lost jobs and now, they hope that Obama will really do something about outsourcing and ensure that more jobs do not go out of the US. If the condition of US economy does not witness a significant improvement in the next few months then there will be more pressure on Obama to keep his promise about working against outsourcing jobs to India.

Indian Politics and Election and Uncertainty

2009 is the year of general election in India. The election is supposed to take place in the month of May. So, it is obvious that until May, everyone will be busy with the election. Outsourcing will not be a priority for the government in the next few months. Well, my suggestion for the Indian government is that they should try to work with NASSCOM more closely. They should ask NASSCOM to help the government with intensive monitoring of the global condition and especially at times like Satyam Scandal.

For many years, India followed closed economic system. In the last two decades, India opened up its economy and IT outsourcing sector witnessed impressive growth. 2009 can be a challenging year for outsourcing sector.

What do you think?

(This entry was first published in January 2009. Because of a technical problem, the entry had to be deleted and I am reposting again now.)

Satyam Ramalinga Raju Scandal: Some Reflections

Ramalinga Raju was considered to be one of the success stories of modern India in the field of outsourcing. He came from south India and he studied there and then he went to USA to get hired studies and even attended a course in Harvard University. Then he came back to India and tried to build his career. He was one of the few persons in India who realized the potential of outsourcing and that is why, he started Satyam in 1987. He started with only just twenty workers and he worked very hard indeed to get projects from American companies.

In the last two decades, Satyam Computer Services Ltd. Acted tremendous growth and success and it has currently more than 50,000 workers. So, it really looks like an Indian success story in the field of outsourcing. Everything looked rosy until a few months ago. Then, things fell apart all of a sudden for the Company. Ramalinga Raju but is no longer the pioneer and hero of a outsourcing sector of India but he is now considered to be one of the worst villains that Indian business sector can think of.

To give you the story in brief, I am quoting from Wikipedia:

In January 2009 Raju indicated that Satyam’s accounts had been rigged over a couple of years.[5] The botched acquisition attempt involving the company Maytas in December 2008 led to a plunge in the share price of Satyam and started unraveling the fraud.[5] It eventually ended in Raju admitting to the accounting fraud to the tune of 7000 crore Rupees or 950 million pounds, and resigning from the Satyam board on January 7, 2009.[6][7] The Indian subsidiary of PricewaterhouseCoopers was the auditor of Satyam.

I am surprised to see one thing is that Satyam Computer was listed in even New York Stock Exchange. How could Ramalinga Raju carry out such large scale accounting fraud single-handedly? What did the other detectors do? Why they could not understand the problem of the company? I guess that many people like me are contemplating on the questions at the moment and we will have to wait for some weeks or even some months to get a clear picture.

It seems that Indian government officials have the same questions in their mind and that is why they have decided to slap notices on Satyam directors. I am a very Interested to see what Indian government do in the next few days. Satyam Ramalinga Raju Saga but has certainly brought a lot of negative publicity for the Indian business sector. I remember that two years ago, Channel 4 of UK but broadcast a documentary on Data Theft Scandal. This brought a lot of negative publicity for Indian outsourcing industry in the UK but you can easily understand that at the time, it was possible for Indian companies to say that it was just a propaganda and in accurate depiction of Indian outsourcing industry. Now, the tragedy is that but a lot of bad publicity has been generated within India itself about Satyam scandal.

The scandal is India’s biggest corporate scandal. And I’m certain that this will not be the last one and it is still a good time that Indian government takes a closer look on the corporate culture in the country. After all, it is a $1 billion scam that has literally given a bad name to the way business is carried out in India.

The people who got affected endorsed a manner are the investors or shareholders of Satyam. It was considered to be a lucrative company and many people did not mind buying the shares are several times more than their actual price. Now, they can find that the shares they own but have any value in the market. Naturally, they are very angry with this matter and they’re demanding exemplary punishment to Ramalinga Raju. They’re also very worried about their future and some family is will perhaps get totally broken financially because of this scandal. It is perhaps a shocking to see that some people are actually supporting Ramalinga Raju if and during his worst time. If you are from Europe or America it may look shocking to you but it is not talking to me because it often happens in South Asia. Ramalinga Raju but was a generous man to his villagers and some other poor people and they got a lot of facility from him. Naturally, to them, he is like a demigod and savior, who has saved their life and their families.

I really wish that Indian government deals for them matter but in a very transparent manner and give full access to media all the documents. Indian government should also allow Ramalinga Raju to talk to the journalist freely and tell his side of the story. Transparency is needed at this moment because the reputation of Indian outsourcing sector is at stake with this scandal. Indian government should also try to figure out how to minimize this kind of scandals in future because it may seriously affect Indian service industry.

It is the time of economic recession and many people in America have lost their jobs. So, those people who were against outsourcing will be trying to take this opportunity and say that outsourcing should stop. Indian government has to take this matter very seriously and assure that American companies that Satyam Ramalinga Raju Scandal is just an exception and is not a part of a future trend.

What do you think about the Satyam Ramalinga Raju Scandal? Let me know your ideas in the comments section.

(This entry was first published in January 11, 2009. Because of a technical problem, the entry had to be deleted and I am reposting again now.)