MNCs Benefit From India's Telecom Outsourcing Demand

Most of India's business went to multinational service companies such as HP and IBM rather than Indian outsourcers. Thus, India has emerged as the biggest consumer of outsourcing services in the Asia Pacific region, ahead of Japan, China, and Australia, according to sourcing consultancy firm Technology Partners International Inc. (TPI) in Houston, Texas.
Most of that business, though, went to multinational service companies, such as Hewlett-Packard and IBM. Indian outsourcers don't tend to focus on their home market because they don't find it as lucrative as the US and Europe, analysts say.
In the first half of 2007, outsourcing contracts from India were worth $1.7 billion and accounted for almost a third of contracts awarded in the Asia Pacific. Japan came second with contracts worth $1.2 billion and China third with $1.1 billion.
The demand in India has come mainly from the country's booming telecommunications industry, including two very large contracts worth about $1.3 billion. Still, momentum for contracts in India is huge and the country will stay among the top three consumers of outsourcing even if more large contracts don't materialize, Siddharth Pai, a partner at TPI and managing director of its Indian operations, told reporters in Bangalore recently.
TPI tracked the contracts worth more than $25 million for its regional survey. Had it included smaller contracts, the Indian outsourcing market would be three times as large, Pai said.
In the global market, the number of outsourcing contracts worth more than $50 million fell 25 percent in the first half of 2007, according to TPI. The total value of contracts also fell, by 23 percent.
The global market continues to grow robustly, however, even if business is shifting to smaller contracts, said Mark Mayo, a TPI partner and managing director of its global advisory services. Contracts are getting smaller because companies are dividing work among multiple suppliers, rather than awarding business to one supplier, Mayo said. Many contracts also tend to be short term and have a large offshore component, he added.
Indian outsourcing companies, such as Infosys Technologies and Wipro, had only a 4.0 percent share of the global market in the first half of the year. That figure does not include multinational companies like IBM that offer services from India.
A new opportunity for Indian companies is what TPI calls Knowledge Services Offshoring (KSO), which is the offshoring of highly complex work, requiring high level skills, such as research and analytics.
Unlike business process outsourcing (BPO), KSO work is non-repetitive and requires staff to use judgment, Pai said. A significant portion of the offshore KSO work will be done by subsidiaries of multinationals rather than by outsourcers, as some of the work is core to a company's business, he added. Most of the KSO work sent to India currently comes from the financial services industry, Mayo said.

Quatrro Acquires US Financial
Group As Mortgage Tech Platform
Quatrro Mortgage Solutions, a subsidiary of Quatrro BPO Solutions, founded by Raman Roy (Quatrro), is all set to acquire the mortgage technology platform and onshore-offshore loan processing operations of Preferred Financial Group, Inc., Burlingame, California, USA. Using this acquisition as a base, Quatrro plans to provide end-to-end fulfillment services to US mortgage lenders across the US.
This acquisition enhances Quatrro's capability of end-to-end processing of high volume of mortgage loans using an onshore-offshore model. It allows Quatrro to provide world-class service at a price-point projected to be 30 percent to 50 percent lower than current processing costs in the US, reflecting the superior efficiency of the acquired state-of-the-art technology platform coupled with the cost-effective onshore-offshore service solution.
Preferred Financial Group, Inc. (PFG) is a privately-held financial services corporation that originates, underwrites and funds mortgage products. The company developed its ePower proprietary mortgage technology platform to deliver fully integrated and automated underwriting, pricing and locking to enhance productivity, strengthen customer relationships, and improve quality. Following the acquisition, PFG proposes to take advantage of Quatrro's expanded processing expertise and cost savings to serve its own customers with increased efficiency at a lower cost. It will also provide ongoing support and domain expertise to Quatrro on business development through automated tools like ePower.

American Tower to Enter India's
Telecom Infrastructure Space
In a move that would heat up the competition in telecom infrastructure space, US-based American Tower Corporation is all set to enter the Indian market. The company manages and rolls out infrastructure such as towers for mobile operators.
American Tower owns and operates over 22,000 sites in the US, Mexico and Brazil. Additionally, the company owns about 2,000 revenue producing rooftop and tower sites.
ATC's entry comes at a time when mobile infrastructure companies in India are getting high valuation. Reliance Communication recently sold 5 per cent stake in its tower business for nearly Rs. 1,400 crore.
According to industry sources, Reliance is looking at a further dilution of around 25 per cent and is in talks with at least three global majors, including American Tower Corp. ATC, meanwhile, is expected to make a formal announcement of its foray into India on Tuesday.
Bharti and Essar have also hived off their telecom infrastructure business into a separate entity.

Hinduja BPO Keen on US Acquisition to
Diversify into Consultancy
HTMT Global Solutions, the ITeS firm of the Hinduja Group, is looking at bringing in consultancy to its portfolio of services and this could preferably be done through an acquisition. The company would be looking at acquiring a mid-sized consulting firm in the US.
The company, which provides both back office and voice services, will be able to move up the value chain with the new service, HTMT Global CEO Partha Sarkar said.
Sarkar said the company will be expanding its presence into tier 2 cities in India. It currently has presence in Mysore, Karnataka and Durgapur in West Bengal and is looking at adding two more locations by the end of this fiscal. It plans to raise the headcount to 12,500 by the end of this fiscal from the current 10,000.
The company is also looking at extending its presence to Latin America in the next fiscal. It has 19 delivery centers across the US, Canada, Mauritius, the Philippines and India. The US and Canada presence was expanded through the acquisition of Affina for $30 million last year.
The company, which has existing revenue of Rs. 585 crore, with reserves of about $115 million, is looking at becoming a $500 million company by 2010 through both organic and inorganic growth route.

First Consulting Buys
US Firm Zorch
First Consulting Group, Inc., (FCG), the parent company of FCG Software Services India, has announced the acquisition of Zorch, Inc., a Salt Lake City, Utah based company that has built a proprietary enterprise software solution to provide regulated content management and collaboration for the life sciences industry.
The products and solutions by Zorch are built entirely on the Microsoft Office Sharepoint Server platform, and are designed to allow life sciences organizations to leverage their existing
Microsoft platform investments while capitalizing on FCG's product innovations and industry-leading best-practices. The new offering acquired by FCG will be named FirstPoint, the company said in a release.
Larry Ferguson, chief executive officer of FCG, said, "We are very excited to add the Zorch team to FCG and offer FirstPoint as a solution to the life sciences market. FCG already has a market-leading solution in FirstDoc(R), a product that is used in 12 of the top 20 pharmaceutical companies and supports over 50,000 end users. We believe there is a good opportunity to leverage FCG's strong brand name and experience in the life sciences market, and the FirstPoint(TM) product opens new opportunities for FCG in pharma and biotech enterprises of all sizes."
Vadeesh Budramane, VP Technology & COO, FCG India, commented, “This acquisition demonstrates our commitment to life science market. It also strengthens our leadership position in the technology space”.

Good News for India's Urban
Poor: US firm to offer loans
The US-based Development Innovations Group has set up a company in India, Capstone Financial Services Pvt Ltd, with a view to providing/facilitating loans to the urban poor.
Capstone will soon be registered with the RBI as a NBFC. The company's first office in India was inaugurated in Mumbai recently.
Addressing a press conference, Franck Daphnis, President & CEO, Development Innovations Group, said that Capstone would essentially be a 'service' company that will provide loans to the urban poor. He said that for starters, Capstone would give loans for housing, home improvement and micro-finance.
Micro Finance
It is not clear how the loans would be funded. Daphnis spoke of Capstone being “supported by Bill Gates Foundation” and that refinance arrangements are being worked out with Indian entities, which include ICICI Bank. Capstone is looking at lending between Rs. 20 crore and Rs. 25 crore in the first year, but plans a quick ramp up.
Capstone, which will set up two more offices in Chennai, will have about 30 “loan officers” who will “work into the community”, Daphnis said. He noted that the Indian urban poor are as yet largely under-financed. While some efforts are on towards rural micro finance, urban micro finance is a market waiting to be tapped.
Today, according to Daphnis, there is no one in India who provides a less-than Rs. 3 lakh housing loan for a self employed urban resident. Capstone will provide such loansat 15 percent compounded. It also intends to give consumer and personal loans to the urban poor hence 'micro finance' at a monthly rate of 1.7 percent, flat.
Delivery Channel
Over time, providers of other types of financial services such as insurance could piggy ride on the delivery channel created by Capstone.
Answering a question, Daphnis said that issues such as small ticket size, risks and higher costs of operations are factored into the pricing of loans.
He said this model would be expanded into other Indian cities typically those with a population of around 80 lakh.

White House Fellows
Visit Convergys' Gurgaon Centre
Recently, the White House Fellows Class of 2006/2007 visited Convergys' Atria facility in Gurgaon, India, as part of its global familiarisation tour. During the visit, the Convergys executives gave a presentation covering the growth of the BPO industry in India and provided an overview of Convergys and its global service delivery capabilities and current presence of more than 11,000 employees in India. Myrna Blyth, chairman of the President's commission on White House Fellows, led the delegation along with the 12 other fellows. Sanjit Bal, director, business development, facilitated the visit and site tour, along with Sharad Talwar, site leader and director of operations, Atria facility, Convergys, and Lalit Lalwani, senior manager, Atria Command Center, Convergys.
The visiting fellows asked questions about Convergys' training and talent management programmes, the company said. They also asked about Convergys' business model, infrastructure and the future of the contact centre industry in India. The fellows enjoyed a short tour of the Atria centre, including the Command Center, and got a perspective of the operations environment and the investment Convergys has made in India.

Warehouse Major SAM'S CLUB
Zeroes in on India

US retail giant Wal-Mart's $41.7-billion warehouse division SAM'S CLUB is planning to set up shop in India.
According to industry sources, the members-only warehouse club is in preliminary talks with Indian consumer durables majors Videocon Industries and South Korean giant LG Electronics for sourcing products for its India operations. It is understood to have hired market research firms McKinsey and Technova to study the Indian market.
Sources said the company was looking at the product baskets of durables companies in India. SAM'S CLUB is a price leader globally and charges no more than 12 percent mark-up on items. The multi-channel retailer operates membership warehouse clubs, samsclub.com and catalogues. It follows a business-to business model and small shopkeepers and retailers can become its members. Significantly, this model is allowed 100 percent foreign direct investment (FDI) in India.
The club accounts for 12 percent of Wal-Mart's sales and runs 575 “no-frills” stores in 48 US states, and about 100 stores in Brazil, Canada, China, Mexico and Puerto Rico. The chain's 47-million-plus members many of them small-business ownerspay an annual fee to shop. The stores offer more than 4,000 discounted items, including bulk office supplies and food, electronic goods, jewellery, clothes, insurance and travel services.
Analysts said the warehouse major's entry into India seemed quite logical as its parent company Wal-Mart and Bharti Enterprises had already agreed to set up a 50:50 joint venture company in the cash and carry segment. The venture will involve selling to wholesale consumers, mostly small-shop owners.

HAL to Make Components for Hawkeye Aircraft

The US-based Northrop Grumman Corporation has signed an agreement with Hindustan Aeronautics Ltd (HAL) for outsourcing components manufacturing for the E-2C Hawkeye aircraft.
“Under the terms of the agreement, both companies have agreed to work together to identify projects of mutual benefits. This would result in involving HAL in Northrop Grumman's E-2C Hawkeye programme by way of sourcing aircraft assemblies and components, digitisation and other related services from HAL,” said Tom Trudell, Northrop's international business development manager.
HAL was chosen for its expertise in aerospace design and manufacturing. “HAL is going to be an excellent contributor to the Hawkeye team,” said Tim Farrell, vice-president of airborne early warning programme for Northrop Grumman's integrated systems sector.
“The quality of their products and the creativity of their people are known to the industry. The capabilities and reliability of the Hawkeye are also well known to our allies and adversaries. HAL will help make this aircraft an even more capable tool for its operators the US Navy and, so far, six allied nations.” Ashok K Baweja, chairman of HAL, said, “HAL is keen to develop a mutually beneficial cooperation with Northrop Grumman, which would help HAL to get on a high-growth trajectory.”

Eicher Motors Buys US' Hoff for $3.5 mln

Commercial vehicles maker Eicher Motors Ltd. said on Wednesday it had acquired U.S.-based Hoff and Associates and its two Chinese subsidiaries for $3.5 million.
Hoff provides engineering solutions to aerospace, automotive, semiconductor, medical, marine and plastics industries, Eicher said in a statement.
Hoff had consolidated revenue of $5.2 million in 2006, Eicher said

Welspun Gujarat to Set up US Facility

Welspun Gujarat Stahl Rohren (WGSRL), one of the country's largest pipe manufacturers, will set up a manufacturing facility in the US, the company's first in the North American continent.
The company will infuse $100 million in the facility to come up on a 140-acre site in Little Rock, Arkansas.
The unit will produce 300,000 tonnes of tubular steel pipes for applications in the oil and gas industry, and hopes to start production by early 2008. The company will hire about 300 workers for the project.
B K Goenka, vice-chairman and managing director of the company, said, “Little Rock today has the advantage of a talented workforce, good transportation facilities and above all, the right geographical location.”

Trans-Asia of US Plans to Invest $1 bn

Trans-Asia Infrastructure Holding LLC of the US is planning to make a foray into urban infrastructure and township development projects with a kitty of Rs 4,000 crore ($1 billion). The company is also planning to tap the market next year to raise funds for the purpose.
Dr Ravindra Verma, managing director of Second Vivekananda Bridge Tollway Company Pvt Ltd (SVBTC), said: "We would tap the market next year to raise funds while a significant portion would come from internal accruals.”
PASGIC LLC, a joint venture between the Pacific Alliance Group and Trans-Asia of the US, and the Stardec Group of the Philippines, leads SVBTC, which designed and built the 880-meter-long cable-stayed extra-dosed bridge.
"We are lining up a significant portion of the fund for projects in West Bengal. This would include new projects like urban mixed land use and township development projects," Verma said.
According to him, Howrah's horizon will change after the toll way project. "Moreover, there will be future industrial growth on the Howrah side, with a lot of activities, like setting up of factories and assembly plants, taking place. We believe a lot of townships will be needed for that. We will be looking at mixed land use development projects for commercial and residential purposes," Verma said.
The company has also lined up funds for proposed infrastructure projects like a deep-sea port at Haldia, light rail transit system in Kolkata and greenfield airport in the state.
While it will focus heavily on eastern India, Trans-Asia Infrastructure will also look for projects in northern India, in places like Delhi, Punjab, Haryana and Rajasthan.
The company might also co-invest with other companies for special economic zone projects, Verma said.

Bangalore Ranks Among World's
Best Places to do Business

According to a latest study, Bangalore emerged as one of the best places to do business in the world, joining the league of cities like London, Shanghai and Singapore.
India's growing presence in the global economic arena has received a boost with Bangalore emerging as one of the best places to do business in the world, joining the league of cities like London, Shanghai and Singapore, a latest study says.
Bangalore, known as the world's back office, is among the 12 cities named in the 'Best places to do business in the wired world´ list recently compiled by Business 2.0, a magazine published by global media giant CNN-Time Warner group.
Other cities which find a place on the list are -- Tokyo , Hong Kong, Barcelona (Spain), Helsinki (Finland), Seoul, Stockholm (Sweden), Tallinn (Estonia) and Tel Aviv (Israel).
“The city is home to Infosys, Google's Research and Development Center, and some of the world's most talented (and inexpensive) software engineers,” the report said while describing Bangalore.
Each place is described along with the availability of free Wi-Fi points, best place to get down to business, best place to celebrate closing the deal and tips on how to get around.
Interestingly, the list also offers the address of saloon to get a good haircut apart from trivia about every city. On the 'What you might not know´ section on Bangalore, the report says, “Residents call their city Bengalooru. Like Bombay (now Mumbai), the city was renamed to make it sound more Indian than British.”
About Shanghai, the report says, ”Shanghai is an increasingly popular choice for businesses looking to outsource software development. It's also the Asian-Pacific headquarters for more than 150 foreign companies, including General Electric and General Motors.“

India Likely to Attract $20 billion FDI a Year Till 2011: Economist

India is likely to receive foreign direct investment of $20.4 billion every year during 2007-11, even as executives around the world see developing countries as having "heightened political risk".
According to a report by Economist Intelligence Unit, compiled in cooperation with Columbia Programme on International Investment (CPII), there is "significantly heightened political risk perceptions among the investors".
This, the report said, is especially in the case of emerging markets where all four forms of political risk - political violence, FDI protectionism, threats associated with geo-political tensions and government instability - are seen increasing over the next five years.
For developed countries also, there is a widespread concern about rising FDI protectionism, the threat of terrorism in the United States and Britain and impact of geo- political tensions ranging from effects of possible conflict with Iran and Islamic radicalism to Russian-Western frictions.
The report projected that India's regional competitor, China, would attract average foreign investments of $86.8 billion a year till 2011.
Last year, the two countries had received FDI worth $17.5 billion and $78.1 billion respectively. In percentage terms, India received 1.36 per cent of the world's total FDI as against China's 5.79 per cent.
The report predicts the US to retain its top slot in the list of FDI recipients with total inflow of $250.9 billion per year. Britain could witness a fall in FDI inflow to $112.9 billion per year over the five-year period, against $137.7 billion last year.