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India - Sunday Times [May. 18th, 2008|09:33 am]
Mark Kobayashi-Hillary
From The Sunday Times
May 18, 2008

How far would you go?

The drive for efficient business services sweeps over national boundaries, but ignores cultural differences at its peril

More UK companies are setting up fully staffed offices abroad — while at the same time, the locations from which outsourced services can be provided are proliferating all over the globe. And between these twin trends, the distinction between outsourcing and offshoring is becoming blurred.

“The difference is clear: are you buying from someone or doing it yourself?” explains Mark Kobayashi- Hillary, offshoring director of the National Outsourcing Association and author of books on the subject. “Outsourcing can remove a lot of headaches: logistics about finding offices or training people, particularly from a different culture.”

The advantages of offshoring, however, are similar. “Cost is the main driver, without a doubt,” says Philip Carnelley, senior business adviser at the Hackett Group, a global strategic consultancy firm. Wage differentials between the UK and other countries, particularly in Asia, account for the vast bulk of offshorers’ savings.

The fact that IT operations are often overhauled at the same time as being offshored makes it difficult to separate the different strands of cost reductions, but Hackett estimates potential savings for companies with a global reach of more than £19m a year by a combination of process transformation and offshoring.

Sometimes it is more a question of certainty of cost, rather than simply a cost reduction, that provides the motivation for change. If companies want a set annual fee to help with budgeting, then outsourcing — which may well be done offshore — could provide the solution.

But money is only part of the story. “People are looking for capability,” says AS Lakshminarayanan, vice-president and country head, UK and Ireland, at Tata Consultancy Services, a global outsourcing specialist and IT services provider. “Some come to outsourcing from a cost perspective, but they also want to be more efficient and effective.”

Offshoring is no longer simply a question of sending low-skilled work to a low-wage economy; it is about hiring skills that are not core to your company.

The astonishing growth of the global offshore IT industry can be dated from the late 1990s and the surge in demand for IT professionals brought about as a result of “Y2K bug” fears.

Global sourcing of technology- related services in 2007 stood at £35 billion-£38 billion, a rise of about 30% on the previous year, according to Nasscom, the trade body for the Indian outsourcing industry.

India has capitalised on this demand: technology sector revenues now account for an estimated 5.5% of the country’s GDP, says Nasscom. “The vast majority of IT offshoring goes to India,” explains Vivek Nijhon, a senior adviser at the IT and business consultancy EquaTerra. “India has made offshoring a process, so it’s not a great challenge.”

India’s investment in education has created a large pool of graduates, an achievement that other countries want to copy. “Countries such as the Philippines are taking offshoring extremely seriously and trying to replicate what India has done,” says Kobayashi-Hillary. “With these services, all you need is a broadband connection and educated people. It can be a huge stimulus to the economy.”

Rajeev Sawhney, European president of HCL Enterprise, a global outsourcing specialist, says UK firms should take several factors into account when deciding where to offshore or outsource their work, from language to time difference.

Then there are issues of security and political stability. Kiran Sandford, partner and head of IT law at solicitors Mishcon de Reya, says these are often forgotten elements in a contract. “There is no such thing as global law,” she says, “so you could be dealing with two potentially conflicting legal regimes. If something goes wrong, the best thing could be not to fight it out in court but simply to pull out, so think about putting an immediate termination clause into your contract.”

As the industry matures, distinctions between countries are likely to become less of an issue for buyers and more of an issue for the outsourcing providers, which will decide what particular services are offered from which countries. “Where there’s an option for global delivery on bigger contracts, companies are already choosing between outsourcers, not countries,” says Nijhon.

Skandia UK

NOBODY could accuse Skandia UK, the investment, pension and life assurance group, of not doing adequate research on IT outsourcing. “It took us about a year,” says Tim Mann, the group’s customer service and technical director.

“We looked at everything — onshoring, near-shoring, offshoring — and we looked everywhere, in the UK, Europe and Asia,” Mann explains.

Skandia had three aims in mind: increasing IT capacity, improving competency and cutting costs. Those objectives were drummed into everyone who worked on the project.

The company ended up with a shortlist of three potential outsourcing suppliers, and in December 2006 it awarded a five-year, £100m contract to HCL Technologies in India to manage its IT infrastructure.

“Relationships and trust are central in India, where it’s important to be ‘part of the family’,” says Mann. “We spent time on cultural training to ensure we understood that.”

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The Hindu [Mar. 11th, 2008|05:29 pm]
Mark Kobayashi-Hillary

Indian IT to see strong growth with a sense of maturity


Chennai: You don’t normally expect case studies on ‘the Arctic Monkeys rock group and Hollywood actor Samuel L. Jackson’ in a book on outsourcing, but that’s what Mark Kobayashi-Hillary and Richard Sykes have done in ‘Global Services: Moving to a Level Playing Field,’ from Viva (www.vivagroupindia.com), as an Indian edition, with a foreword by Sir Howard Davies, Director of the London School of Economics.

“A very approachable look at some of the ways technology and the globalisation of services is changing our lives, and it’s not a typical ‘dry’ read on outsourcing,” assures Mark (www.markhillary.com), during the course of an e-mail interaction with Business Line, when he was recently in India, during the Nasscom summit.

“The interesting thing about Nasscom this year and last – as opposed to other years – is that the industry in India seems to have matured a great deal,” he adds. “There used to be a lot of tub-thumping at Nasscom, with the entire industry joining together to oppose some key issues or to lobby the Government. These days it is far more about the companies themselves and where they are headed.”

Excerpts from the interview, in which Mark airs his opinion on some of the issues top on the agenda of Indian IT (information technology) businesses.

Should the industry be worried about the US slowdown fears?

A lot of people have been talking about the potential issue of the western economic slowdown, particularly caused by the sub-prime banking crisis in the US. Of course economic conditions can be a cause for concern, but I don’t see this as a major issue for the Indian technology sector.

Why so?

First, it could in fact be an opportunity. Companies that have not yet explored offshoring – possibly smaller companies than we are used to – may look to it as a strategy now as a way of achieving ongoing cost certainty. That means there could well be a whole load of new opportunities for Indian tech companies.

On the other hand, there are additional fundamentals that are important to note. Though margins have been damaged by the dollar/rupee rate, all the companies are still registering very strong growth.

Investors have been concerned and share prices have dipped, but through all these market concerns the companies are winning new clients and expanding their business. It is perhaps a sign of market maturity in India that investors express great concern at moving from very fat margins to margins that are only good. This is still an industry where money is being made and jobs are being created.

There are very positive future signs. KPO (knowledge process outsourcing) is expanding from a concept we all debate to an area where there are genuine case studies and a history of success. This is a huge growth area for the Indian market because of the local experience of other forms of outsourcing.

The increase in size of the domestic market is also providing a welcome boost to the industry. In fact, there are many more positive signs at present than negative and I would say that the general outlook is for strong growth, but with a sense of maturity. We are not going to see the hyper-growth of the past, but this industry is becoming mature and responsible now and so it can grow in India and expand to new areas of services, building on the experience of the past.

Attrition, however, continues to worry the IT industry.

True. Attrition remains a concern throughout the industry and there are clearly several approaches being taken to resolve this.

At the Nasscom show, even luminaries such as Pramod Bhasin of Genpact were moaning that with all the training and facilities provided, he still sees people leave his company for very small salary increases. Ultimately it’s a question of supply and demand in the industry and the problem of all the companies chasing after a very small pool of experienced talent.

Naturally they will move on if the rewards are better elsewhere and everyone is free to do so – this is not bonded labour and lifetime loyalty cannot be expected – but with a larger pool of trained talent there will be more competition for each available job and a more natural approach to job changing for self improvement rather than job hopping for a few extra rupees. We need to increase the supply of skilled and experienced people in the industry today.

The industry complains about the lack of employable graduates in good numbers because they lack soft skills. How do you suggest employability can be increased?

I can’t see any way out of this other than a root-and-branch restructuring of the Indian education system. The present system is too elitist and too focused on skills that are not related to the workforce.

Even the elite schools – at the IIM and IIT level – are not really geared up for supporting the industry. They are in the fortunate position of being able to churn out highly intelligent graduates because the entry process is so tough that those kids are highly intelligent when they start at the school.

Many private sector companies, such as Steria and NIIT, are looking to create their own universities now so they can create their own stream of talent, which is great for them, but it’s not the answer for the whole of India.

And don’t forget, it’s not only the IT industry that is growing fast in India these days. The education system needs to be examined now with a view to supporting the growth of the nation over the next 50 years, ideally with suggestions on change from someone who is respected and does not have an axe to grind with the status quo.

Your take on the behaviour of stock markets with regard to IT companies.

It’s just natural market behaviour. The companies are seeing their margins squeezed, that affects future earning predictions, that affects valuations. It’s all basically a mathematical formula and the market is generally right, but it feels as if some human sentiments have been lost.

The market can’t expect hyper growth to continue forever, but we are still looking at healthy growth, good customer acquisition records, and strong development of new markets. These tech firms are doing pretty well still. I’m no market analyst and in no position to give advice, but my own sentiment would be that it’s time to buy shares, not get concerned about the latest dip in value.

On policy directions for the industry.

The Government has effectively told the industry to grow up, the implication being that offering tax breaks to companies investing in areas such as BPO is only what infant industries do. I can understand the sentiment of the Government, but I would urge the Government to look again at what they are planning for the tech and services industry.

It’s an area where international regions compete with each other for business and if the Indian Government thinks it is acting in a mature way by starting to demand more tax from the industry – compared to similar companies in other regions – then they will find a problem on their hands.

I think Nasscom has been proposing a responsible and mature debate on what level of perks are needed to maintain international competitiveness and the Government needs to listen to their call – it’s not about tax evasion, it’s about ensuring that the success already achieved by India in this industry can continue to grow.



Mark Kobayashi-Hillary is offshoring director of the UK National Outsourcing Association. He has written several books on globalisation and outsourcing, including ‘Outsourcing to India’ and ‘Building a Future with BRICs’ - both published by Springer. Mark also writes a regular blog for Computing magazine titled ‘Talking Outsourcing’ and he publishes a podcast on iTunes with the same name.

Mark is a founding member of the British Computer Society working party on offshoring. He is a non-executive director of foreign exchange firm FXA World and he has an MBA from the University of Liverpool Management School.

Current projects include writing a TV documentary series on globalisation for Force Ten Productions and a fable on globalisation titled ‘Who Moved my Job?’ – planned for publication in 2008.



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NASSCOM Report [Mar. 6th, 2008|05:38 am]
Mark Kobayashi-Hillary

NASSCOM Leadership Forum: There's No Stopping IT

Published: February 21, 2008 in India Knowledge@Wharton

Casual visitors to the NASSCOM (National Association of Software and Service Companies) India Leadership Forum 2008, held in Mumbai from February 13-15, could be pardoned for thinking that a celebration was in progress. Bonhomie was in the air, the speakers were upbeat and the large number of panel discussions and seminars reflected much optimism.

"The Indian IT industry has been evolving rapidly," noted NASSCOM president Som Mittal. "Growth is on track to achieve, if not exceed, the targets for 2010." Lakshmi Narayanan, NASSCOM chairman and vice-chairman of the NASDAQ-listed Cognizant, added: "The robust growth of the Indian IT-BPO (information technology-business process outsourcing) industry by more than 33% in the current fiscal year reinforces the confidence of global corporations in India."

This sunny outlook contrasts sharply with the somber mood a couple of months ago at the TiE Entrepreneurial Summit 2007 held in New Delhi in December (see "Reversal of Fortune"). While debating how Indian IT and BPO firms would cope with a global slowdown, pessimism ruled. The Summit attendees concluded that big firms might escape with a few bruises, but the small and medium firms would be badly affected.

Have things changed so fast? Several IT industry leaders who attended the NASSCOM event told India Knowledge@Wharton why they are upbeat about the future -- and also about the rising potential of India's domestic IT market.

Their optimism may seem contrary to external developments. Stock markets around the world have tanked, driving down the valuations of IT companies. And the recession in the U.S., which could hit tech spending, seems much closer.

But, viewed from NASSCOM's perspective, the worst is probably over. The rupee appreciated against the dollar by a whopping 12.3% during the past year, and this wreaked havoc on the margins and finances of IT firms. But the Indian IT brigade is now prepared. It has begun deploying the standard tools -- currency hedging, geographical diversification, pegging tariffs to the rupee and cost-cutting.

Additionally, few expect the rupee to keep rising so dramatically in the future. "As long as the appreciation is gradual and about 3% to 5% a year, we believe it can be managed through methods like pricing, offshore leverage, productivity and so on," says S. Ramadorai, CEO of Tata Consultancy Services (TCS), India's largest software and services company.

Finding Opportunity in a Recession

The possible recession in the U.S., too, is seen more as an opportunity than as a threat. "If the U.S. were to go through a slowdown or even a mild recession, it may be advantageous for the Indian IT industry as customers will want to offshore more to reduce costs," says Ashok Soota, chairman and managing director of the Bangalore-based MindTree Consulting. Mittal adds, "We believe the demand is still strong."

"If there is a slowdown, we will be the ultimate beneficiaries as companies will look to move work offshore and take advantage of the productivity improvements that go along with it," says Ramadorai, speaking of TCS. "This will help our bottom line and profitability as offshore work provides us with higher margins."

While the rupee and the recession are the two major concerns confronting the industry, perceptions differ about their impact on IT firms. Various views were offered on the sidelines and in the networking events.

The summit appeared to have too much on the agenda often at the same time. For instance, on the first morning you could attend a session on "Building ICT Trade in Asia Pacific" or one on "Shifting Sights from America to Europe." The second morning, there was even a Track C. Track A was the Thought Leaders Conclave, Track B was the Global CIO Conclave and the Insights Conclave brought up the rear.

Two issues, however, seemed to dominate the attention of the 1,500 participants of the NASSCOM Leadership Forum. The first was the removal of benefits for the IT sector. In the 1990s, the federal government had introduced the Software Technology Parks of India (STPI) program, which gave software firms located in such parks a tax holiday until 2010. NASSCOM has been lobbying for an extension of this program.

"The proposed withdrawal of tax benefits under the STPI scheme is an issue that we think the government should reexamine," says Soota of MindTree. The government seems to be inclined to agree. Thiru Raja, Minister for Communications and IT, told the summit: "Based on feedback from the Indian IT industry, we are looking into the issue of extending the STPI program on a priority basis."

There was one loud voice against the extension of the program: the flag-bearer of the Indian IT industry, N.R. Narayana Murthy, chief mentor of Bangalore-based Infosys. A short while ago, Murthy told business channel CNBC-TV18 that companies should not ask for tax exceptions when they did not need them. "We have to rise above the interest of our own company and say that we have to do what is good for the country," he said. "I believe that what is good for the country is that we should pay taxes." Murthy was similarly dismissive about the brouhaha over the rising rupee. "It is silly for the industry to say that we will be viable only at Rs. 40 per dollar," he said.

The War for Talent

While differences persist on continued tax benefits for the IT industry, there are none on the other big issue of the day -- the shortage of suitable talent. Speaker after speaker at the summit pointed out that this was the real crisis area.

"Current projections indicate that, by 2010, the IT industry may face a shortfall of 500,000 professionals, unless proactive steps are taken," says Ganesh Natrajan, CEO of Zensar Technologies. "Of the large number of engineering and other graduates being churned out every year, only 10% are employable in the IT industry. Most are unsuitable because of a lack of soft skills, particularly communication skills, which are essential for industries like IT."

"However many people we have, we are always short of good people," says Jerry Rao, chairman of Electronic Data Systems (EDS) Asia-Pacific. Rao is co-founder of MphasiS, which merged with EDS in July 2006. "This is a challenge of staying in business," continues Rao. "There has been a tremendous increase in the number of engineering colleges in the country during the past 10 years. We now need to focus, not just on quantity, but on upgrading quality." Companies need to be proactive in this context. Rao points to the EDS Learning and Leadership Academy in Mangalore, which opened last year and provides 75-day courses for engineering graduates.

"NASSCOM has proposed setting up a chain of finishing schools for IT professionals, who can be made more employable with three-four months of honing technical skills and imparting soft skill training," says Mittal. "This will help bridge the manpower supply-demand gap by at least 30% to 40%."

TCS, the country's oldest IT firm, has a multi-pronged approach to this issue. Says Ramadorai: "To develop talent, TCS is working towards creating an ecosystem that nurtures talent and enhances suitability of the talent pool in the country. As part of our Academic Interface Program (AIP), we conduct student development and faculty development workshops; set up labs and provide internships; sponsor academicians to sabbaticals at TCS; conduct an annual meeting, called 'Sangam,' of heads of institutes; and sponsor awards at the institutes. TCS has developed a Faculty Development Program to collaborate with select universities in conducting custom-made courses to be taught to students in engineering colleges in smaller towns in India. We encourage students to go through certification programs in software technologies; when they join the company, the cost of the certification is reimbursed."

During the past fiscal year, Ramadorai notes, "396 institutes in India benefited from our ongoing AIP initiatives. In addition, we signed MoUs (memoranda of understanding) with 45 institutes in India. And 60 institutes from across the U.S., Canada, Brazil, APAC (Asia-Pacific), Europe and the UK have benefited from our Global Academic Interface program.

"We have also begun an intensive seven-month program to transform science students into software professionals. This is proving successful and will help us increase the talent pool for the industry," Ramadorai adds. This is the TCS way of answering criticism that the IT industry is hampering India's economic growth by poaching all available engineering graduates, when what they need are science or commerce grads.

Reorganizing for Change

TCS also announced a couple of days before the NASSCOM conference that it would reorganize itself to face the changing times. Operations will be split into five verticals -- industry solutions, major markets, new growth markets, strategic initiatives and organization infrastructure. Under the earlier structure, there were three groups focused on industry, geography and service practices. The restructuring will be effective April 2008.

Infosys went through a similar reorganization late last year. A New Growth Engines strategic business unit was set up to look beyond the Americas, and a separate business unit was formed to concentrate on the domestic market. "There is a need to realign to create a structure that can meet the new challenges, increased customer expectations and higher levels of competition," Infosys CEO Kris Gopalakrishnan said while announcing the changes. The exercise has been called, "One Infy."

Almost all IT companies are reorganizing to cope with the changing environment. (MindTree Consulting has even dropped the word Consulting from its name, and chief operating officer Subroto Bagchi has a new title -- Gardener; he is supposed to "grow minds.") They are also preparing for inorganic changes brought about by mergers & acquisitions (M&A).

At a special session at the NASSCOM conference titled, "India M&A Wave: Making Acquisitions Work, Sharing Experiences," speakers were united in their belief that the pace of mergers would definitely increase. "Going forward, we are going to see more efforts at consolidation," said Ananda Mukerji, CEO of Firstsource, an Indian company that has orchestrated a string of international takeovers in the BPO space over the past few years.

According to a Grant Thornton study, there were 175 IT and ITeS (IT enabled services) deals involving Indian companies in the first nine months of 2007. The total value was $3.59 billion, which puts the average deal size in the little league. The bigger portion of this pie ($2.19 billion) came from cross-border deals and $2.03 billion of this was for outbound deals. Indian IT companies have been spreading their wings.

But foreign takeovers have been happening too. In addition to U.S.-based EDS' acquisition of MphasiS in 2006, noted above, Capgemini has acquired the U.S.-based Kanbay International, which had most of its operations and personnel in India. And the Nasdaq-listed Covansys has merged with a wholly-owned subsidiary of Computer Sciences.

An M&A orientation, however, has its dangers. Speakers at the NASSCOM conference repeatedly warned against this. "No matter how careful you may be, there could be surprises in store," said Sid A. Pai, partner, TPI India, the local arm of a global firm that specializes in transforming business support operations. "More often than not, there are skeletons in the cupboard. It's a lot like an arranged marriage. You have all these people playing matchmakers yet, inevitably, there could be something that was missed. But once you tie the knot, you just have to swallow hard and make it work."

At a different session, though on the same theme, Leo Puri, managing director of Warburg Pincus, a private equity firm, said the IT industry was far too concerned about protecting its margins than making investments for the future through M&A activity. "The industry has been growing fat and happy based on the labor-arbitrage model," he said. "This has to change to move on to the next phase."

The NASSCOM summit ended with fresh hope on the horizon. Rao of EDS said that the industry could look forward to a rewarding five-year period ahead. NASSCOM chairman Narayanan noted: "The journey through the next five years is not without its share of challenges. Key among them are increasing the employable talent pool in the country, sustaining growth momentum in an uncertain tax-holiday structure, harnessing the promise held out by the domestic market, leveraging innovation as the next drawing point and ensuring better growth for the small- and medium-sized companies."

Mittal spoke about the next big frontier -- the domestic market. Revenues from the Indian IT market, including hardware, are estimated to reach $23.2 billion in the year ending March 31, 2008, up 43% from the previous year. Now that the low-hanging fruits -- markets like the U.S. -- have all been picked, IT firms are discovering that there's no place like home. "We always looked outward -- now there are also many domestic opportunities."

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Dawn of E2K in India [Nov. 9th, 2007|08:59 am]
Mark Kobayashi-Hillary



The Dawn of E2K in India

Published: November 7, 2007

New Delhi

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Fred R. Conrad/The New York Times

Thomas L. Friedman

Remember Y2K? That was the “millennium bug,” the software glitch that threatened to melt down millions of computers when their internal clocks tried to roll over on Jan. 1, 2000, because they were not designed to handle that new date.

And remember that the only country that had enough software programmers to adjust all these computers so they wouldn’t go haywire, and do it at a reasonable price, was India. And remember that it was this huge operation that launched the Indian outsourcing industry — which is why I have long felt that Y2K should be a national holiday in India.

Well, remember this: there is an even bigger opportunity for India than Y2K waiting around the corner. I call it “E2K.”

E2K stands, in my mind, for all the energy programming and monitoring that thousands of global companies are going to be undertaking in the early 21st century to either become carbon neutral or far more energy efficient than they are today. India is poised to get a lot of this work.

I first started thinking about this when I heard Michael Dell declare that Dell Inc. would become “carbon neutral” in its operations by the end of 2008. He said Dell would take inventory of its total greenhouse gas outputs and then develop plans to reduce, eliminate or offset those emissions.

With a carbon tax or cap-and-trade legislation looming, every day you are going to see more and more companies doing the same thing. It is going to be the next big global business transformation. And it’s going to require tons of software, programming and back-room management to measure each company’s carbon footprint and then monitor the various emissions-reduction and offsetting measures on an ongoing basis. Guess who’s got the low-cost brainpower to do all that?

Some of the smartest Indian outsourcing companies are already positioning themselves for the E2K market.

“What did Y2K do?,” asked Nandan Nilekani, the co-chairman of Infosys Technologies, one of India’s premier outsourcing companies. “It was a deadline imposed by the calendar, and therefore it had a huge ability to concentrate the mind. It became a drop-dead date for everyone. Making your company carbon neutral is not a date, but it is an inevitability.”

When Y2K came along, some companies responded tactically, doing only the minimum reprogramming to keep their computers operational after Jan. 1, 2000. Others approached it more strategically, saying: “Since we’re going to have to go through all our software anyway, why not just retire all the old stuff and upgrade to the newer, simpler systems that will make us more efficient.”

These companies went from seeing I.T., or information technology, as a cost to looking for ways to make money from it — through data mining and using better information to cross-sell products, reduce cycle times for introducing new services and to manage inventories more efficiently.

The key to winning E2K business for the Indian outsourcing firms, said Mr. Nilekani, will be showing big global companies, like a Dell, how becoming more energy efficient or carbon neutral doesn’t just have to be a new cost they assume to improve their brand or satisfy regulators, but can actually be a strategic move that makes money and gives them an edge on the competition.

“The strategic companies will say: ‘We are stuck with this problem — why not take advantage of it and use it to revolutionize and rejigger our whole energy infrastructure,’ ” added Mr. Nilekani. They will use E.T. — energy technology — “to reduce material costs, simplify logistics, drive down electricity charges and shorten supply chains.”

As they start to do this, it will require a lot of data management, which companies will want to do as cheaply as possible. Hello India. Hello E2K.

“My impression is that there is certainly a significant opportunity for Indian outsourcing companies,” said B. Ramalinga Raju, chairman of Satyam Computer Services, another top Indian outsourcing company, adding that the precise size of that business will depend on “the speed and scale at which the carbon neutral policies are adopted by the global companies.”

To better compete for such business, Mr. Nilekani is installing solar systems and other efficiency technologies at Infosys’s Bangalore campus. Satyam is planning to do similar things with its verdant Hyderabad complex, which already has its own zoo.

I.B.M. seems to be moving into this space, too. Big Blue knows that even if Indian companies do a lot of the back-room work, there will be lots of front-end jobs nearer the customers.

So, mom, dad, tell your kids: if they’re looking for a good stable-growth career — green consultants, green designers, green builders are all going to be in huge demand. And if they can speak a little Hindi — all the better.

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Labour Friends of India [Sep. 27th, 2007|11:56 am]
Mark Kobayashi-Hillary
Bournemouth, UK: On Tuesday 25th September 2007, on the fringe circuit of the Annual Conference of The Labour Party, leading independent Westminster parliamentary group, Labour Friends of India (LFIN) hosted its Annual Reception. Amongst the guests were 200 prominent British Government Ministers; Labour Parliamentarians from Westminster, Scotland, Wales, London; Councillors from across Britain; Representatives of the Indian High Commission, Business leaders, Media representatives, and other leading figures in The Labour Party.
LFIN Chairman, Stephen Pound MP, said: “...that this the 8th year of LFIN and our largest and most prestigious gathering yet shows that the link between India and the Labour Party is stronger than ever and promise that India would always have a voice in Westminster while LFIN flourishes.”
In his address, His Excellency Mr Asoke Mukherji, Acting High Commissioner of India, said: “In the 60th year of India’s independence, our relationship with Britain is one of closeness. I believe that the independence of India has in fact not resulted in us drifting apart but has brought an intensity of even greater interaction.”
He added: “Today, we stand together on various fronts, whether it is in the realms of financial and legal services, countering terrorism, climate change, in international political and economic relations, and we intend on making such closeness to be the building block for the most successful visit by a British Prime Minister to India, which will take place in the very near future.”
In conclusion, he said: “I congratulate Labour Friends of India for the meaningful and constructive contribution they have made for the promotion of our relationship in the British Parliament.”
The Rt. Hon. Jacqui Smith MP, Secretary of State for Home Affairs, in her address said: “I congratulate Labour Friends of India for the work it does in keeping us informed in Parliament of the various developments in India. India and Britain have a common understanding of many issues and as Home Secretary; I applaud the diversity and commitment to democracy of India and celebrate with you in your 60th anniversary since Independence.”
During his address, Rt. Hon. Des Brown MP, Secretary of State for Defence said: “This is a historic year for India and for Indians in Britain. Your country deserves extraordinary congratulations for its achievements in the face of significant challenges. I thank you for being a beacon to the developing world by emerging from those challenges to the extent that today you are as a country on the verge of taking your rightful place as a very senior member of the international community.”
He added: “You are on the verge of making an extraordinary and binding contribution to the future of the world and you are to be congratulated for this remarkable achievement. Furthermore, we owe thanks to the Government of India and Prime Minister Singh for the political courage it takes to consistently support peacekeeping efforts across the world. You are very brave to send your people into conflict situations, as you regularly do, to stand in between warring parties and to police fragile peace. This shows your commitment to lead the way where many countries look away from their responsibilities.
He concluded by saying: “..thanks also to your armed forces, who we have the highest regard for. It is not an insignificant contribution that they make. We are committed to improving our relationship in which both countries benefit, and we intend on extending this relationship to learn more from each other. In you, we have people who share our own values and who will work together with us to make the world a better place.”
Labour Friends of India was established in 1999 to promote and strengthen the bilateral relationship with India. It has an exclusive membership of 190 MPs and Peers of The Labour Party.
Other speakers at the event were:
1.    Rt. Hon. Ed Balls MP – Secretary of State for Children, Schools and Families
2.    Rt. Hon. John Hutton MP – Secretary of State for Business, Enterprise & Regulatory Reform
3.    Rt. Hon. Tony McNulty MP – Minister of State for Security, Counter-terrorism, Crime and Policing
4.    Rt. Hon. Stephen Timms MP – Competitiveness Minister
5.    Rt. Hon. Bob Ainsworth MP – Defence Minister
6.    Rt. Hon. David Hanson MP – Justice Minister
7.    Rt. Hon. Margaret Beckett MP – Chief Patron of LFIN
8.    Baroness Shriti Vadera, International Development Minister
9.    Vernon Coaker MP – Home Office Minister
10. Bridget Prentice MP – Justice Minister
11. Liam Byrne MP – Home Office Minister
12. David Lammy MP – Innovation, Universities and Skills Minister
13. Pat McFadden MP – Employment Minister
14. Parmjit Dhanda MP – Children, Young People and Families Minister
15. Meg Munn MP – Foreign Office Minister
16. Mike Gapes MP – Chairman of the Foreign Affair Select Committee
17. Huw Irranca Davies MP – Minister for Wales
18. Sadiq Khan MP – Government Whip
19. Dawn Butler MP – Vice Chair of The Labour Party
20. Barry Gardiner MP – Prime Minister’s Envoy for Forestry
21. Sharon Bamford – CEO of the UK – India Business Council
22. Murad Qureshi AM – Greater London Assembly
23. Virendra Sharma MP – Newly elected from Ealing Southall
24. Fiona Mactaggart MP
The event was attended by 200 guests which included Labour Party Members, Representatives of British Businesses, Media Representatives, Trade Union officials and other prominent people.
Please contact Vikas Pota on 020 7887 6161 or vikas.pota@saffronchase.com for further information.
Vikas Pota
Managing Director

Saffron Chase Ltd
2nd Floor, Berkeley Square House
Berkeley Square, Mayfair
London. W1J 6BD
T: +44 (0) 20 7887 6161
F: +44 (0) 20 7887 6162
M: +44 (0) 7956 959637
W: www.saffronchase.com

The Corporate Affairs & Communications Strategy Specialists
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Captain's Blog - Innovation and Social Networking [Sep. 20th, 2007|10:42 am]
Mark Kobayashi-Hillary

Captain's blog

Mark Kobayashi-Hillary says social networking brings business benefits MySpace, Facebook, YouTube, Bebo, Flickr, blogs and podcasts: is your organisation actively engaged in the blogosphere, or do you still think that interactive social networks are for teenagers to burn the hours they used to spend watching television?

Mark Kobayashi-Hillary, Computing Business 20 Sep 2007
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Is it even possible for corporate IT to engage with social networks without selling out, and possibly even causing brand damage in the rush to ‘keep it real’?

Key attributes shared by all social networking sites are transparency and immediacy ­ and that is exactly what Mike Scott, UK head of innovation for Tata Consultancy Services (TCS), was looking for when he wanted a way of keeping customers informed about research at the Peterborough-based innovation lab he heads.

‘We could have started publishing yet another glossy corporate newsletter, but they usually go straight into the bin, they are expensive and the information flow is one-way,’ he says.

Instead Scott produced a new blog to not only update customers on what TCS is doing, but to also stimulate online debate on innovation. He hired technology journalists to contribute and encouraged TCS executives to comment, both on the blog and through audio podcasts.

In their book Wikinomics, authors Don Tapscott and Anthony D. Williams argue that increasing interaction with clients through interactive web technologies encourages a transparency that can have positive long-term business benefits.

‘Recently, smart companies have been rethinking openness and this is beginning to affect a number of important functions, including human resources, innovation, industry standards and communications,’ they say.

‘Companies were closed in their attitudes towards networking, sharing and encouraging self-organisation, in large part because conventional wisdom says that companies compete by holding their most coveted resources close to their chest.’

Tapscott and Williams go on to argue that organisations that make their
boundaries porous to external ideas and human capital ‘outperform companies that rely solely on their internal resources and capabilities’.

Such ideas echo the experience of Scott at TCS, who says that for a very low initial investment the firm has created an extremely collaborative environment.

‘Globally we have 19 innovation labs, and interaction between them has improved because of the blog, along with the better communication with those reading the information who might never have interacted with TCS if this was on glossy paper,’ he says.

It’s not just companies exploring the potential of social networking for reaching out to interested collaborators; politicians are also dipping a toe in the water. MP Michael Meacher ran his MM4PM campaign almost entirely on various social networking sites, before announcing he would stand aside to back John McDonnell.

Prior to the decision, Meacher’s campaign manager Dan Judelson said the Labour leadership election would be the first major party-oriented contest involving social network sites.

‘We can expect all three major political parties to draw lessons from them for the next general election campaign,’ he says.

‘The interesting thing about Facebook, Live Journal and MySpace is that they have the potential to put campaigns in places where a target audience already is ­ we are going to them, rather than designing an expensive-looking platform with any number of interactive plug-ins to make it look more interesting and hoping voters will turn up.

‘The test will be to see if political campaigns are accepted in social network sites.’

But beyond the use of blogs to reach out to interested consumers or voters, how else can companies use a collaborative web environment to their advantage?

Mahesh Ramachandran, a non-executive director of foreign exchange currency firm FXaWorld, says his firm decided to take advantage of the innovative networking possibilities offered through YouTube.

‘We decided to run an online competition that uses the system as a delivery platform,’ he says. ‘Basically, we asked the online community to upload their own videos to YouTube with the promise of a $10,000 cash prize for the video that best captured the spirit of our company.’

As a peer-to-peer company that directly connects a currency buyer to the seller using the internet, FXaWorld can already be viewed as an innovative organisation ­ but was Ramachandran afraid of people making spoof videos or in some way abusing the spirit of the competition?

‘Not at all,’ he says. ‘We have seen some excellent videos being produced, which we can now use for our own marketing purposes. If anyone wanted to go to the effort of making a negative spoof then it would in fact be quite complimentary ­ all online publicity is good publicity.’

But the networking and collaborative possibilities of the internet don’t have to be harnessed from the boardroom for the initiatives to be useful.

A Californian college student and former Starbucks employee, Andrew Gonis, created a MySpace group named Starbucks HQ 18 months ago ­ now he has 4,000 members.

The group was not created or endorsed by the company itself ­ Gonis wanted to create an unofficial environment where colleagues could connect with their international peers and share experience and ideas.

‘There is no way you can go wrong when you connect employees who share the same passion for your company,’ he says. ‘When you put such people together, their passions ignite and they feed off one another.’

Gonis believes that MySpace and other networking similar sites can humanise a brand or company.

‘Rather than having to look at a corporate dot com, the viewer is on equal ground with the company because MySpace is something they can identify with,’ he says.

Online collaboration is the next killer application. It is crucial technology leaders recognise that tapping into the creativity of your employees and customers through established web platforms is an essential key to future innovation. CB

Mark Kobayashi-Hillary is the author of a number of globalisation-themed technology books. He writes a blog on outsourcing for Computing. markkobayashihillary.computing.co.uk

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BBC article on India by Mark Kobayashi-Hillary [Aug. 17th, 2007|10:45 pm]
Mark Kobayashi-Hillary

India faces battle for outsourcing

By Mark Kobayashi-Hillary
Director of the UK National Outsourcing Association

Workers in an Indian call centre
Indian firms have been quick to cash in on their skilled workforce

As US and European companies look to cut costs by moving many of their operations abroad, India has stepped in to become a world leader in IT outsourcing.

However, success has attracted imitators and India is facing a fight to keep its position at the top.

India now leads the world in offshore outsourcing - the remote servicing of information technology (IT) or other business processes by staff based in India.

The value of outsourcing to India in 2007 is estimated at $47.8bn (£24bn), ten times what it was worth back in 1998.


Outsourcing: Moving company functions from internal departments to external firms

Offshoring: Relocating corporate activities overseas.

Nearshoring: Relocating offshore activities nearer the client's home country

BPO: Business processing outsourcing - moving white collar tasks like accounting or invoicing. to an external firm

Captive firms: Companies owned by foreign multinationals who perform outsourcing services for the parent firm

UK call centres/US contact centers: Offices where workers provide telephone customer services like sales

Expansion is happening fast, and the IT outsourcing industry is predicted to continue growing at about 28% a year.

The sector has become a very important part of the overall economy of India, creating growth and new wealth in a country that has only enjoyed economic liberalisation since the early 1990s.

IT and business process outsourcing (BPO) services now account for 5.4% of India's gross domestic product (GDP), and have had a huge impact on cities such as Bangalore, the centre of the industry.

Chasing pack

But India's success in hi-tech services has not gone unnoticed.

From Mexico to Vietnam, local governments are busy creating investor-friendly tax policies, such as special 'export-zone' offices on the model of India, where offshore work is free of domestic taxes.

Russia has a good talent pool and competitive costs, but lack of government support and infrastructure are still severe holdbacks

Thiago Turchetti Maia, Vetta Technologies

They are also encouraging the creation of new trade bodies to represent and promote their industry in the same way that India's National Association of Software and Services Companies (Nasscom) has been doing since the 1980s.

One of main threats to India has been the expansion of the European Union (EU).

Malta's harbour walls
Malta is one of the new EU centres for IT outsourcing

In 2004, the EU expanded east to accept ten new member states, and then went on to welcome Romania and Bulgaria into the union earlier this year.

These twelve nations in Eastern Europe can now offer lower costs, combined with the protection of the EU legal safety net.

This legal back-up is particularly important for companies in relation to issues such as the protection of customer data as it travels across borders.

Strength in numbers

Of course none of these countries can match the sheer scale of India, which has more than a billion people - with more than two million graduating from university each year.

But countries such as Poland, Hungary and the Czech Republic are becoming very attractive low-cost European choices for executives who want to hire skilled people without the travel headache of regularly visiting Asia.

In the long run, it may also mean that a passage to India is no longer the automatic choice

Mark Kobayashi-Hillary

Among the other nations eyeing outsourcing riches, only China, with a population above 1 billion and a similar number of graduates entering industry each year, can come close to matching India.

China and India are both highly dynamic, large developing economies, and along with Russia and Brazil, some observers expect them to dominate the world economy by the middle of this century.

And all of these nations are looking at their potential to match India's strength in global services.

'Talent pool'

Remi Vespa, vice president of market development at Venus Software Corporation in China, is bullish about China's future as an outsourcing destination.

Garuda shopping mall, Bangalore
Shopping mallls have proliferated in Bangalore, India's IT capital

"The major strength of China in this race to leadership is that the focus of China is not on becoming the world leader, but in creating the conditions that make the country the privileged destination for IT outsourcing," he explains.

Thiago Turchetti Maia, chief executive of Vetta Technologies in Brazil also sees China catching up thanks to its "enormous potential for talent together with competitive rates".

However, he points out that structural problems in some of these nations could lead to patchy development.

"Russia and Brazil are still to catch up," Mr Turchetti Maia explains.

"Russia has a good talent pool and competitive costs, but lack of government support and infrastructure are still severe holdbacks."

New continents

At the same time, Africa is also trying to take a piece of the outsourcing action.

This should come as no surprise because many African nations have the infrastructure, the talent pool, and the entrepreneurs ready to seek out new opportunities.

South Africa - with English widely spoken - now has hundreds of contact centres serving clients in Europe and the US.

China has rapidly emerged as an industrial powerhouse

Ghana is growing in stature as Nigerian entrepreneurs fund start-ups there to avoid the scam email stigma that is proving difficult to shake back home.

Uganda is about to unveil an entirely new town built around a technology park and designed to stimulate the local outsourcing industry.

Egypt will go on a charm offensive, spending on a new marketing and PR programme to ensure that the decision-makers of Europe know that it has more to offer than just the pyramids.

Passage to India

In some ways India is becoming a victim of its own success.

Infosys facilities in Bangalore
Indian computer firms like Infosys are finding it harder to retain staff

Staff attrition is high, and it is quite normal for a company to have to replace its entire workforce each year in a contact, or call, centre.

And though there are a huge number of graduates coming through to the industry, not all have the skills needed for intensive IT work..

Companies are finding it harder and harder to recruit the cream from the best universities, leading to inflated salary demands and more job-hopping.

There have been security scares with customers' personal financial details apparently being sold by unscrupulous employees, and in the UK for example, there is a growing consumer dissatisfaction with telephone calls being answered offshore.

All of these issues coupled with the emergence of hungry and determined rivals now means that India has to work harder to sell itself.

In the long run, it may also mean that a passage to India is no longer the automatic choice for the many executives interested in outsourcing.
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Malta - a small rival to India? [Aug. 11th, 2007|08:20 am]
Mark Kobayashi-Hillary

Malta woos technology wanderers
By Michael Dempsey
Business reporter, BBC News

Malta's harbour walls
Malta's ancient defences no longer deter outside interests
Keyboards click away as a small team of software programmers devise intricate lines of code that will create another computer code for far-flung clients in the global economy.

The digital world may have banished geographical boundaries, but not all outsourcing projects are located thousands of miles from Europe.

The work that will allow Lloyds Register to sell on a new maritime maintenance service is being carried out in Malta, an island nation of 400,000 people that joined the EU in 2004 - and is winning work due to corporate disillusionment with the trend towards outsourcing such projects to Asia.

Shipping news

Grant Macleod is a project manager with Lloyds Register in London.

Getting computer projects signed off and delivered is his job and he has a £10m ($20m;15m euros) budget to spend on it.

Grant Macleod, project manager with Lloyds Register
Lloyds Register is smiling after moving work from Manila to Malta

Lloyds Register joined the global outsourcing vogue when it shifted work to India and the Philippines earlier in this decade.

But over the last two years 40% of this budget has returned to Europe as Lloyds Register transferred vital coding from Manila to Malta.

The problem, Mr Macleod admits, lies in the language.

"English is widely spoken but not widely understood," he says.

The Maltese speak English and their own language, switching fluently between the idioms and expressions in English and a language that is largely a blend of Arabic and Italian.

Near sourcing boom

Mr Macleod's decision to move work to Malta was based on an equation of time and quality. Money matters, but a cheaper location can cost more in the long-term.

Farming work out to locations on the edge of the EU has generated a new piece of business jargon, "near sourcing".

"Malta is not cheaper than the Philippines, but here we have complete predictability. And if a project slows up because we cannot communicate properly with staff in Manila then it can cost us more anyway," says Mr Macleod.

The high retention rates of businesses on an island with a limited number of high-tech employers also appealed to Lloyds. And having one of the world's biggest natural harbours at hand matters if you're in the shipping business.

Other UK technology companies are now following suit.

The Indian technology boom had prompted Crimsonwing to move a chunk of its business to Chennai (formerly known as Madras).

David Walsh, chief executive Crimsonwing
David Walsh was won over by Malta's ambience

Crimsonwing writes software for UK businesses such as supermarket group Morrisons and discovered that the superficial attraction of setting up a programming team in Asia was undermined by the difficulties in communicating with Indian staff over a long distance

"What happened was that we lost control of things. There was a lot of attrition among the personnel," says David Walsh, Crimonswing's chief executive.

Seeking names and faces that would remain in place, Crimsonwing opted to relocate the work to Malta.

Emotional lure

Mr Walsh admits that his criteria for selecting Malta was not the stuff of business school MBA courses.

"I didn't do a massive exercise in analysis; it was a decision that came from the heart. The labour rates here are one third of the UK, there is a keen workforce and it's three hours from London," he says.

Salaries in Malta are low by EU standards. A computer programmer with 5-10 years experience can expect to earn £12,500-£15,625 per annum.

We have no oil, no grain, and no minerals. All we have is people
Joseph Sultana, managing director, Ascent

Walsh's employees are a mix of native Maltese and British IT staff lured by a Mediterranean lifestyle.

"A good apartment can be rented for £5,000 a year and personal taxes are lower than in the UK," says Mr Walsh.

Joseph Sultana, managing director of local software house Ascent, works for a variety of clients who have abandoned the Indian outsourcing model in recent years.

He knows that the Indian model has its attractions. "Offshoring IT development works for people who need large numbers of staff working on a project."

Mr Sultana is precise about where Malta's near sourcing proposition fits in.

Joseph Sultana, managing director, Ascent Software
Joseph Sultana runs a business with its sights set on SmartCity

"Let's be very clear about this, here in Malta we can't turn around and offer you a 200-strong development team overnight. But we can deliver consistent quality. "

"We have no oil, no grain, and no minerals" says Mr Sultana, "all we have is people."

SmartCity plans

Claudio Grech, first secretary at Malta's Ministry for IT & Investment, wants to expand that part of the economy.

Mr Grech says that attracting more IT development will create better-paid jobs, by local standards, and also draw in a better class of corporate company.

A high-tech theme-park, the SmartCity project, is taking off with $300m backing from Dubai's Tecom group.

Claudio Grech, first secretary at the Ministry for IT and Investment
Claudio Grech thinks the technology sector makes a good neighbour
Mr Grech knows that putting Malta on the map is a challenge in an technology industry dominated by billion-dollar players.

"It is tough for a small country to knock on all those doors."

Ricasoli, a former industrial zone on a neglected promontory overlooking the Grand Harbour, is the SmartCity site.

Just across the water from Valletta, it is perched above the area known locally as The Three Cities.

The Maltese are hoping that Ricasoli will host a cluster of technology firms that can cooperate across business boundaries.

However, Malta is not the only EU country where "near sourcing" is taking place.

Indeed, many Indian outsourcing companies are setting up subsidiaries in Eastern European countries like the Czech Republic.

But Malta may be able to capitalise on the reaction against outsourcing that is sweeping businesses across Europe.

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Steria to purchase Xansa [Jul. 30th, 2007|01:00 pm]
Mark Kobayashi-Hillary
“The Directors of Xansa and Steria are pleased to announce that agreement
has been reached on the terms of a recommended proposal whereby Steria will
acquire the entire issued and to be issued share capital of Xansa.  It is
intended that the Acquisition will be implemented by way of a Scheme of
Arrangement and, subject to the satisfaction, or, where appropriate,
waiver, of the Conditions, it is expected that the Acquisition will become
Effective by the end of October 2007.”

There are some good synergies from this proposed deal:  Steria does not
have any BPO nor offshore (India) operations.  We have almost no overlap in
business in the UK.  Steria has strong presence in Europe and also in Asia
(Malaysia and China).  I've dropped some standard notes on Steria below..

Steria  is  a  leading  European  IT  Services  provider,  focused  on  the
establishment of strategic partnerships with its clients in each of its key
vertical  market sectors: public services; finance; telecommunications; and
utilities  and  transport.  Steria  provides  consulting  services  for its
clients'  core  business  processes,  and  also develops and operates their
information  systems.  Steria  has  over  10,000  employees  working  in 15
countries.  For the year ended 31 December 2006, Steria reported revenue of
€1.262  billion, operating profit of €81.1 million and profit before tax of
€77.9  million.   Headquartered  in Paris, Steria is listed on the Euronext
Paris Eurolist. More information is available at www.steria.com.
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Independent - Mixed signals for outsourcing [Jul. 18th, 2007|09:55 am]
Mark Kobayashi-Hillary

Mixed signals for outsourcing

Wages in the Indian IT sector are starting to resemble those in the West. Some companies are bringing the jobs back home. By Andrew Buncombe

Published: 17 July 2007

At the well-tended Bangalore campus of MindTree Consulting there is an air of quiet but determined industry. Casually dressed employees walk briskly between buildings, drop in for cappuccino at the complex's own gourmet coffee shop or else gather to chat on the closely clipped lawns. One can almost hear the gentle purr of activity at this international IT consulting company, which last year cleared more than $100m (£50m) in revenues.

But for all the positive noises coming out of companies such as this - whose clients include Avis, Volvo, Cendant - there have in recent weeks been confusing messages emerging about the Indian outsourcing industry, some of which have suggested that the outsourcing boom may at the very least have reached a plateau. There have even been the first hints that the financial benefits of outsourcing work to booming India may be coming to an end.

The Silicon Valley search engine company Like.com recently made the headlines when it announced it was closing its Indian engineering site and transferring jobs back to the US. This "reverse outsourcing" was ordered because wages in Bangalore had simply become too high. "Bangalore wages have just been growing like crazy," the company's chief executive, Munjal Shah, wrote on his blog.

While companies have long been aware that the wage differential between the US and India for educated, capable people was reducing, Mr Shah said to compete for the best staff, he faced having to increase the salary of one of his Bangalore engineers to 75 per cent of the US level. Just two years ago the same engineer had been earning 20 per cent of the American salary.

"In general this wage inflation is really good for my employees and great for India. I am so proud of the strides forward that India has made," he continued. "However, this huge run up in the wages has destroyed the [return on investment] I referred to earlier. So today we decided to consolidate all of our engineering and research efforts back to our HQ in California."

In the US, Indian investment is worth $2bn a year and the president of the Confederation of Indian Industry, Sunil Bharti Mittal, met recently with the Democratic presidential front-runner, Hillary Clinton, to brief her on the number of Indian companies outsourcing to US firms - a task he undertook after Mrs Clinton became embroiled in the perennial political "controversy" about the loss of US jobs.

In Britain, the Indian government estimates that there are just 5,000 jobs that have been created by reverse outsourcing or inward investment from India. All are in e-commerce and software. But how long might it be before one stand-up comedian's joke about middle-class Indians from Bombay dialing a call-centre in Glasgow to book a train ticket to Delhi (and complaining that they cannot understand the Scottish accent) becomes true?

Wage inflation - along with the rising strength of the Indian rupee driven by an economic growth rate of 9 per cent - is certainly changing the way that Indian IT companies think about doing business and how to present their services. Krishnakumar Natarajan, otherwise known as KK and the president and chief executive of MindTree's IT Services, said it was no longer possible to think purely in terms of providing a service to Western clients that was simply cheaper. Quality and expertise had now become essential.

"A key challenge is that costs keep going up," he said. He said that one solution was to reduce overheads by concentrating people and operations, something that is easier for larger companies. At MindTree, for example, there will soon be more than 8,000 employees located at its Bangalore campus.

But Mr Natarajan also said companies had to work at becoming core to their clients' operations. Indian companies had to make themselves crucial because of the quality of the work they provided, not simply an attractive option simply because of low costs. "We are getting ingrained in the heart of the customer's business," he said.

Industry bodies are certainly confident about the future, despite rising salaries and property costs. The National Association of Software and Service Companies (Nasscom) reported recently that the industry grew by a remarkable 30.7 per cent in the last financial year and that revenues soared to just under $40bn, with the top 10 Indian IT firms accounting for nearly 60 per cent of the total revenue.

The association estimated that similar growth will continue in the current year with revenues reaching more than $50bn by March next year. "We are confident and I think we will get there," said Kiran Karnik, Nasscom's president. "The overall demand is strong ... the headroom for growth is huge."

So how is the industry managing this? Partly it is the result of remaining price competitive. Despite the headlines and for all the talk of rising salaries, wages here remain considerably lower - especially for entry level employees - than in the US. In India starting salaries in the IT industry begin at about $10,000, about one-sixth of the equivalent salary in the US.

Moreover, the soaring of Indian wages has been largely confined to the IT sector, which only accounts for a portion of total outsourcing work. In areas such as medical transcription and call centre operations, wages are still considerably lower than in the West. One challenge that companies are having to deal with in these areas, however, is the high turnover of staff. And another threat India faces to its dominance is from international competition, primarily from its neighbour and strategic and economic rival, China, but also from new outsourcing centres such Russia and Dubai and even Egypt.

A recent report by Frost & Sullivan said that while India remained the premier outsourcing hub, high attrition rates and poor infrastructure - when combined with those rising wages - were reducing its advantage. And while India produces three million graduates a year, demand for experienced professionals is outpacing supply. "India is faced with increasing threat from China, which is emerging fast as an attractive location for information technology, research and development, and procurement services," the study concluded.

Mr Natarajan and others remain confident India will be able to confront such challenges. He even said there may be something in the genetic make-up of his country's citizens that gave them an advantage of their rivals. "Indians tend to be very good at serving people. We are service orientated," he said, as he pondered the prospects of India's outsourcing industry. "I think this is the tip of the iceberg."

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