Divestures not a trend; firms are no longer in distress.

While 97 new captive announcements were made in the last 12 months, only 10 captives were actually divested

Captives can triple their value on EBITDA basis by managing complete service lines and the demand for parent

They are much more effective in getting lower pricing in terms of contracting with third party providers

New Delhi, March 26

Offshore captive IT/BPO units that transition into mature roles such as governance of third party suppliers, and undertaking risk and demand management functions can become up to three times more valuable to their parent entity, according to Mr Peter Bendor-Samuel, CEO of outsourcing advisory firm Everest Group.

Debunking the industry perception that the 2009 trend of captive divestures would continue, Everest has pointed out that against 97 new captive announcements in the last 12 months, only 10 captives were actually divested.

“Historically captives have been seen as a platform to reduce costs. But in this maturing environment, we can see that captives can potentially can triple their value on EBITDA basis by managing complete service lines and the demand (for parent), and by providing a vehicle to do vendor management of the third parties,” Mr Samuel told Business Line recently.

The first quarter of 2009 witnessed 20 new captive announcements and one divesture and the following quarter 27 new captives and one divesture. In the third quarter, against four captive divestures 28 new captives were established – an 18 month high.

Despite the few divestures announced in fourth quarter of 2009, Everest expects continued momentum in the market going forward.

Notable divestures

Some of the notable divesture announced recently include Cognizant Technology Solutions’ acquisition of UBS India Service Centre Pvt Ltd, the Hyderabad-based captive service provider to the Swiss UBS Group; EXL’s acquisition of the back-office centre of American Express Business Travel; and Integreon’s acquisition of Grail Research, the captive unit of the US-based management consulting firm, Monitor group. “For a while there, captives were being valued very highly and it made commercial sense if a company was in need of capital…Firms were in severe distress. The situation has changed now. The valuations have dropped precipitously and firms are no longer under significant distress,” the Everest CEO said.

Relook at strategy

This, in turn, has prompted companies to re-examine their strategy and look at the value creation.

Explaining the changing face of captives, he said that these units started off as a platform for labour arbitrage, but are now moving onto more complex functions right from offering expertise to build reciprocal operations in other geographies, to managing third party suppliers. Captives can advise parent organisations on how to optimise the sourcing programs and mitigate risk, in the process becoming a strategic partner to the parent.

Being an offshore unit themselves, captives are suitably placed to manage the dynamics of offshore sourcing, believes Everest.

“They are much more effective in getting lower pricing in terms of contracting with third party providers. They can become a hub in the ecosystem – so now not only are they doing work themselves but they are also managing third party ecosystems,” Mr Samuel said adding that hybrid models would gain traction as companies outsource part of the work to third parties and retain certain capabilities in-house at comparable price points.

Source: thehindubusinessline.com

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Cambridge, Mass., January 12, 2010 . . . After a dismal performance in 2009, the technology sector will see a recovery in 2010 as businesses and governments in the US and around the world begin spending again on information technology, according to a new report by Forrester Research, Inc. (Nasdaq: FORR). After declining 8.2 percent in 2009, US IT spending will grow 6.6 percent in 2010 to $568 billion. Global IT spending, which dropped 8.9 percent last year, will rise 8.1 percent in 2010 to more than $1.6 trillion. Software and computer hardware will see the greatest growth, as Forrester forecasts a new multi-year cycle of technology investment growth and innovation defined by Smart Computing. The Forrester forecast provides Vendor Strategy professionals with recommendations regarding how to align their sales and marketing efforts to the current and future environment for IT spending.

“The technology downturn of 2008 and 2009 is unofficially over,” said Andrew Bartels, Forrester Research vice president and principal analyst. “All the pieces are in place for a 2010 tech spending rebound. In the US, the tech recovery will be much stronger than the overall economic recovery, with technology spending growing at more than twice the rate of gross domestic product (GDP) this year.”

With regard to sector growth, hardware and software will lead the charge. Measured in US dollars, global purchases of computer equipment will be up 8.2 percent, communications equipment buying will rise by 7.6 percent, software spending will increase by 9.7 percent, purchases of IT consulting and systems integration services will grow by 6.8 percent, and IT outsourcing services will be 7.1 percent higher.

On a regional basis, Europe will be the strongest performing region. Measured in US dollars, the strongest growth in 2010 will be in Western and Central Europe, where tech purchases will rise by 11.2 percent, boosted by the dollar’s decline against the euro. IT purchases in Canada will grow by 9.9 percent, Asia Pacific by 7.8 percent, and Latin America by 7.7 percent. The weakest market will be Eastern Europe, the Middle East, and Africa, rising by just 2.4 percent. When measured against local currency, however, the US will actually post the strongest growth of all the regional tech markets.

“We are entering a new six- to seven-year cycle of IT growth and innovation that Forrester calls Smart Computing,” said Bartels. “New technologies of awareness married to advanced business intelligence analytics make computing smart. Smart Computing rests on new foundation technologies such as service-oriented architecture, server and storage virtualization, cloud computing, and unified communications. 2010 marks the beginning of this next phase of technology advancement.”

Select Forrester clients can access the 38-page “US And Global IT Market Outlook: Q4 2009″ report, which includes a more detailed breakdown of IT spending by sector and region.

About Forrester Research

Forrester Research, Inc. (Nasdaq: FORR) is an independent research company that provides pragmatic and forward-thinking advice to global leaders in business and technology. Forrester works with professionals in 20 key roles at major companies providing proprietary research, customer insight, consulting, events, and peer-to-peer executive programs. For more than 26 years, Forrester has been making IT, marketing, and technology industry leaders successful every day. For more information, visit www.forrester.com.

©2010, Forrester Research, Inc. All rights reserved. Forrester is a trademark of Forrester Research, Inc.

Source: Forrester

Source:  THE HINDU-Business Line

India has become the top offshore destination for European enterprises traditionally thought to be shy of sending work to the country, a recent report by Forrester Research said.

Forrester’s survey of 300 European enterprises shows that more than 60 per cent of firms intend to send their work to India. This count is more than any other obvious single country or grouping of countries — for example the CIS region or Central Europe, the report said.
Budget cuts likely

Forrester also said that European companies plan to increase their India spend substantially. Nearly 50 per cent of the firms that currently offshore or plan to offshore in the next 12 months plan to increase their spend on Indian resources. Twenty per cent of these firms plan to increase their spending by more than 10 per cent of what they spent in 2008.

However, most firms are expecting moderate budget cuts as economic pressures and cost-cutting drivers are visible in their budgeting decision. All three top European markets including UK, France and Germany would pare budgets. More than 60 per cent of UK firms are cutting their budgets, the report said. While there is talk of economic recovery, it is not yet reflected in firms allocating money for technology expenses.
Fewer first-timers

Also, very few first-time users will try offshore services, the report said. Compared to Forrester’s survey in 2008, the current research shows a drop of more than 20 per cent in the number of companies that were thinking about starting an offshore initiative for the first time, it added.

But experienced offshore clients would extend their usage further. The companies that saw offshore benefits in the past are optimistic about continuing and expanding their offshore usage, the report said. These firms report that they will either continue ramping up their offshore work or will use offshore resources wherever possible, the report added.

Overall, compared with the US, Europe still offers a lukewarm response to offshore. The majority of European companies are keeping their offshore budgets flat. Furthermore, compared to North American firms, fewer Europeans are increasing their offshore budget, and a higher percentage of companies are reducing their offshore spend, the report said.

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Quality Assurance has changed the perspective in which the customers/ end users/ buyers see things. As the saying goes; Quality in the bygone ages meant “Let the buyer beware”. It means that the user/ buyer knows that the  tool/ product is fit enough to serve the actual purpose. It speaks of the attitude that goes into producing tools, products and goods with basic quality embedded in it.

We have come a long way and the perspective of creating quality product still stands the same. The way we do it and enforce it has changed to pave way for bigger and smarter processes. The QA process ensures that products (goods and/or services) satisfy customer requirements in a systematic, reliable fashion. QA cannot however guarantee of quality products, but rather makes the production of quality products more likely. The importance of Software Quality Assurance can be gauged from the inclusion of processes such as software design, coding, source code control, code reviews, change management, configuration management and release management.

Quality Assurance in Cordiant has always contributed in its own way. Products and Services at Cordiant have always gained in Quality due to a well defined quality process in place. We have always won words of praise from our customers for our quality products/ services. It speaks of the ample care taken at Cordiant to ensure that the customers get their worth by dealing with Cordiant development teams who are well versed and accustomed in producing products with high quality. Having a well organized QA in place has enabled us to realize the customers vision and emphasized the need to provide a top quality services to our customers. Every process enhancement is carried out with a view to provide our customers the benefit of gaining a quality service/ product.

With increased diversification in business, the concept of quality with the focus on management and people came to the fore.  The realization that all departments should approach quality with an open mind to gain success became sacrosanct. The involvement of management became thus a major contributing factor towards the success for the implementation of quality.

As can be seen, the organization wide approach for quality management emphasized the following areas.

-          Elements such as controls, job management, adequate processes, performance and integrity criteria and identification of records

-          Competence such as knowledge, skills, experience, qualifications

-          Soft elements such as personal integrity, confidence, organizational culture, motivation, team spirit and quality relationships

-          Infrastructure elements

It is clearly evident that QA has become an integral part of organizations who think about quality and want to give the best to their customers.

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The world today presents numerous challenges and one of those challenges worth mentioning is that of Outsourcing. It is a valuable and cost effective strategy to achieve high performance and maintain the business impetus. The most important aspect of businesses today is the ability to respond to the uncertainties in the global market and be able to respond both quickly and effectively.

Most companies are on the lookout for a service provider with cutting-edge capabilities and excellent track record so that they can enhance and gain in their business ventures. The services providers should be able to help these business companies to respond to the uncertainties within the business environment and make them successful. Cordiant has the experience, scale, flexibility and the much wanted global reach to help your organization.

Outsourcing with Cordiant can deliver high performance and achieve benefits through:

• Performance improvements at all levels
• Better productivity and best practices
• Improved operational capability and excellence
• Better technological improvements and gains
• Continuous improvements in knowledge and experience.

The most important aspect of the outsourcing venture is the sanctity of relationship built on trust, commitment and respect. Cordiant will take care of your outsourcing needs not only as a “provider”, but also as an active partner to help you overcome your business challenges and navigate these to reach greater heights.

Such a relationship ensures that your outsourcing arrangement with us is considered as an honest commitment over an extended period of time. Cordiant’s outsourcing clients trust us to play an important role in their organization’s future success, no matter how challenging the market.

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Agile methodologies are synonymous with continuous process improvement and are considered more suitable for software development. With every scrum, quality is implemented iteratively to improve the product to the desired level. It provides the customer the much needed success and ultimately customer satisfaction.

Improvement in Communication: With Agile methodologies, it is evident that communication plays a vital role in the overall success. Even with projects situations geographically across, Agile methodology provides an opportunity for different teams across various locations to sort out their differences and arrive at a consensus. Immediate feedback and adjustments that are vital for the project can be obtained immediately and proper fine-tuning can drastically improve the overall quality.

Perfection Is an Iterative Process. When two disparate organizations work together, success can be achieved only iteratively with as many feedback loops as you can design into the effort as possible. Agile software development and continuous process improvement offer both buyers and sellers of outsourcing services the opportunity to achieve perfection iteratively.

Building Expertise. Service providers can move to using agile software development methodologies or billing customers on a transaction basis only if the sellers of these services aren’t just executing a project or process but building expertise in that area.

Responsiveness to Change. Software requirements change over time. Business processes are evolving everyday due to competitive pressures as well as changes in the law. Agile methodologies are needed in outsourced software development to keep the development effort synchronized with changes in requirements.

Building Longer Term Partnerships. Building a partnership with your software development service provider makes it easier and better the next time you have another major software development effort come up.

Building Quality. Agile methodologies achieve something that is counterintuitive at first glance. You build things faster, but by doing so, you ensure better quality. Agile methodologies address serious problems in ways humans communicate. They do this by allowing faster and quicker feedback cycles so that course corrections are made as soon as possible.

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