Mega-deal outsourcing deals - those contracts with a value of $1 billion or more - picked up in the second quarter of 2012, according to the quarterly Global TPI Index.
Five mega-deals were signed during the quarter compared with just one each in the second quarter of 2011 and the first quarter of 2012. All five were awarded outside of the mature U.S. and Western European markets-three of them in India and Brazil.
Mega-deal activity is always fairly uneven quarter to quarter, said John Keppel, partner and president of research and managed services for outsourcing consultancy ISG, which produces the index. But the location of the awards is worth noting.
"In the future we expect most new scope growth to come from emerging markets," said Keppel, "while the U.S. and Western Europe will generate the bulk of restructuring activity."
The mega-deals awarded by companies in the telecom, banking and consumer goods industries with a combined value of $6.3 billion, accounted for nearly 30% of global contract value signed during the second quarter. Four of them were entirely new deals, while one was a restructuring.
Additionally, 11 mega-relationships-those with an annual contract value of $100 million or more--were initiated in the quarter, the most since 2009 and an increase of four signed the year prior and seven in the previous quarter.
Keppel doesn't expect the mega-deal activity to return to decade-ago levels of robustness. "Some mega deals in the past year, especially those that are restructuring-related, are being broken up and returning to the market in the form of multiple smaller contracts with shorter durations," said Keppel. And the bellwether for large outsourcing deal affairs is likely to be the mega-relationship category of deals as contract durations continue to get shorter. The average deal length so far this year is 4.85 years, compared to 6.48 back in 2000.
"We expect mega-deals and mega-relationships will continue to make up an important part of the market," said Keppel. "We also expect more mega-deals to be awarded in less mature regions but mega-relationships to continue in mature and less mature regions."
Taking into account all outsourcing contracts worth $25 million or more, $13.1 billion in IT outsourcing business took place in the second quarter, up six percent year over year but down five percent over last quarter due to light contracting activity.
TPI is predicting a softer outsourcing market in the third quarter. "Historically, third quarters have been softer than other quarters, and current industry pipelines suggest this will hold true in 2012," Keppel said. "The fourth quarter will likely pick up, with some help from larger deals in the pipeline ready to go to award."
Meanwhile global outsourcing vendors continue to battle it out for business. American multi-national service providers have held 53% of total market share since 2010, down 10% from the 2007 to 2009 period.
European, Middle Eastern and Asian (non-Indian) vendors held 25% of the market since 2010, up three percent from the 2007-2009 period. While the Indian-heritage firms gained seven percent in market share, from 15% in the 2007 to 2009 period to 22% today.
Source: IT World
- BPO company Serco in talks with Agon for outsourcing deal (timesofindia.indiatimes.com)
- HCL inks $200 million deal with Disney (timesofindia.indiatimes.com)
- HCL bags Citibank BPO deal, to hire 800 (timesofindia.indiatimes.com)
- Indian IT services industry is at a crossroads: HCL Tech CEO (timesofindia.indiatimes.com)
- IT Outsourcing Predictions in 2012 (satpute.wordpress.com)
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New UK boss Robert Care completes cull losing 670 posts.
Arup has made 15% of its UK staff redundant following its restructuring late last year, the architect and engineer confirmed today.
The firm, which drafted in Australasian chairman and chief executive Dr Robert Care to run the UK and Europe business as part of the restructure, has made 670 posts redundant after it put 600 staff on a 90-day notice of redundancy in November.
It said today the consultation resulted in 280 permanent and 230 part-time and agency roles being made redundant.
In addition, 86 vacant positions will now not be filled. However, a further 70 staff will be redeployed to offices overseas.
Arup last year employed more than 10,000 staff worldwide, including just under 4,000 in the UK. Robert Care has re-organised the UK office into five sub-regional groups.
Why did you think of India as an entrepreneurial destination?
The rapid development and surge of India as a major economic player on the global stage has echoed in business circles in the West for several years now. The nation’s young profile (not in history but in terms of workforce), combined with its huge pool of talent are attractive factors for any young entrepreneurs. My native passion for Construction and Information Technology, coupled with Indian contacts I worked with, has naturally attracted me to India.
How has working out of India been beneficial to building your business?
What are the unique inputs/facilitating factors that your business has leveraged here?
Simply put, our whole business model is based on operating from a developing country. Our model would not have been viable from within Europe. So in this regards, the Indian context is essential for our business planning and growth. It is essentially giving us the ability to reduce the cost of our services, be extremely competitive and to offer additional resources. The huge domestic market represents potential for longer term growth. Interestingly, the Indian context has also enticed us to expand our business propositions, offering a wide range of services that we weren’t even promoting at first.
Can you give us an idea of the challenges, the difficulties faced in doing business in India?
To my surprise, the biggest hurdle for me to conduct business in India isn’t cultural. The biggest difficulty faced is to find a network of reliable contacts for asking questions and getting the right information. For many westerners, India seems disorganised and un-institutionalised.
Your business is also focused on reaching some of the most under-served segments of the market - how much more challenging has this been - any anecdotal examples to describe your experiences?
Our business is focused on SMEs primarily, as it represents the biggest segment of the market and also because most SMEs are companies that still have to experience and enjoy the benefits of outsourcing; the big players have been doing it for years. As western economies have become stale in recent years, SMEs are the ones most targeted by this downturn.
We have realised that many SMEs have a psychological apprehension to embrace new offshored business models, due to the fact that most of them don’t trade globally yet, and therefore are not used to work with companies in foreign markets. As a company It is our mission to overcome this problem; we work hard to make ourselves available “ears open” and make the workflow as fluid as possible. Based on our commitment to quality and international standards of our deliverables, we ought to fill the cultural gap between different markets.
Some European SMEs were offended when we approached them, because they thought we were trying to steal their jobs. If anything, we are actually trying to collaborate to boost their productivity and help them retain their jobs!
There is much talk of the intersection of social good and for-profit businesses - how do you view the growth of your company from this perspective?
Social Entrepreneurship runs a long way in India. The Indian market creates unique scenarii for innovative business models and pursuing social justice. Our ultimate company ethos is to grow organically and remain commercially sound, while contributing to develop the social context we operate from. That implies working with local communities, collaborating with charitable bodies, recruiting talent at the door steps of universities, sharing knowledge with similarly-minded companies, launching new ventures with aspiring Indian entrepreneurs, as well as empowering our team members.
Longer term, we aim to become a catalyst for multicultural collaboration – poised to create opportunities for western companies to benefit from the Indian context, whilst opening doors for up-and-coming Indian designers whiling to work on projects in western markets.
Does selling to the poor offer a large scalable business opportunity?
Are there examples/illustrations that you can offer from the experience of building your company?
The “Bottom of the Pyramid” represents a huge pending opportunity for businesses operating in emerging economies. It is arguably an essential component of the Indian engine. Hundreds of millions of people live with modest means, but represent the larger piece of the consumers’ pie.
By working with charitable organisations that operate at the lowest levels of the pyramid, we have started an initiative for our clients to plant trees in the state of Karnataka, around greater Bangalore. This incentive offsets some of our company’s carbon footprint, and we are hopeful to become carbon neutral by 2012. This has generated positive reactions from some of our clients; by working with us, they can save time, money and combat climate change.
How much has doing business in India helped define products/business models that your company can take to other emerging markets? Any examples?
Emerging markets present unique business patterns, in terms of need, revenue model and saleability that are quite different to conventional old pastiche models. Emerging markets offer different societal constraints, which in return, creates opportunities for new models.
For example, in emerging markets, not everybody his connected to the internet, however mobile phones are affordable and widely used. So mobile phones represent a unique medium for consumption, transfers and transactions. Some of the ventures we have launched in East Africa could, with minor customisation, be suitable for the Indian market, and vice-versa. So for each new venture we work on, we try to tackle solutions from a wide and scalable perspective, while respecting the authenticity and sensitivities of the local market.
Do you expect to see more expat entrepreneurs such as yourself building businesses out of India in the future?
As India opens up economically and socially, coupled with a softening of the laws and regulations, it will inevitably become home for more foreign entrepreneurs. Already we are observing a shift in perception, as India is recognised as an engine of growth in Asia after decades of economic stagnation due to poor management and uneven commitment to tackling corruption. And this transformational phenomenon will only be accelerated, the faster India’s economy opens up to other markets.
What are the sorts of businesses that you expect will be built out of here? And why?
The Service and ITeS sectors will continue to be essential to the growth of India, accounting for at least 15% YOY growth till 2020, according to moderately conservative studies (source: LSE). Tourism, Hospitality and Leisure industries are still lacking and way behind in India and we’ll observe dramatic improvements in the coming years in those sectors, as well as a sustained growth of the wider construction industry.
What is the reaction from investors - angel, venture capitalists to such business models - where expat entrepreneurs seek to build business in markets such as India?
We haven’t sought the financing back up of Angel and Venture Capitalists so far, simply because we believe in a slower more organic growth model. However, those that have approached us seem at first puzzled to see western entrepreneurs running businesses in India, but as we expose our vision and longer term ambitions, they all seem to share our views. Once our mindset on global goals is exposed, they all seem to agree with our positions and practices for business.
What are the networks, ecosystems that you have connected with in your entrepreneurial journey and how have they helped?
Since our inception, we have been affiliated with the Royal Institute of British Architects (RIBA) in Europe, which gives us international exposure and credentials, and helps us on achieving “best practice” procedures. Locally, we have approached the entrepreneurship cell of IIM Bangalore and have attended numerous networking events and brainstorming sessions with Indian talent. We have also actively collaborated with “Jaaga”, a community-led social incubator that is a wonderful place to meet talent and share ideas, essential for the growth of our company.
Source: Economic Times
Virtually the whole of Cabe’s staff have been put on notice of redundancy
Letters have gone round Cabe’s headquarters in London’s Kemble Street warning “the majority” of staff of the imminent loss of their jobs, a legal requirement after the DCMS pulled funding in the wake of the Comprehensive Spending Review.
Last year, the DCMS funded Cabe to the tune of almost £5 million – almost 40% of its entire budget.
Following the department’s withdrawal of support last week, the CLG confirmed it too would not be funding the design watchdog. Instead it would work with Cabe, the DCMS and the construction industry to “ensure the most valuable areas of Cabe’s work are retained, and local communities can put great design at the heart of shaping new development in their area”.
Matt Bell, Cabe’s director of education and external affairs, who is among those who have received the letters, stressed that design reviews would continue until at least March 2011, the end of the financial year.
He refused to say exactly how many staff had been put on notice, or to reveal who had been spared.
“The majority of staff have been put on notice that they are at risk of redundancy because the DCMS funding is being withdrawn,” he said.
The precise terms of redundancies are the subject of a “massive legal debate” with the Cabinet Office, “which adds an uncomfortable layer of uncertainty”, added Bell.
The Cabinet Office has been involved in a battle with unions over proposed reductions in redundancy payouts.
The Superannuation Bill, currently pushing through Parliament, would cap payoffs at one year’s salary or 15 months for voluntary redundancies.
However, this weekend’s Sunday Times reported that public sector workers who take voluntary redundancy will be able to retire early, at 50, on a full pension.