Week Ending 12/21/2007
As the year comes to an end, predictions about globalization of services in 2008 fill the headlines. Forecasting is always a difficult enterprise, but even more when talking about an industry that is emerging so fast and in so many directions at the same time as the service sector is.
Some of the trends suggested in the articles seem evident. One of them is that 2008 will bring more rather than less demand for global service providers. The reason cited to support this is that the industry is counter cyclical and benefits from economic downturns. This is probably true, but it is difficult to think of a scenario—even without economic difficulties—where globalization of services halted in the near future. Tough economic times might increase companies’ attention towards costs and booms will give companies more space to explore the landscape for additional sources of value. But up or down, economic numbers should not interfere with the globalization of services’ current trend.
Week Ending 11/30/2007
The criteria used by Gartner was cost, cultural compatibility, data and intellectual-property security and privacy, educational system, government support, global and legal maturity, infrastructure, labor pool, language and political and economic environment. Since the factors included are somewhat similar to the ones used by A.T. Kearney in its 2007 ranking, it is not surprising that the results are not that different. With a few exceptions, both exercises depict a very similar landscape.
Week Ending 11/9/2007
Week Ending 10/26/2007
Week Ending 10/12/2007
India has seen how offshore outsourcing evolves and goes from 1st to 2nd tier cities. Companies that initially moved there have also diversified by opening centers in Latin America, Asia and Eastern Europe. Moreover, Indian companies have recently moved some of their operations to the US and UK, either by opening offices there or buying other companies: “reverse offshoring”.
Week Ending 9/28/2007
Weekly Summary
Weekly summary and more stuff coming back soon...
Week Ending 4/20/2007
Tata Consultancy Services (TCS) total revenues for the quarter were $1.2 billion, up 8% quarter-on-quarter, with net profits of US$270 million, a 9% increase quarter-on-quarter. The company said that it added 43 new clients and 5,287 associates in these last three months. Annually, TCS reached US$4.3 billion in revenues for 2006-07, up 41% year-on-year, with income totaling US$950 million, up 43% year-on-year. Big deals throughout the year included a US$146.6 million deal with Qantas Airways and a US$100 million five-year contract with Bank of China.
Wipro’s revenues and net profit for Q4 stood at US$690 and US$246 million respectively, both growing 39% from the previous year. The annual revenue for the combined IT businesses of the company (Wipro Technologies and Wipro Infotech) crossed the US$3 billion revenue mark to reach US$3.25 billion. Finally, Satyam's revenue totaled US$492 million during the January-March quarter, with a reported profit of US$86 million. Revenue grew 35% and net profit 43%, both on a year-to-year basis. Satyam said it won 35 new clients and added 1265 new employees to its staff during the latest quarter. Annual revenues were US$1.46 billion, profits totaled US$298 million.
Offshoring 2.0
We have seen before how R&D and innovation activities are getting increasingly globalized. A study by Duke university and Booz Allen found that this globalization of innovation would form the next generation of offshoring. An interesting shift is taking place in type of activites being offshored. While IT offshoring is maturing, BPO and innovation offshoring is growing faster. Innovation activities such as product development, R&D and engineering services - considered core - are growing at an aggressive rate of 50%. The potential is definitely huge, with global engineering and R&D spend projected to exceed 1 trillion dollars by 2020. Over time, we should see a broad geographic spread in origins of global product and process innovations. China, India and East Europe are emerging as leading destinations.
Week Ending 4/13/2007
A.T. Kearney’s “Global Services Location Index 2007” recently ranked China as the second country in terms of attractiveness for global service delivery. The past week’s news continue to underscore that companies are diversifying their global locations, and in line with the report show China as the preferred destination with EDS, Oracle and Achievo expanding their presence there.
Electronic Data Systems (EDS), one of the world's largest technology service providers, opened a global service center in Wuhan, capital of China's Hubei Province. The facility will employ roughly 700 people by the end of the year, and is their second center in China; the Shanghai center employs around 250 workers. Similarly, Oracle announced that it will open its fifth branch in the country in Xian, capital of China’s northwestern Shaanxi Province. Oracle entered the Chinese market in 1989, and has offices in Beijing, Shanghai, Guangzhou and Chengdu, and development centers in Beijing and Shenzhen. Finally, Achievo Japan Business Group announced that it is expanding its offices in Shanghai. The new facility offers 50% more space to accommodate the company's rapidly expanding Japanese offshoring business.
Countries in Eastern Europe and Latin America also gained importance in A.T. Kearney’s index and companies are also increasingly adding these to their possibilities. Capgemini has been present in Poland since 1996 and recently announced that it will open a new IT centre in Katowice. The new center is expected to employ 135 people in 2007, and will later grow up to 400 workers. Satyam, on the other hand, stated that it will launch a 4,500-square-foot development centre at Sao Paulo, Brazil. This will be its largest facility in South America and is said to be followed by another one, also in Brazil, for which plans are already under way.
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