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Lehman Brothers has filed for Chapter 11 bankruptcy after Barclays and Bank of America abandoned talks to buy

the company. Following the news, the IT space felt a fair bit of pressure. With Lehman Brothers filing for bankruptcy and Bank of America taking over Merrill Lynch; the key question would be - do these companies have significant exposure to the Banking, Financial Services and Insurance (BFSI) space and what would be the impact? As has been observed in the previous three-four quarters, every time there is a client-specific issue, it shows up on the financials in the next one-two quarters. Lehman Brothers, which has filed for bankruptcy, seems to have very little outsourcing done as of now and the exposure remains with Wipro and Tata Consultancy Services (TCS). Wipro has given a statement that Lehman Brothers is not such a significant client and they are not worried about it. Extrapolating what Wipro has said, TCS may not see much of the impact. But one needs to watch out for what happens with Merrill Lynch because Merrill Lynch was a significant client for both Satyam and TCS. The one which is going to suffer from Merrill Lynchs takeover is going to be Satyam because it was a significant top client for them. Where TCS gains over Satyam is it has in relationship with the acquiring company Bank of America, which gets more outsourced work. Infosys and Bank of America have a very steady relationship. So Infosys maybe one of the gainers. S Mahalingam, CFO, TCS has said that the company has a very steady-state relationship with both Merrill Lynch and Bank of America. So he is expecting no impact coming from this part of work at least. HCL Technologies has done a little bit of work for Lehman Brothers but the management has clarified that it is over and they are not going to be impacted by it. EDS does a lot of work for Bank of America globally. So one needs to wait and watch of what kind of shape this takes and whether any work pours down to Mphasis. When one puts all of this together, there is some loss but given that most of our top five companies have over 40-45% exposure to BFSI space, then mood is worried and concerned right now. Everybody is calling their relationship manager and trying to figure out what is happening officially because normally there is a two-three months' time, by when the impact actually flows down to the offshoring vendors. has roped in senior officials, including retired, from Boeing, Airbus, Cadence and Bombardier to strengthen its aviation practice. Mr John Douglass, former president and Chief Executive Officer of Aerospace Industries Association of America, which represents US aerospace manufacturers, will join Satyam as an advisor. He is also an advisor to the Senator, Mr Barack Obama, the Democrats Presidential candidate. Mr Douglass has accepted our offer, said Mr Subu D. Subramanian, Director and Senior Vice-President, Satyam. Upping the Ante The company is gearing up to meet the demand of international firms that are eyeing India to take advantage of available skill base, technology base and cost advantage for global and Indian opportunities, he said.

The global aerospace industry spends $60 billion on engineering. Currently, India Inc accounts for less than one per cent of this market, as compared to 12 per cent overall offshoring in engineering services. Utilisation of offset clause and global export commitment requirement will fasten the investment by foreign aviation players in India, he said Bleeding financial giants may turn to India to cut down losses. Technology consulting firms have said that Indian IT and BPO firms may see more deals being struck in the Banking, Financial Services and Insurance (BFSI) space. So, is a turnaround is underway? Even as financial giants reel under losses, experts have said that this is the time for Indian IT and BPO companies to look at the BFSI segment again. As per a Dallas based consultancy, Everest, there has been a significant hike in the number of deals signed by financial services companies. There were 54 transactions signed in Q2, valued at more than USD 240 million in an annual contract value. North American firms have shown a strong jump with deals up 41% compared to 26% in Q1. Everest has said that the Indian BPO market will see substantial job creation in the next six-seven months. This view seems to be echoed by India' largest outsourcing outfit, Genpact. The company sees growth coming from the European as well as the US financial sector. According to a new survey by Forrester Research, the global economic slowdown will continue to have a short term impact on outsourcing. About 43% of firms have already cut their overall IT budgets in 2008 in reaction, while 24% of firms have put discretionary spending on hold which is going to have an impact specially in the financial sector. Other leading players also believe that the turnaround in BFSI will take time and one could see selective growth coming out of captives. Amitabh Chaudhary, CEO, Infosys BPO said, The upside will take some time as the ramp-ups are slower now. Over the last few months several leading companies downgraded the revenue share from the financial sector due to the sub-prime crisis, the picture could change if the contrarians are to be believed. CFO, Infosys feels that

there could be an impact seen on reported dollar numbers. He believes that it is too early to speculate on the missing dollar guidance numbers. He said that the rupee depreciation will offset the margin impact. However, the pricing environment is still fine, he said. Balakrishnan said that 30% of revenues from other currencies have depreciated against the dollar. The reported dollar numbers will be impacted due to depreciation in other currencies.
Meanwhile, CLSA has said that Infosys FY09 US dollar revenue growth guidance should be cut to 17-19%, reports CNBC-TV18 quoting NewsWire18. CLSA also said that Infosys will most likely miss Q2, FY09 US dollar revenue growth guidance.

Stepping up its focus on the Indian market, International Business Machines Corp (IBM) is now eyeing the countrys aerospace and defence sectors with its enterprise optimisation and microelectronics solutions. IBM is evaluating strategies including partnerships with private and public sector companies to tap into the Indian defence market.

We see India as a significant market as part of our growth strategy and would be investing to develop it, said Mr Tom Kilkenny, General Manager for IBMs global aerospace and defence solutions. IBM sees a potential to earn up to $5 billion from these sectors in India over a 10 year period, Mr Kilkenny said. India tops the list of emerging markets for IBM from a growth perspective, while the Big Blue continues to earn a major portion of its aerospace and defence revenues from mature markets in the US, Europe and Japan. Offset opportunities Sensing the potential in the unfolding Indian defence and aerospace market, large local software companies such as TCS, Wipro, Satyam and HCL Technologies are working on IT implementation contracts. The offset programme is expected to open up new opportunities for these IT vendors as for every defence contract worth Rs 300 crore or more, the multinational vendors have to source components or systems from Indian companies for 30 per cent of the deal value. contd on page 2... New Delhi, Sept. 9 IT majors including Infosys, Satyam, HCL and TCS have put in their bids for deploying ERP solutions for Bharat Sanchar Nigam Ltd. The project, expected to be valued at around Rs 500 crore, will be awarded to one of these companies based on technical and financial evaluations to be conducted by BSNL. Tuesday was the last day for submitting the bids. The company proposes to implement Enterprise Resource Planning in BSNL. The objective of ERP system is to improve the information flow to facilitate better decision making. This would lead to overall improvement in the performance of the organisation by way of improvements in productivity, cycle time, financial performance and information transparency, said a BSNL official. Analysts said that the project will enable BSNL to face challenges due to competition by providing effective and efficient business processes and improved operational efficiencies, besides aiding in better decision makinghas bagged a multi-million dollar order from AT&T and the company is also not ruling out the buzz around the British Telecom (BT) stake sale. Almost 70% of Tech Mahindra's revenues come from Europe, that too from its largest client, British Telecom. It wants to reduce this dependence on BT and hopes that its recent stake buy in Servista will help it garner revenues from other European countries as well. Telecom software provider, Tech Mahindra won a system integration project from AT&T, which it will deliver over a period of five years. It has also signed a multi year contract with a Kuwaitbased broadband firm. CP Gurnani, President, Tech Mahindra said, "One of the major telecom players is consolidating its vendors and its systems and Tech Mahindra is taking over the responsibility of consolidating some of the processes and handling it over the years. So it is a five year deal worth USD 250 million. We have also signed up a couple of deals in Kuwait, one of them is with a leading broadband player."

This has come at a time when there is buzz of private equity firms battling with each other to pick up British Telecoms 31% stake in Tech Mahindra though the company calls BTs exit as speculative. Even if such a move happens, it does not expect a shift in the management or the day to day running of the company. In fact, even a buyback from M&M or Mahindra & Mahindra has not been ruled out. Gurnani added that there has been a fair amount of interest among private equity and strategic investors as everyone wants a stake in a company which is growing so fast. Indian IT services companies, whose clients see slowing IT spends, are targeting the biggest part of their expenses manpower to keep costs in check. The bottom few, ranging from 0.5 per cent to 10 per cent of most IT companies workforce, are now finding it hard to retain their jobs. Top IT companies, TCS, Infosys, Wipro, Satyam, HCL Technologies and Cognizant together employ about 4.5 lakh people. Typically, 60 per cent of employees in these are fully employed, excluding those on the bench and those under training. If all these companies, on average, weed out the bottom 1.5 per cent of their fully employed people, and by inference, between 4,000-5,000 people would have been made to walk out of these IT majors, last year itself. Recruitment firm Ma Foi Management Consultants CEO, Mr Balaji E, feels that the back-of-theenvelope calculation may not be far off the mark, though it is difficult to say exactly how many people lost their jobs since no one confesses to having been fired, in their resume. In good times, CEOs rarely talk of targeting the bottom 1-5 per cent in their companies. You didnt hear about these things in 2006 or 2007, he says. Agrees Ms Nirupama V.G., Managing Director of recruitment consultant Ad Astra. Employee measurement on the scale of productivity has become key to retaining competitiveness, she says. Industry observers point out that while last year non-performers could get away with a nominal 4-5 per cent hike, this year companies are either asking them to leave or are ignoring salary hikes will buy a minority stake in European IT Services company, Servista, reports NewsWire18. An official at Tech Mahindra said the company would buy a 17.28% stake in Servista. Servista operates in telecom, financial services and the energy space. Tech Mahindra would be Servistas exclusive delivery arm for three years. The stake would give Tech Mahindra the right to nominate one member on the Servista Boardhas acquired Axon Group, a UK-based company, for 407.1 million. Infosys says the Axon Group deal would be completed by November. The Infosys management said the deal is at 33% premium to the six-month average price of Axon. S Gopalakrishnan, CEO, Infosys said that his company's SAP practice has been growing about 65%. "We are seeing continued demand for SAP services and we found the right opportunity and so we made the offer today." "Our desire or our aspiration is to become a trusted transformation for our clients. This (deal) allows us to combine the strengths of both the organisations and become a trusted transformation partner using SAP as the underlying platform for making those transformations," Gopalkrishnan added. Accenture, which launched its HR Academy in India in partnership with XLRI (Jamshedpur), is all set to replicate the effort in other parts of Asia.

We are finalising details on starting similar tie-ups in two other countries where Accenture, in partnership with HR schools in these regions, would create a human resource talent pool for the company, Mr Rahul Varma, Senior Director, Human Resources Strategy, Accenture Pte Ltd, Singapore, told Business Line. In 2005, when there was a huge dearth of human resource talent in the country, trying to get people through the door would mean huge costs for the company, apart from the challenges of skills mismatch. Accenture India partnered with XLRI to launch a two-year programme work-study programme to impart industry-relevant skills with academic fundamentals. This programme aims at creating a new HR talent pool with skills relevant to the industry. Currently, Accenture India has 100 HR people on the job. Detailing the advantages of such a programme, Mr Varma said that apart from imparting contemporary skills and getting the right quality of HR people, the academy has also helped positively impact cost pressures. There have been substantial savings for the company because hiring laterals would mean higher costs, both in terms of compensation and training efforts. We have invested in the academy so heavily that there is a lot faster and better output, which we would like to repeat in other countries, says Mr Varma. Taken from Business Line Shoppers in India might be finding it hard to look for bargains with rising inflation but the Indian BPO companies say this is the best time to expand overseas as falling valuations globally is helping them get the best bargains. On shoring and acquisitions are the new buzzwords for BPOs. Wipro BPO says it is growing faster in the international market with its Global IT Services Business clocking almost 23% growth year on year during the fiscal. Wipro BPO has nearly 20,000 employees in India, Romania, Poland, China, Philippines, Brazil. The company is in the process of setting up onshore centers in the US and is even evaluating an entry into the UK. Wipro BPO expects to increase volumes in Eastern Europe and China by more than 20 %. The company says it is open to acquisitions in China to grow its presence. Sanjeev Bhatia, VP International Operations, Wipro BPO said, We are very clear of about acquiring companies which will get aligned to us. We are very choosy; thats the reason that we are starting a little late in that segment. Financials - I will not disclose but yes we are looking at a 500-seater currently in China in addition to what we have right now.

Not Just Wipro, even Genpact is looking for acquisitions in the US in the USD50-400 million range. The company recently acquired a 700-seater delivery center in Guatemala from GE Money. Other companies like HTMT and Quatrro are also on the prowl. While HTMT Global Solutions has set aside Rs4.4bn for the same, Quatrro is in the process of evaluating 2-3 companies in the US. According to industry sources, almost five big companies are on the block in India and with IT companies looking at cutting costs by selling their captive units, this could be the best time for Indian BPOs to look for bargain buys. Cognizant Technology Solutions, rattled by the downturn in the US economy, is expanding rapidly in emerging markets such as China and India as it looks for succour, but the move may take a while to provide a balm for the informationtechnology services provider.

Investments being made in those geographies will start showing results two to three years from now, Chief Executive, Mr Francisco DSouza, said in an interview with Reuters. While competitors such as Tata Consultancy Services and Infosys Technologies have made strides in galloping economies like China and India, Cognizant lags far behind with only 1.5 per cent of its revenue coming from Asia. The company, which gets the bulk of its revenue from the US, drew 20 per cent of its secondquarter revenue from Europe. . But as the malaise in the US spreads to the other side of the Atlantic, and concerns mount about the companys ability to sustain its strong growth rate in Europe, Cognizant is testing other shores. contd on page 2... will buy UK-based BPO company Liberata Financial Services, reports CNBC-TV18 quoting Newswire 18. HCL Tech will get 4 UK delivery centres with the Liberata Financial buy as well as 800 employees