The subprime crisis and the subsequent meltdown have had a mind-boggling impact across the globe. In this article, I would like to focus on their impact on the Indian IT services industry and the opportunities it is likely to throw up for companies operating in the Third Wave.

Let’s first look at the Three Waves of Indian IT.

The Three Waves of the Indian IT Industry

When we look at globalization, specific industries in emerging economies typically go through three waves of evolution. The electronics industry, first in Japan, then in South-East Asia and now in China, are good examples of this. In the first wave, companies in emerging economies typically act as component suppliers to developed countries that manufacture the complete product. In the second wave, the local industry gains enough expertise to provide cost-effective contract manufacturing services - of either the entire product or major sub-assemblies. The third wave is when a set of firms start marketing these products under their own brand - initially within their own countries, and then going international.

We can trace the evolution of the software services industry in India using a similar paradigm.

Wave 1 (Proving Capability through People) started in the 70s and 80s and peaked in the mid-90s; it established the competence of the Indian software professional and the industry got results largely through staff augmentation.

Wave 2 (Offshore Development) established India as a destination for low-cost, high-quality programming services. The catalyst was the Y2K bug and Indian companies’ success in delivering these projects cost-effectively. Many Fortune 1000 companies discovered that moving their application maintenance and ongoing development activities to India was viable and attractive. The Second Wave of Indian IT started in the mid to the late 90s, and is at its mainstream phase today.

Wave 3 (Strategic Value Delivery), which is emerging, will be characterized by Indian companies moving to high-value, IP-led services that are strategic to the customer and hence command premium, value-based pricing. The industry is already facing a severe shortage of talent, rising attrition levels and increasing salary costs. All indications are that the linear relationship between growth and headcount will not be sustainable. The future is in creating strong brands out of India that command the respect and trust of large global customers and hence the appropriate value.

Orders of Short-Term Impact

The first order impact of the crisis is obviously related to the banks that have either been unable to survive as stand-alone entities (like Bear Sterns and Lehman) or have taken a deep hit and are trying to recover on their own. These institutions may cancel some contracts, and downsize others. This will have an immediate impact as most of them are large customers of Indian services firms.

The second order impact will be on firms with large investment portfolios that have been exposed to subprime lending. A prime example is AIG. In such cases, the firms may get more conservative on new initiatives and discretionary projects, thereby impacting the revenues of Indian firms that service them.

The third order impact is based on fears of recession and the general conservatism that it is likely to bring in discretionary spending.

Given that 30% or 40% of Indian IT services revenues come from the BFSI segment, NASSCOM has brought down its growth estimates from 30% to between 21% and 24% for the year.

The Longer-Term opportunities

While we can blame blind optimism and greed for the present crisis, at a more fundamental level it is a failure of systems.

The quality of underwriting at the point of loan origination has failed. Systemic controls that ensure uniform and consistent application of underwriting rules would have done much to avoid bad loans. Credit scoring that took into account not just the propensity to pay but also the quantum of debt that a person had any hope of repaying would have brought these issues to light much earlier.

Better transparency and visibility of the underlying asset portfolio, and a more balanced approach while packaging a set of mortgages into bonds, would have helped monitor the health of the assets and the loans in real-time.

Better controls and risk management systems governing individual firms as well as the entire financial system would have helped to track the quantum of leverage and the risks associated with it - both from the perspective of board governance and regulatory oversight.

For too long, large institutions have been trying to get away with spending 80% of IT dollars on maintenance and only 20% on new initiatives. In a recent Information Week article, Rob Preston, argues strongly against the 80-20 rule, and says that IT’s top priority is to release money for new projects.

Today’s financial institutions are large and complex, but their core enterprise systems are inadequate. To make matters worse, quant wizards have devised sophisticated financial products that are derivatives of derivates and far removed from the physical reality they try to hedge against. So much so that the underlying financial control and risk management systems are unable to provide adequate governance and oversight.

To top it all, the financial crisis is forcing mergers of huge, complex institutions that were individually ungovernable in the first place. The only possible way these institutions can be managed is with substantial investments in new IT applications that can track all the nuances of the underlying operations and provide meaningful online, real-time controls.

Implications for Indian IT

Clearly the need is to reduce maintenance budgets and increase transformation budgets. Reduction in maintenance budgets will force companies to send more work offshore - which is good news for the Wave 2 services players in India. However, customers will force the vendors to bring in new efficiencies, and expect aggressive cost improvements year on year.

There are tremendous opportunities for Wave 3 companies that have the expertise and intellectual property assets to bring better governability and manageability to these large enterprises. Indian companies will probably have to partner with local firms that have this expertise or hire these experts in-house (easier now). This is the time for these companies to make the investment - so that they will be able to reap the benefits in the years to come.

Author: Chief Managing Director of Mastek Ltd.

TheInfoPro.net, an independent research network has announced new findings on 2009 storage budgets among Fortune 1000 (F1000) enterprises.

The survey said that the financial services sector continues to be weak, with 68% of respondents expecting to decrease storage spending. However, 75% of technology organizations and 63% of manufacturers sited significant declines in 2009 spending levels.

1. 32% spent less in 2008 as compared with the amount that had originally been budgeted, bringing the average 2008 spend to $10.7 million.

2. 32% of clients expect to spend the same or more in 2009 vs. 2008 down from 81% in the 2008 vs. 2007 period.

3. The average 2009 budget cut vs. actual 2008 spending represents a 14% decrease.

The studies are conducted twice a year and include discussions about spending with storage suppliers such as EMC, NetApp, HDS, IBM, and HP.

We started to witness potential softness when we completed the initial 2008 Storage spending study in Q2, and as would be expected, the just-released Q4 update shows a material decline, said Ken Male, CEO of TheInfoPro. The macro economic environment has been a driver for the spending decrease in 2008 compared with 2007, along with the reduced planned spending for 2009. However, excess capacity and the procurement of lower-cost tiers of storage have also contributed to the considerably lower Q4 budget flush that we’re witnessing compared to previous years.

By Joan Gralla

NEW YORK, Dec 16 (Reuters) - New York Gov. David Paterson on Tuesday proposed a new $121.1 billion budget that increases spending by 1.1 percent and relies on cuts as well as higher taxes and fees to close a 15-month $15.4 billion deficit.

Saying the state faces its worst fiscal crisis since the Great Depression, the Democratic governor in a televised address said he was not proposing any “broad-based” tax increases. But he did recommend shutting tax loopholes for hedge funds and proposed an extra 5 percent sales tax on luxury items, including yachts and jets, jewels and furs.

Wall Street’s troubles cost the state dearly because it gets one-fifth of its tax revenues from the financial sector. Hedge funds have in the past avoided federal tax hikes proposed by Congress by arguing they would move overseas. New York City is home to a number of hedge funds, although lower-tax Connecticut has also attracted many firms.

Democrats in the Assembly have sought to raise personal income taxes for millionaires. Paterson’s strategy includes a number of fee increases that would hit residents of all income levels, from a new obesity-fighting tax on sugary soft drinks to higher motor vehicle fees.

Beer and wine drinkers may pay higher excise taxes, but consumers would be able to buy wine from groceries and drug stores. At present, beer is available in groceries and drug stores but wine can only be sold at specialist liquor stores.

A sales tax exemption for clothing and footwear that costs less than $115 would be abolished. Homeowners would lose rebates under a property tax relief plan, called STAR.

Noting the credit crunch has driven interest rates on student loans as high as 18 percent, Budget Director Laura Anglin unveiled a new $350 million lending program for students that will only charge 8 percent rates. But students will have to pay higher tuition at state universities and colleges.

New York City is the only municipality to get less aid from the state, taking a $328 million reduction over last year’s budget. Paterson is planning to reduce funding for the state mass transit agency by $285 million, although the agency says it needs 23 percent more revenue.

Lame duck Senate Republicans last month rejected Paterson’s plan to slice $2 billion of spending, and since then, the Democrats, who won a two-seat majority in November, have failed to pick a new leader. That could imperil Paterson’s budget.

“I think the legislature has been sobered by the incredible downturn in the economy,” Paterson said. “It won’t be easy, it won’t happen overnight.”

Paterson is proposing to save more than $1 billion by enacting his budget by March 1, a month before the deadline.

He is also proposing to increase welfare grants for the first time in 18 years, increasing 10 percent per year for three years, a move that would benefit children most, said Anglin.

More than 500 workers will be laid off as at least 7 agencies are merged. The state workforce will lose a total of 3,108 positions. Workers, who on average earn $68,000 a year, will be asked to forego a planned pay increase, and benefits for new workers will be reduced while the retirement age is raised to 62 from 55.

Paterson is proposing $3.6 billion of cuts in healthcare, mostly in Medicaid, the state-federal health plan for the elderly, disabled and poor. Paterson noted New York’s Medicaid plan will still be the most generous in the nation.

Public schools will lose $2 billion of aid, though Paterson said a majority have sufficient reserves to offset the cut.

Other popular programs singled out for cuts include over $400 million of cuts in environmental protection and mental hygiene, and $300 to $400 million of reductions in human services, economic development, work force, and higher education. (Reporting by Joan Gralla; Editing by Chizu Nomiyama)

Source: Reuters

TOKYO (AFP) — The Japanese cabinet has approved a 4.8 trillion yen (54 billion dollar) second extra budget to finance a massive stimulus package, according to government officials.

Prime Minister Taro Aso’s cabinet plans to submit the budget, for the year to March 2009, to parliament early next year, the officials said.

The budget, exceeding the 1.81 trillion yen first supplementary budget, is intended to fund cash handouts, a job-creation scheme and other economic measures in the 26.9-trillion-yen stimulus package unveiled in October.

Separately, the finance ministry announced a draft state budget reaching an all-time high of 88.5 trillion yen for the year to March 2010, giving up its belt-tightening policy amid the global financial crisis.

“I would like to compile an audacious and practical budget aimed at recovering the economy and securing people’s life,” Aso said in a statement.

The total amount of national bonds issued in the 2009-2010 financial year will reach 33.3 trillion yen, marking the first rise in four years.

“The rapid deterioration of the economy is far beyond our projections,” Finance Minister Shoichi Nakagawa told a news conference. “It is our important task to take flexible measures for the people and the economy.”

The government plans to adopt the draft budget on Wednesday following minor revisions. It will then be submitted to parliament in January.

The Japanese government on Friday forecast zero growth for the year to March 2010, battling to stave off a prolonged contraction in the world’s second-largest economy.

It was Japan’s first zero growth forecast in real terms in seven years as Asia’s largest economy is battered by slowing demand overseas for its exports and a slump in domestic demand.

The global economic crisis has plunged Japan into recession in the current year to March 2009, despite earlier government projections of growth.

Yahoo has bought a 30 percent stake in Info Network Management Company (INMAC), a company in Chennai in south India that specializes in telephone directory search.

Users in India will now be able to access information about local businesses and services through Yahoo Web sites such as Yahoo Local — and also by phone through the Call Ezee service offered by INMAC, said Keith Nilsson, senior vice president and head of emerging markets at Yahoo.

Starting with data integration of the two companies’ lists, Yahoo also plans to look at other ways of integrating the business models of INMAC and Yahoo, Nilsson said.

Yahoo did not disclose how much it paid for the stake in INMAC. The deal gives Yahoo representation on the company’s board, the company said. Yahoo also has a revenue-sharing agreement with INMAC, Nilsson said.

The Call Ezee service currently covers 14 cites across India. Consumers can call the local Call Ezee number from any mobile or fixed line phone, and request contact details of a business, or a list of businesses that offer the product or service they are looking for.

Indian businesses can be listed on the directory without any charge, although sales leads are charged on a premium listing or ‘pay for performance’ basis.

INMAC expects the funding provided by Yahoo to enable it to continue to develop its team and technology as it seeks to triple its reach across India over the next two years.

The Indian local search market is seeing significant changes, as consumers are increasingly using mobile phones to search for and find local businesses, Nilsson said.

WASHINGTON (Reuters) - Search engine Yahoo! Inc will cut to three months the time it stores personal data gathered from Web surfing, making its retention policy the shortest among peers, the company said on Wednesday.

The company will “anonymize” the computer addresses of its users within three months in most cases, from a prior standard of 13 months. It is reserving the right to keep data for up to six months if fraud or system security are involved.

Internet search companies have come under pressure from European and other data protection officials to do more to protect the privacy of users.

Earlier this year, industry leader Google Inc halved the amount of time it stores personal data to nine months. Microsoft Corp has said it will cut the time to six months if its rivals did the same.

“Google first went to 18 months and started this competition,” said Ari Schwartz, vice president at the Center for Democracy and Technology, a privacy advocacy group.

Yahoo’s pledge is “significant because they are getting rid of some data after 90 days and they actually have an implementation plan to get this done,” he added.

The company is also expanding the scope of the data it is making anonymous, to include page and advertisement clicks and views, from just search log data alone.

The European Union has recommended that companies keep data no more than six months and urged the sector to adopt an industry-wide standard.

“This was our attempt to put a stake in the ground” on the issue, Yahoo vice president of policy and privacy chief Anne Toth said.

Internet search engines get their revenue by matching advertisements to searches, so advertisers can peg their ads to what is on the searcher’s mind.

RIVALS WEIGH IN

Microsoft said it welcomed the move, but made a distinction between the timeframe and the method of making data anonymous.

Yahoo will delete the final segment of the Internet Protocol (IP) address, which it said makes it no longer unique or identifiable.

Microsoft is deleting all of the Internet address, which it said will break any potential link to a particular set of search queries, according to Brendon Lynch, director of privacy strategy at the software giant.

“The best anonymization is to get rid of all the identifying information,” Schwartz said. “We are still not there on an industry standard.”

Google reiterated in a statement its current policy of nine months and said it is “continually evaluating” its policies with respect to privacy.

Ask.com, owned by IAC/InterActiveCorp., recently offered customers the ability to “opt out” of having their information stored for more than a few hours.

Yahoo’s Toth said the company is not considering such a policy.

Once the companies make commitments on data retention, they are enforceable under federal and state laws in the United States, Schwartz added.

Source: Yahoo

Zurich , 15 December 2008, GLOBCOS NetWorks GmbH Switzerland announces the signature of a long-term contract with RTV Jesenjin ( Novi Sad , Serbia ) for satellite capacity at the EUTELSAT W2™ video neighbourhood and associated ground services. The new capacity will be used to broadcast Jesenjin Television.

In addition to capacity at the EUTELSAT W2™ neighbourhood, the contract covers 2Mhz space segment. The service is scheduled to launch as of 15.12.2008. Direct-to-home satellite reception on EUTELSAT W2™ satellite provides fixed wideband coverage, spanning Europe , North Africa and the Middle East , and a steerable coverage.

Bojan Lazic, GLOBCOS NetWorks GmbH Senior Sales Manager

“We are particularly pleased with the confidence placed in us by Jesenjin TV with this contract. The arrival of the Jesenjin channels on our satellite platform confirms the strong pull of the EUTELSAT W2™ platform for the Balkan TV market.”

- RTV Jesenjin

About GLOBCOS NetWorks

GLOBCOS NetWorks GmbH is a media consulting and service company. GLOBCOS has successfully worked in the media sector (Radio and TV) for many years, therefore the real needs of companies working in this sector are well known to us and we are in a position to give our customers professional advice.

GLOBCOS provides its customers with a range of services, starting from program schedule analysis to cost optimization of their satellite platforms. Our target is that our customers are always satisfied with the services provided and that they get the solution which fits their needs and budget.

GLOBCOS – New definition of communication

www.globcos.ch

If you generally garner information about anything under the sun (or beyond it) on the Internet, it is likely that your knowledge quest maps have driven you to Wikipedia more than once.

Wikipedia founder Jimmy Wales was in India recently to launch the ‘Wikipedia Academy,’ and to boost awareness about Wikipedia among the rural masses in the country. The academy was started recently by Kiruba, the founder of the Knowledge Foundation.

Techtree had an opportunity to have a chat with Jimmy Wales. Following are excerpts from the interview.

Where did the whole idea of Wikipedia come from?

The idea originated from watching the growth of the free software movement or open source software and realizing that people, programmers, are coming together to read the really great software that are running through the internet. We realized that this kind of collaboration could be extended beyond just softwares to all kinds of (cultural) products.

What makes Wikipedia stand out as a source of information?

Well, already Wikipedia is by far the most popular source of information in the world; and the thing that makes it stand out is quality. This is something we are really focused on within our community. We want to think about how we can make Wikipedia as good as it possibly can be, so that people can rely on it as much as possible. This is a challenge, but it’s one that we are meeting with time.

Aren’t the blogs crowding the web space?

Not really. People use blogs for certain purposes. Blogs are a great place to post an analysis, commentary, or opinion. However, when people want to get mutual information as opposed to opinions, they turn to Wikipedia.

What is going to be the key take-away from the Wikipedia Academy?

The main thing we are looking to do at Wikipedia Academy is to teach new people how to edit Wikipedia. It will be a test of learning for me too. I am going to meet some people who are interested in Wikipedia but have never edited. I am going to learn why they haven’t done that and what problems they faced. Thus, we can go back and think about how to improve the website so that more people can participate.

How will Wikipedia counter the risks of collaborative writing?

The main thing is that we have a core community. We know that we are at risk since we have an open website. Anyone can do something bad at any moment in time. Thus, we try to give our core community the tools to monitor things so they can block people if they are misbehaving. They can quickly find errors and remove them and also lock pages when necessary. There is a whole suite of tools that gives the community the power to make Wikipedia better.

So, what next for Wikipedia?

The biggest thing that’s coming next in the coming year would be a major project that looks at making it easier for people to edit the website. The other thing when I think long term, i.e., in the next 5 years, would be really focusing on giving the word out to help Wikipedia to grow in all the languages of the world. We have really taken English and other European languages and now we want to be big in all the languages. So, there is a lot of work to be done. We have over 250 languages in total and about 157 languages with 1000 articles.

How is Wikipedia coping with the economic breakdown?

Well, it’s interesting. We are holding a fundraising drive, and before we started we were wondering if we will see the impact of the economic condition on our drive. However, so far, we haven’t seen any impact whatsoever. People seem to be understanding that we need money to survive and they have been donating very well. In terms of participation, we are expecting people to participate at higher levels. If there is an economic downturn, then people cannot afford to go out for a fancy dinner or something, but stay home and surf the net, which is a cheaper form of entertainment.

When was Wikipedia started, with how many people, and how has it developed from that time?

I started Wikipedia in January 2001. It was an outwork of a previous project called ‘Newpedia’. We started with about 200 people in our active community who used to contribute. It then mostly grew by word of mouth and now it’s the 4th most popular website in the world, which is amazing.

Can you give me a number on how many people use the website?

Every month, about 280 million people look up Wikipedia.

What are your plans for India?

The main thing we are looking at in India is how we can develop a (Wikipedia) community in India and how to hold events to build the community here. I am very interested in the growth of all the languages in India. This is something we are very excited about since the past 2 years. We have been seeing a 5-10% monthly growth in a lot of our languages, and it’s really beginning to explode now. Also, I am very excited about the future of IT in India. There is already a very large IT industry here, which is continuously growing. I believe that the bulk of the IT industry is going to move to India in the next 20 years. I do not think that many people see that coming, but a few smart ones do.

What is the turnover of Wikipedia?

We are more of a charity than a company. We are getting donations of about $6 million next year. It’s very tiny considering the impact that we are having. We are more of a social movement than a company.

A Landmark Customer Service Initiative in the Indian ICT Industry

• First of its kind initiative by an IT company in India
• HCL sets new benchmark for Laptop service & support
• 24*7 Round the clock anytime, anywhere service
• HCL Touch Service reaches out to over 4000 towns across India
• Support in 11 Regional languages in addition to Hindi & English
• Offers Lifetime telephonic support to Leaptop customers

New Delhi, December 17th 08: HCL Infosystems, India’s premier information enabling, ICT System Integrator and Distribution Company today announced a pioneering initiative in the Indian ICT sector to further strengthen its customer care services. In an unprecedented move, HCL today announced the launch of ‘HCL TOUCH’ its 24X7 round the clock, service & support for its Leaptop customers.

‘HCL Touch’ sets a new benchmark for laptop service in the country and offers the support that today’s users will need. A laptop user of today uses his/her machine both at work and at home, works at home & while travelling and looks for a round the clock support with the facility to service his laptop anywhere he travels in India or abroad.

This new service has been configured keeping today’s customer requirement in mind. It has various customer features some of which are described below.

HCL Touch Initiative

• 24*7*365 Round the clock, Lifetime support.
• Touching over 4000 towns across India.
• Universal Support no.- 1860 1800 425.
• Support in 11 regional languages.
• Response and repair within 24 hours.
• SMS & Email based support facility.
• Repair Factory for specialized component level repair in India.
• Largest Direct IT Support Infrastructure of the country.
  • 505 Company owned outlets.
  • 390 Spare part Ware Houses.
  • 14 Remote support centers.
  • 150 Specialized Repair Centers.
  • Pan India Onsite direct HCL service.

HCL Touch offers round-the-clock service to Leaptop users across India through a universal customer care number. Support is offered in 11 regional languages, in addition to Hindi & English making it a very customer centric service addressing the needs of consumer both in Metros and the interiors of India.

HCL touch delivers for the first time in India a number of value added services that today’s laptop user looks for. Services such as “Network and Email support”, Peripherals & Hardware Configuration Support”, “Fortressing Support”, “Preventive Health Care” support, “Tracking Services” etc. This is also backed by several other initiatives such as SMS request for support, pick & drop facility, and “On Site” direct Company service anywhere in India at the customer’s premises.

This landmark Laptop service will be delivered through India’s largest IT Service & support network. A network that, reaches out to over 4000 towns, The HCL touch network consists of 14 remote support centres, 505 Service offices, 390 Ware houses & 150 repair centres, all of which are company owned, making it India’s Largest Direct IT service Infrastructure.

Speaking on the occasion, Mr. Ajai Chowdhry, Chairman and CEO, HCL Infosystems said, “Customer has always been at the core of HCL’s business with customer care services as a top priority. This initiative has been designed to address the service needs of today’s customer, and will take us closer to the customer. By further extending our reach and offering round the clock service, HCL Touch will enable us to cement our stand in the industry as a customer centric organization.”

To further enhance its consumer engagement, HCL also unveiled a new logo for HCL customer service today. This initiative will be supported by a series of customer seminars across the country to update HCL customers with the benefits ‘HCL Touch’ services. Also HCL will be organizing special dealer meets to educate dealers and will be rolling out an advertising campaign around this initiative.

Source: HCLInfosystems

EDS, an HP company, has been awarded a $111 million contract by the U.S. Defense Information Systems Agency (DISA) to provide security readiness reviews for the Department of Defense (DoD).

These readiness reviews will support DISA’s mission to provide integrated, agency-wide protection and operational restoration capability to counter security threats.

Under the contract, EDS will work with the DoD’s Field Security Operations (FSO) division to conduct worldwide security reviews of DoD enterprises, enclaves, networks, systems and applications. EDS will send technical resources to client locations around the world to conduct security assessments on DoD operating systems, applications, databases and networks.

EDS also will deliver certification and accreditation support, provide independent evaluation of DoD security policies and conduct security assessments to evaluate the compatibility and interoperability of FSO systems located at various DISA FSO locations.

This agreement builds on a 13-year relationship between the DoD and EDS. EDS has provided DISA with a wide range of infrastructure services, hardware and software through the DISA I-Assure and ENCORE contract vehicles.

“By providing security readiness reviews, we will help DISA to counter security threats,” said Dennis Stolkey, senior vice president of U.S. Public Sector at EDS, an HP company. “This contract builds on a long-standing relationship between EDS and the agency. We look forward to continuing to provide the right people, processes and technology to help DISA align technology with the Defense Department’s needs into the future.”