HIGHLIGHTS:
This last week’s news starkly brings to light the technology industries that are witnessing wide scale adoption in India (mobile telecom, with 8 million new subscribers in July alone- reflected by the fact that India has now surpassed the U.S. as Nokia’s second-largest market) and those industries that are not (broadband Internet, with fewer than 2.5 million total subscribers).
Press reports indicate that Citigroup continues to move forward with a planned sale of its Indian BPO unit. There are three bidders listed as leading the pack- Genpact (the former GE Capital BPO subsidiary), 3I Capital and Firstsource Solutions. The sale is estimated to be in the $600 million range.
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Policy/ Market News:
1. Subprime crisis hits BPOs handling mortgage processing (Economic Times, Aug 27)
2. India Adds 8 Million Mobile Subscribers in July 2007 (TRAI Release, Aug 21)
3. 9 m broadband user target for 2007 may be missed (Sify.Com, Aug 27)
4. Another Information Revolution (Financial Express, Aug 23)
5. India to aim for telecom manufacturing hub status (Economic Times, August 24)
6. Hiring: The next big wave in BPOs (Economic Times, Aug 24)
7. E-World Breaking Free (BusinessLine, Aug 20)
Corporate News:
1. Philips takes Moser Baer to Dutch court (Economic Times, Aug 23)
2. Genpact, 2 others in final lap for Citi BPO (Economic Times, Aug 25)
3. IP & royalties key prongs of TCS business revamp (Sify.Com, Aug 27)
4. India overhauls US as Nokia 2nd biggest market (Indian Express, Aug 23)
5. GM’s India tech centre to design, develop complete cars (Sify.Com, Aug 27)
Policy/ Market News:
1. Subprime crisis hits BPOs handling mortgage processing (Economic Times, Aug 27)
Indian outsourcing companies that process mortgages are seeing a decline in work orders and loss of revenue because of the US subprime crisis.
Several companies have started redeploying their staff, moving some of those assigned to mortgage documentation and related services to other areas. Some company officials fear there could be layoffs if the crisis in the United States deepens further.
As US lenders tighten credit, and some - such as GreenPoint Mortgage - close down, the volume of paper work done by Indian outsourcing companies declines because of fewer applicants and fewer people getting loans.
``There are likely to be staff cuts, but companies will first try and redeploy them toward other services,'' said Rishi Maheshwari, an analyst at Networth Stock Broking.
Mumbai-based WNS Holdings is in the process of redeploying 500 of its staff after one of its top 10 clients - First Magnus Financial Corp - filed for bankruptcy in the US.
Bangalore-based Infosys Technologies Ltd and iGate Global Solutions Ltd have also redeployed about 50 and 100 staff respectively due to the winding up of their business with GreenPoint.
iGate said the share of mortgage processing in its total revenue fell from 10 percent to about 7 per cent over the past two quarters because of ``negligible contribution from GreenPoint.''
Bigger companies such as Infosys Technologies Ltd say they do not face much downside as mortgage processing forms a very small part of their business.
``There will be some impact on us, though minimal, maybe less than a million dollars,'' said Amitabh Chaudhury, who heads the company's business processing unit.
Although no firm number is immediately available for the industry, analysts say the crisis in the United States could wipe off 3-4 4 per cent of revenue earned from companies engaged in outsourcing business processes such as mortgage documentation.
The full impact will be ``clearer in the next two to three months'' once US companies complete their year-end budget evaluations, Maheshwari said.
Some companies feel redeploying staff would be difficult as it would involve additional spending on training.
Chief Financial Officer Alok Misra at Mphasis Ltd indicated his company might be forced to cut some jobs. ``Redeploying staff ... is costly as it involves retraining,'' Misra said.
Mphasis, based in the western Indian city of Pune, is majority owned by EDS Corp of the United States.
2. India Adds 8 Million Mobile Subscribers in July 2007 (TRAI Release, Aug 21)
The total number of telephone subscribers has reached 232.87 million at the end of July 2007 as compared to 225.01 million in June 2007. The overall tele-density has increased to 20.52 in July 2007 as compared to 19.86 in June 2007.
In the wireless segment, 8.06 million subscribers have been added in July 2007 while 7.34 million subscribers were added in June 2007. The total wireless subscribers (GSM, CDMA & WLL (F)) base is 192.98 million now. Circle-wise wireless subscriber base of service providers is given at Annexure-I.
The wireline segment subscriber base stood at 39.89 million with a decline of 0.20 million in July 2007. Circle-wise wireline subscriber base of service providers is given at Annexure-II.
3. 9 m broadband user target for 2007 may be missed (Sify.Com, Aug 27)
Telecom connections in the country may be witnessing the fastest growth worldwide, but broadband users are not keeping pace and the target of having nine million customers by the end of this year will be missed in all likelihood.
Total broadband connections have reached 2.47 million by the end of July with an addition of 50,000 subscribers, according to latest figures released by Telecom Regulatory Authority of India. This means that the country would have to add 1.3 million subscribers every month to meet the target.
Ironically, 2007 has been designated as the 'Year of Broadband'. As per Department of Telecom's broadband policy of 2004, the subscriber base should grow to 20 million by 2010.
The industry has already missed the first target of three million broadband subscribers by 2005-end and this has not even been fulfilled even after more than one-and-a-half years.
In contrast, the target of 250 million for telecom subscribers by this year-end is set to be achieved earlier.
The telecom subscriber base was 225.01 million in June and the monthly mobile addition has been between 6-7 million.
DoT officials said the addition of broadband subscribers has been much below expectation but ruled out any move to provide access of BSNL and MTNL copper network to private operators to push broadband penetration.
DoT was banking on one million broadband subscribers addition a month before the end of 2007 and to trigger this growth BSNL and MTNL have came out with an aggressive plan to provide broadband connections with minimum download speed of up to two Mbps from January 2007.
Officials said there are more than 40 million copper loops available with BSNL and MTNL, out of which 14 million loops are in rural areas. Copper cable network of these operators is a combination of old and new cable and this makes providing broadband on all the available copper loop technically difficult.
Therefore, around 25-30 per cent of the remaining 26 million loops or about seven million loops can be leveraged for broadband service by BSNL and MTNL, taking into account the condition of copper cable and demand potential.
4. Another Information Revolution (Financial Express, Aug 23)
Data protection in India is an increasingly important issue, not least because of the increasing importance of the outsourcing business and the fact that larger quantities of processed data can potentially increase the degree of risk that any misuse could pose for data-subjects. The data protection regime in India is still a work-in-progress. When the Constitution came into force, it explicitly guaranteed no fundamental right to privacy. It is judicial activism that has brought the Right to Privacy within the realm of Fundamental Rights.
India's Information Technology Act, 2000, was found inadequate in that context, and the government appointed an Expert Committee on Cyber Laws whose role was to suggest amendments. The Committee has proposed the following: (i) A new Section 43(2) related to handling of sensitive personal data or information with reasonable security practices and procedures thereto; (ii) Gradation of severity of computer related offences under Section 66, committed dishonestly or fraudulently and punishment thereof; (iii) fine-tuning of Section 72(1); (iv) additional Section 72 (2) for breach of confidentiality with intent to cause injury to a subscriber; (v) Language of Section 66 related to computer related offences has been revised . Some older laws are relevant, too. The Indian Contract Act, 1872, offers an alternative solution to protect data under Article 366(10). Under this, Indian companies acting as "data importers" may enter into contracts with "data exporters" to adhere to a high standard of data protection. The Specific Relief Act provides preventive relief in the form of temporary and perpetual injunctions (sections 37 and 38) to the plaintiff to prevent the breach of an existent obligation in his favour, whether expressly or by implication, or to award damages. Outcomes, though, could depend on judicial interpretation. While the Supreme Court of India has recognised a general Right to Privacy, no general right relating to personal data protection has been developed so far. Note here that the Indian conception of privacy, as rooted in the local culture, is rather different from the European one.
Specific issues of enforcement, therefore, remain a problem. Given the absence of any general data protection Act, no authority has been established in India for this. In the past, self-regulation and industry codes took the place of legal provisions. It was only in 2000 that Nasscom, the coordinating body for India's software services industry, urged the government to pass a data protection law to ensure the privacy of information supplied via computer networks. This led to the IT Act. Now, Nasscom is in the process of setting up the Data Security Council of India (DSCI) to establish, monitor and enforce privacy and data protection standards for India's ITeS-BPO industry. DSCI shall be based on self regulation, best global practices, independent oversight, focused mission and an enforcement mechanism.
Of more significance is the Indian Personal Data Protection Bill, 2006, drafted for the protection of personal data and information of an individual collected for a specific purpose and to prevent its usage by other organisations for commercial/other purposes. The draft Bill states that the personal data of any person collected for "a particular purpose or; obtained in connection with any transaction, whether by appropriate Government or by any private organization, shall not be put to processing; without the consent of the person concerned". The Bill requires that every organisation, whether government or private, engaged in the commercial transaction and collection of personal data of persons shall: * Report to the Data Controller the type of personal data and information being collected by them and the purpose for which it is being or proposed to be used; * Take adequate measures to maintain confidentiality and security in the handling of personal data and information; and... * Collect only such information that is essential for completion of any transaction with the individual. In order to give effect to the provisions of this Act, the central government may make further provisions so long as they are not inconsistent with the provisions of this Act. However, a more appropriate and long-term approach is the need of the hour.
India needs to create a culture of privacy and data protection. Self-regulatory mechanisms can be put in place across the corporate world. Some banks and IT majors, in partnership with Fox Mandal Little, have started training modules that could be used as a basis. Much needs to be done, especially in terms of making information users aware of the issues involved, so that society at large can reap the benefits of India's latest revolution: information privacy. Respect for privacy goes hand in hand with respect for Individual Rights.
-Rodney D Ryder heads the tech law practice at Fox Mandal Little, and is an advisor to the IT & communications ministry. Salman Waris is a tech law practice associate at Fox Mandal Little. These are their personal views
5. India to aim for telecom manufacturing hub status (Economic Times, August 24)
The Telecom Equipment Manufacturers Association (TEMA) has started a TEMA Export Promotion Forum which was inaugurated by the union communications and IT minister A Raja this week.
"It was a long pending demand of the industry and the government is happy to see it coming through. The public-private participation in the growth process is quite visible in the telecom sector and government has set an export target of $10 billion in next few years," said the minister on this occasion.
Raja added that with the present level of over 230 million subscribers and addition of over 7 million subscribers per month, India is all set to achieve the target of 250 million much earlier than the year end.
"By the year 2012, we have projected a target of 650 million, for which we will require telecom equipment worth $ 84 billion, said Raja. While promising full support to the industry, the minister urged upon private service providers to promote the use of indigenous equipment in their networks and contribute in the growth of telecom equipment manufacturing in the country.
In the past, telecom equipment manufacturing was limited to meeting the domestic requirement and there was no emphasis on the export of telecom equipment and services from India. Now that India has emerged as a manufacturing base and more and more investments are being committed, there is need to give focused attention for exports as well.
While thanking the minister for his support, TEMA president NK Goyal said, "Since the inception of TEMA in 1990s, the organization has been supporting all the efforts of the government in realizing the Indian telecom dream. We shall continue to do so in the future also".
According to TEMA president PS Ramesh, "TEMA EPF is the first step, and in due course of time, it would be converted into Export Promotion Council (EPC). The basic objective of TEMA EPF is to promote and develop the export of telecom equipment and services from the country."
6. Hiring: The next big wave in BPOs (Economic Times, Aug 24)
High attrition rates may be a blot on the great Indian BPO success story, but this problem has helped spin off a niche industry - Recruitment Process Outsourcing (RPO)- which is expected to grow by a billion dollar this fiscal to about $3.5 billion.
The industry is set for rapid growth with a large number of companies in India and from abroad seeking to outsource their hiring-related jobs to third-party vendors here in order to save costs as well as time.
"India has been a hub of global outsourcing activities and RPO is the sunrise segment in this sector," hiring industry umbrella body Executive Recruiters Association's Executive Director B R Muralidharan told media.
"In India, RPO is already a $2.5 billion market and is expected to grow at a rate of 30 to 40 per cent during this financial year," he said.
This new buzzword is already enjoying taste of success with a number of corporate giants adopting the RPO model for their hiring needs inside and outside India. The hiring needs of British mobile major Vodafone is taken care of by RPO provider Alexander Mann Solutions, which also handled accounts of clients like Credit Suisse, HP, Prudential and Capgemini.
Closer home in India, the BPO arm of the country's third largest IT firm Wipro has outsourced its recruitment process to MeritTrac and aims to reduce its hiring costs by 15-20 per cent by this move.
"Right hiring is the first and the most important step toward reducing attrition. Our objective is to move to a 'hands-free' recruiting process and this is the first step towards it," Wipro BPO CEO T K Kurien said.
7. E-World Breaking Free (BusinessLine, Aug 20)
The Indian Business Process Outsourcing (BPO) industry is at a point of inflexion. Having grown upwards of 30 per cent for the past several years to $8.4 billion in 2006-07, the less-than-a-decade-old BPO industry is staring at the next level of growth
Projected to cross a significant milestone of $10 billion revenues this fiscal, the BPO industry is waiting to come out from the shadows of the Indian IT services industry that has made rapid strides in the global outsourcing arena
Traditionally, the BPO industry has been clubbed with the IT services industry. But suggestions are now being voiced by industry stalwarts to decouple it from the IT industry and treat it as a separate entity when it comes to policy issues
The recently held Nasscom ITES-BPO Summit saw some high-decibel demand to treat the industry as a separate entity as regards extension of tax holiday. The 10-year tax holiday under the Software Technology Parks of India scheme comes to an end by 2009
The demand comes amidst a set of challenges faced by the industry, including a stronger rupee, rising wage inflation and attrition, and emerging threat from newer low-cost destinations to wean away the clientele. The rupee appreciation in the long term will not only impact the bottom lines, but also erode the country's competitiveness
'Significant size' "BPO companies have attained a significant size to be recognizable as an entity," says Kiran Karnik, President, Nasscom. "Export revenue of $8 billion is substantial for any sector. Every large IT services player in the country has a sizable BPO presence and in fact you can already see sub-segments emerging within the ITES-BPO industry, such as legal process outsourcing, knowledge process outsourcing and data analytics, among others," Karnik adds
Justifying the need to consider the de-linking, EXL's president and co-founder, Rohit Kapoor, says the government needs to extend the tax holiday for BPO companies for at least five years beyond 2009
"Today's IT services and BPOs differ in the skillset requirements and pose different people management issues. Another way to look at the IT services and BPO industry is to look at their sheer size and growth potential. The market capitalisation of the top five IT players is about $100 billion, while the same in case of ITES firms in India is $5 billion. Still, the market size for ITES and BPO is bigger than IT services. This means that the BPO industry needs to be given time and room for growth to enable it to become more competitive, particularly at a time when other countries are wooing investments," Kapoor adds
Quality, diversity The BPO industry has come a long way from predominantly offering voice-based call centre services and data entry-type of work in the early days to widen its services portfolio to high-value non-voice based back-office offerings such as finance and accounting, investment banking research, credit card and insurance claims processing and technology support services. Built on the advantage of low-cost human resources, the Indian BPO industry has moved on to add quality and diversity as its differentiators
Companies have successfully scaled up their operations and have been expanding overseas. The industry has seen several changes over the past few years. Indian players have also been fairly aggressive in plugging their strategic gaps to enhance their service portfolio by acquiring firms overseas. Several players, such as FirstSource, WNS, EXL and Genpact, among others, have gone public in recent years. Also, the leading Indian IT services firms merged their BPO entities with self and phased out their BPO brands
While Wipro phased out the Wipro-Spectramind brand, Infosys phased out the Progeon brand after it acquired the minority stake from Citigroup and renamed the company Infosys BPO
In a bid to cater to their diverse client portfolio, Indian BPOs are seen aggressively adding multi-lingual capabilities by expanding their operations to emerging low-cost destinations such as the Philippines, Vietnam, Western Europe, the Czech Republic and Latin America. Recently, many Indian players announced plans to set up operations in Mexico, the Philippines, Romania, and China. The declining cost advantage due to the stronger currency and rising wage inflation is forcing Indian vendors to ramp up their operations in emerging low-cost destinations
HR, Infrastructure among challenges "Going forward, the two major challenges facing the sector would be human resources and infrastructure," says Karnik. "Clearly, the growth of the industry is creating issues pertaining to HR, not so much as demand and supply of people but suitability of professionals." BPO is already a major employer and as the industry grows in the next five to 10 years, it will have to look seriously at HR issues, Karnik adds
Another major challenge would be to create infrastructure to support the manpower requirement such as power, office space, and transport, Karnik adds
Outlining the challenges, EXL's Kapoor says BPOs face issues related to wage inflation on the people side and foreign exchange fluctuations, among others. "The currency volatility in the recent quarter did have a major impact on the operating margins of BPO firms. The month of April alone saw the rupee appreciate by around 7 per cent. This kind of a steep appreciation makes it difficult to adjust customer contracts and manage cost structures," says Kapoor
Gaurav Gupta, country head, Everest Group, says Indian suppliers are adopting multiple strategies to overcome the challenges. From providing a cost saving arbitrage, suppliers are now offering end-to-end, integrated offerings
Nasscom estimates the total addressable offshore market size to be in the range of $120-150 billion currently with the offshore penetration at around 9 per cent. The India-based BPO vendors account for 46 per cent of the offshore BPO market, having grown at a compounded growth of around 45.5 per cent over FY04-06
Buoyant Domestic Market Indian players could look to offset the emerging challenges by tapping into the domestic market. The demand for BPO services on home turf has witnessed noticeable growth in the past few years
The domestic BPO market touched $1.2 billion in 2006-07 from $0.9 billion in the previous year
Players such as FirstSource, MphasisBPO, Serwizsol, Aegis BPO are fairly active here. Buoyed by the potential, several players are actively looking at the domestic market a lot more strategically, says Gupta. The unfolding retail sector, financial services, insurance and telecom offer tremendous potential for outsourced BPO services, he adds. Everest estimates that the Indian insurance sector would outsource processes worth $10 billion over the next five years
The emergence of the BPO industry has provided a new hope to the burgeoning youth populace of the country. BPOs in Tier-II and Tier-III cities have changed the entire face of the cities by providing not only direct but also indirect employment. The industry employs close to 5,53,000 people, coming close behind the IT sector, and holds out great hope for young graduates without any other career choice
"BPO will emerge as the largest private sector employer in India over the next few years," predicts Pramod Bhasin, Chairperson of the Nasscom ITES-BPO Forum
Over the next five years, Gupta predicts a consolidation in the Indian supplier side, where currently there are more than 3,000 players. Further, hybrid business models would emerge wherein clients would go for a mix of captives and third party. The role of BPO industry in the Indian economy will become significant and "we see global deals emerging from India," Gupta adds
Corporate News:
1. Philips takes Moser Baer to Dutch court (Economic Times, Aug 23)
Leading optical storage manufacturer Moser Baer India, on Monday, said Dutch electronics major Koninklijke Philips Electronics NV has filed a suit against the company in a district court in the Netherlands related to a patent license agreement between the two firms.
Moser Baer said in a filing to the Bombay Stock Exchange that it had received notice from Philips about a suit filed against it in the district court of The Hague, in relation to certain patent license agreements for Compact Discs and Digital Video Disc (DVD) recordable formats executed between the company and Philips.
Philips had, on a prior occasion also served notices of default under these patent license agreements on the company.
Moser Baer had challenged these notices as they substantively relate to a prior contract between Philips and Imation Corporation, under which the company supplies optical media to Imation Corp and its subsidiaries. These notices are under challenge in the High Court of Delhi, it said.
Shares of Moser Baer today settled at Rs 264.15 down 0.56 per cent on the Bombay Stock Exchange.
2. Genpact, 2 others in final lap for Citi BPO (Economic Times, Aug 25)
The sale of Citigroup’s captive BPO in the country is a few steps closer to being concluded. The number of potential bidders has come down to three with Genpact, the number one third party BPO in the country, along with PE firm 3I and BPO firm Firstsource Solutions in the final round for Citigroup’s 80% stake in the firm, according to sources close to the deal.
The three contenders are expected to submit their final bids by August 28. Sources said Citigroup expects a total valuation of about $1 billion, but bids are likely to come in the range of $600 million-$700 million. Citi will retain 20% stake in the unit.
Citigroup’s stake has been on the block since June. In these months, several high profile bidders have dropped out of the race, the most recent being WNS Global Services.
The environment for BPOs has also changed significantly since June. Valuations of BPO firms have taken a drubbing and the sector has become less attractive because of the sharp appreciation in the rupee against the US dollar. In the last couple of weeks, sub-prime worries in the US market have also come to haunt BPO firms. WNS, for instance, reported it would have to cut its fiscal 2008 guidance, following the hit taken by one by top clients in the mortgage space, First Magnus Financial Corp.
TCS and Infosys BPO, which were also initially interested in acquiring Citigroup’s stake, dropped out because the valuation was perceived to be high. After that, Infosys BPO went on to announce a major deal with Philips BPO, involving taking over three facilities catering to the finance and accounting segment and running them for Philips. TCS is also learnt to be evaluating a similar deal for Prudential’s BPO facility.
Firstsource, on its part, is also in advanced talks to buy another firm in the US, MedAssist, and sources said this may mean Genpact is the strongest contender for Citigroup’s stake. However, an industry source said the acquisition would also bring synergy for Firstsource. “The deal will give access to regional and sub-regional banks in the US. Its intent to tap this segment is clear from its partnership with Metavante,” the source said.
The strategic partnership with Metavante, a US technology provider to banks, gives Firstsource access to local banks and financial institutions, over and above its traditional customer base of large national and international banks and financial institutions.
Valuations for captive outsourcing units are typically lower than those of third party BPOs, because of the business risk being concentrated on one client. But investment bankers say there can be exceptions to this depending on what value such a captive unit brings to the acquirer.
3. IP & royalties key prongs of TCS business revamp (Sify.Com, Aug 27)
Ask S Ramadorai what's the biggest threat to his business, and pat comes the reply: "The rupee."
So much so, the managing director and CEO of TCS, India's largest information technology company, said these are very, very challenging days.
"We have to restructure our business. We have to stress our intellectual property rights and try to monetise it in every manner," said Ramadorai.
TCS also plans to heavily lean on product royalties.
Ramadorai was speaking to DNA Money on the sidelines of a programme that saw his company induct 500 BSc graduates to its mammoth 95,000-strong roster.
The youngsters' skills were honed for seven months to make them an equal to fresh IT engineers.
Many CEOs in the past have pointed to the lack of employable talent available in the country as the biggest threat before them, which could make or break their business models. But Ramadorai believes that he can tackle that problem through innovative programmes such as Ignite, which is basically a finishing school that prepares the young graduates for an IT career.
Has it faltered by not focusing more on acquisitions even as group companies such as Tata Steel, Tata Tea and Tata Motors have rapidly scaled up through the inorganic route?
Peers such as Wipro have already made a stream of acquisitions, paying top dollar.
Closest rival Infosys Technologies is getting into M&A gear, too.
Ramadorai is unfazed.
"We believe integrating a smaller acquisition is easier than integrating bigger ones. The larger companies, by virtue of their high cost base, are less lucrative and it is not easy to immediately outsource their work to low-cost bases. We will look at niches instead," he said.
Ramadorai said integrating larger acquisitions also bring in their wake cultural integration problems.
Is money a factor, as the Tata group is expected to monetise a portion of its holding in TCS to fund ambitious acquisitions elsewhere?
"It hardly matters. We have Rs 3,000 crore in cash and we'll be adding considerably to this amount annually. We can leverage this to raise more debt and use for future projects," Ramadorai said.
TCS revenues were Rs 5,203 crore and net profit Rs 1,203 crore for the quarter ended June 30, 2007.
He said about eight new software development centres to be set up by TCS will be owned by Tata Realty & Infrastructure.
"We will be the anchor tenant and Tata Realty will lease the space to us. Tata Realty is free to get more tenants for the properties. For us, this arrangement will free up about Rs 1,000 crore, which, otherwise, would have been incurred on developing the brick & mortar facilities," Ramadorai said.
Blackstone, Goldman in PFC radar
PFC has simultaneously sought proposals from private power developers with details of the equity funding support they require.
"The fund could also cater to the needs of ultra mega power projects," said the executive.
It's estimated that the power sector could attract investments worth $235 billion in the Eleventh Plan, with total equity requirement of $70 billion. Of this, about $15 billion equity would be required in the private sector.
4. India overhauls US as Nokia 2nd biggest market (Indian Express, Aug 23)
Nokia, the world's top cell phone maker, said on Thursday India overtook the United States in the second quarter as its second biggest market after China.
Globally Nokia sold 100.8 million phones in April-June and according to research firm Gartner had a market share of 36.9 per cent.
The Finnish mobile phone maker said in a statement it had started exporting handsets made at its plant in Chennai, India, to 58 countries.
It also repeated that its joint venture with Siemens, Nokia Siemens Networks, would invest $100 million in India over the next three years.
5. GM’s India tech centre to design, develop complete cars (Sify.Com, Aug 27)
The India centre of the General Motors’ technical centre will be able to design and develop complete cars for the global market soon even as the centre plans to double its headcount to over 1,600 in two years.
“We are on a learning curve. We are growing from engineering services to full product development service,” GM technical centre director for engineering and operations, Ms Sheila Jain Sarver, told Business Line.
The centre which currently has around 800 engineers is also the fastest growing among the 12 centres of the world’s leading car market. Since its launch in 2003, General Motors has invested over $60 million in the India centre.
The centre will also set up the clay model of cars in November this year in its newly expanded 1.6 lakh square feet capacity near Bangalore. The centre has already started working on developing and designing major parts of vehicles.
“We did not want to outsource our work to others because once you do it yourself, you take full ownership of the product you develop,” the centre’s senior manager for engineering and business planning, Ravi Desai, explained.
Tapping talent
Most of the global car makers have outsourced design and engineering part of their cars to Indian companies to reduce costs as well as to take advantage of the vast pool of talent in India.
Ms Sarver said even though General Motors does outsource some part of product development, GM’s centres across countries allows it to harness inhouse talent. Currently, the centre near Bangalore does a large chunk of work for cars being developed for the Australian and South Korean markets.
In three-five years, the centre will have the capability to do full vehicle development for the Indian market as well as for other markets. “We are getting larger and larger chunks of projects. You need a number of learning cycles before you get to the stage where the centre can have the confidence to do complete projects,” she said.
Long-term planning
One of the policies of General Motors is to allow local engineers to slowly come of age rather than import a mature work force and put the centre on fast track. Such long-term planning has helped each centre to develop its own capabilities, giving each of them an identity of their own.
“We provide training, we have separate budgets for each centre and we also send engineers to work in other centres who come back equipped with doing better work as well as return with more work for the centre,” the centre’s engineering group manager, Shaun Marshall, said. He said the Bangalore centre currently does work on key sub-systems like bonnets and chasis sub-system and has started doing the entire ‘face-lift’ for newer versions of passenger cars.
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