Computers Today, May 16-31, 2001; Country Buzz, [pg1]

While on a visit to India last fortnight, chairman and CEO of Hewlett-Packard Co. Carleton S. Fiorina had remarked: "The slowdown should be good for India. The country has a competitive and comparative advantage in terms of quality, talent and cost. I don't think the slowdown will cause us to think differently. In fact, we plan to increase our sales presence, software operation and our back-office operation for our internal accounting functions substantially. The software operation will grow to more than 5,000 professionals in the next seven years from the present level of 1,500."

HP is not alone in this emerging trend in which, on one hand the company is streamlining its businesses by eliminating management positions worldwide, and instead continuing to hire people for R&D, professional services and software works, with a special emphasis on India. In recent times big names like Cisco Systems, Lucent Technologies, Intel, Texas Instruments, Ford and GE, among others have stepped up their R&D work.

Lucent Technologies, the global communications networking equipment major, is building its largest worldwide centre in Bangalore to develop the next-generation integrated network management solution frameworks for its global customers in the carrier class. As part of the first phase of its investment plan in the Inter-Networking System India Development Center (IIDC), the parent company's 100 per cent wholly-owned subsidiary, Lucent Technologies India is spending over $10 million by this year-end to employ 125 lateral software professionals. Lucent's Network Operation Software president Ravi Gulati said the initial assignment of the IIDC would be to develop management and configuration systems for Inter-Networking Systems' multi-service core network business.

At Cisco Systems, Prem Jain, vice president and general manager, New Business Venture, is spearheading a new strategy for the company's growth in the Indian subcontinent with an emphasis on the expansion of R&D activities. While he announced an investment of $150 million in India early this year for the expansion in R&D activities of the Cisco Global Development Centre in Bangalore, Jain recently announced the launch of the "Advanced Networking Research Lab" at IIT, Delhi in which the company will be investing $200,000 and will provide training, related materials and on-going support.

Microprocessor giant Intel has said it will continue to expand its R&D activities in India, even though the US slowdown has forced it to cut costs through layoffs elsewhere. "We are reducing our headcount from 89,000 to 85,000 globally. But we will increase our work here," said Patrick Gelsinger, vice president and CTO of Intel. The chipmaker currently has three R&D centres-located at Delhi, Bangalore and Mumbai. The number of people in these centres stands at over 400, up from barely 20 two years back.

Wipro Bucks Trend, Races Ahead
The company has managed to give the slowdown a slip by diversifying its country and product portfolio and through cost curtailment initiatives.

We want to be the largest IT company in India forever," Wipro Corp. chairman Azim H. Premji told Computers Today. Even as the ominous signs of the US slowdown are becoming visible after the not-so-encouraging results by the darling of the Indian software industry-Infosys Technologies-and a slew of revenue/profit warnings by other leading firms like NIIT and Visualsoft, Wipro appears to have bucked the trend and is expected to grow at an impressive rate. And the facts speak for themselves. For the year ended March 31, 2001, Wipro has announced a record net profit of Rs 666 crore.

Survival Kit

ť Huge expansion in operating margins, which grew to 24 per cent from 18 per cent in 2000
ť Its current billing rates are still 15 per cent lower than those of Infosys
ť Management displays more prudence in cost management and investment in fresh capacity
ť To stay nimble, Wipro has also ruled out plans to acquire another company for the present
ť The contribution from the US has declined to 64 per cent from 70 per cent

The primary reason for the over-enthusiasm seems to be the huge expansion in operating margins, which grew to 24 per cent from 18 per cent in 2000. Moreover, Wipro posted a healthy sequential growth (quarter on quarter) of 19 per cent in the last quarter ended March 2001. This is much higher than 5.7 per cent reported by Infosys. While the jump in operating margins was contributed by Wipro Technologies, the global IT services division; a sharp rise of 58 per cent in revenues of Wipro Infotech, the IT products and services division, boosted the sequential growth of the company.

There are two reasons why amongst the frontline companies Wipro appears to be best positioned in the current difficult market environment. First, its current billing rates are still 15 per cent lower than those of Infosys, making it less susceptible to pricing pressures. Wipro's onsite billing rate for the year works out to about $120,000 per person per annum as compared to about $145,000 charged by Infosys. In fact, despite all the hype about the expected pressure on the billing rates of domestic companies in the wake of the US slowdown, Wipro has been successful in renegotiating billing rates with some of its Fortune 500 clients. For instance, in a bid to improve the operating metrics, Wipro decided to terminate its business from General Electric (GE) as a preferred vendor and restart business as a non-preferred vendor. Though by doing so the company runs the risk of not having assured business from GE, but as a non-preferred vendor, the billing rates are much higher. This also speaks about the company's confidence as GE accounted for almost 15 per cent of its global services revenues in 2000.

Secondly, Wipro's management is displaying more prudence in cost curtailment initiatives and investment in fresh capacity. This reduces the risk of over-investment in an uncertain market environment. Even then, Wipro Technologies is setting up two strategic business units in Hyderabad apart from the existing software development facility. It is planning to double the number of employees from 1,000 to 2,000 in Hyderabad. Wipro has also ruled out plans to acquire another company for the present.

Commenting on the US slowdown and the possible impact on Wipro, Premji says, "The slowdown has put our target customer base of fortune 1,000 companies under profit pressure. This provides us with a platform to demonstrate our value-add to them in enhancing their profitability. We plan to increase our sales team from the present 70 to over 100 within the next six months." Even otherwise, the contribution from the US has declined to 64 per cent from 70 per cent. On the other hand, Europe's contribution grew from 24 per cent to 29 per cent and Japan increased from 5 to 6 per cent.

Today, Wipro operates in a large market space encompassing enterprise application software, R&D services and communication software services. The firm has a team of 9,934 professionals, and with its long-term relationships with clients like GE, Nokia and Cisco, the global services division is expected to drive the future growth of the firm.

IT Majors Discover Singapore
Satyam, i-flex Solutions and TCS are some of the firms to have set up their offices there in a bid to consolidate their reach in the Asia-Pacific region.

Suddenly waking up from their US-centric slumber, domestic IT companies are spreading their markets in the Asia-Pacific region, with Singapore emerging as the ideal centre for many. After Satyam Computer Services and i-flex Solutions having set their offices in the country, it is now the turn of Tata Consultancy Services (TCS) to consolidate its reach in the Asia-Pacific region by establishing its regional headquarters in Singapore.

What is it that attracts Indian majors to set up regional base in Singapore? TCS officials told Computers Today, "Located at the crossroads of Asia, Singapore is an ideal platform for companies with regional or global ambitions to launch or expand their business operations in the region. The country offers an attractive and open telecoms market as well as world-class transport and financial infrastructures. Especially at a time when technology, capital, knowledge and talent are being pushed beyond national boundaries, Singaporeans think global and act really fast."

Hot Spot in Asia

ť Located at the crossroads of Asia, Singapore is ideal for firms with regional or global ambitions
ť The country offers an open telecoms market as well as world-class transport
ť It is already one of the topmost E-commerce-ready countries in the world
ť The World Competitiveness Yearbook 2000 ranked Singapore as the top country in Asia for E-commerce infrastructure

Speaking at a World Economic Forum, this is what Singapore Minister for Communication and Information Technology Yeo Cheow Tong had to say on the country's potential: "Just a few days ago I met a senior director of a British E-business company, who told me that while they do a lot of product and software development work in India, they market their products and services out of Singapore. He explained that it gave their regional clients, including those in India, greater confidence." Singapore is already one of the most E-commerce-ready countries in the world. The World Competitiveness Yearbook 2000 ranked Singapore as the top country in Asia (fourth in the world) for E-commerce infrastructure. The Economist Intelligence Unit 2000 also ranked Singapore as No. 1 in Asia, and eighth internationally, for E-business readiness.

No wonder, TCS has embarked on a major foray to make Singapore its regional base by even appointing Girija Pande as regional director for its Asia-Pacific operations. Pande would be responsible for spearheading the company's activities in the region, which includes Australia and New Zealand. "We recognise the emerging importance of the Asia-Pacific headquarter in Singapore as a move to build on our open client relationships and develop new ones in a dynamic region," says S. Ramadorai, CEO, TCS.

Even other wise, says i-flex Solutions chairman Rajesh Hukku, Singapore appears to be an ideal option on account of innumerable reasons-its economic influence and an excellent infrastructure. The centres of these companies would spearhead growth in the Asia-Pacific region, covering ASEAN, north China and Australia-New Zealand and meet the needs of the Asia-Pacific clients. From Singapore, companies like Satyam intend to provide comprehensive end-to-end infotech solutions to meet the varied needs of its clients in the region. This office would represent the company's diverse skills in the area of telecom billing, embedded software and packaged software platforms such as Ariba, Vignette, SAP, Oracle, i2 and Siebel.