IT companies to hike variable part in pay amid global worries

MUMBAI/BANGALORE: The proportion of variable pay in the gross salary of IT sector employees is likely to rise once again because of the emerging uncertainties in the sector. A number of recruitment firms dealing with compensation issues and IT company officials said the variable component which currently hovers around 15-20 % on an average across all levels will rise to as much as 25-30 % of an employee's gross salary. The variable component typically differs for employees based on seniority. Most IT majors cut variable pay, as a first resort, in the event of adverse circumstances. Variable pay is linked to the performance of the company, unit and the individual , and safeguards the company's margins in times of falling revenues. With the IT sector's major markets, the US and Europe, slowing down and possibly even slipping into another recession, the risks for the sector are high. IT companies took the variable component from about 10% in 2007-08 to an average of 18-25 % in 2009-10 , immediately after the economic downturn, but brought it down in 2010-11 , when the economic situation improved. "The general industry trend under the current context is that everybody is linking performance with variable pay. At Wipro, we have brought additional focus on variable pay in the beginning of the current fiscal , as part of our corporate restructuring . We will continue to have this focus," said Saurabh Govil, senior vice-president , human resources, at Wipro Technologies , the country's fourth largest IT company. Wipro gives out anything in the range of 10-25 % as variable component to employees at different levels. "In times of decelerating growth there is increased stress on the productivity model even as companies want to incur limited fixed liability," said Surabhi Mathur-Gandhi , VP (IT sourcing ), at recruitment firm Teamlease Services. In an early sign of belttightening in the industry, TCS, India's largest software exporter , gave only 25-50 % of the quarterly bonus to employees above the associate consultant level in the June quarter, as per an HSBC report. "The variable component is expected to rise to balance out the more conservative changes in fixed salaries. The objective would be to keep top performers engaged while at the same time keep in mind the overall cost considerations," said Poonam Bajaj, CEO, Talisman Advisors, a recruitment agency. At the peak of the global financial crisis three years back IT companies not only cut variable pay, they also increased work hours and trimmed peripheral costs. "There have been a lot of fluctuations in the Indian job market and the global economy is not stable yet, so variable pay is returning to 2009-2010 levels. It has also been observed that there could be a further slowdown in the next two quarters. Companies are cautious and do not want to increase their fixed cost," said Sunil Goel, director, GlobalHunt, an executive search firm.

IT companies kick-start campus hiring, plan to recruit 2.5 lakh

CHENNAI: Tech titans have kick-started their campus recruitment process. On plans are to recruit nearly 2.5 lakh engineering graduates from across the country's campuses this year. Last year, offers were made to nearly 2 lakh students. Campus recruitment, which usually happens in the last semester, has been advanced to the seventh semester this year. Consequently, tech companies have started visiting campuses in the past few days and have started issuing offer letters. TCS has issued offer letters to 702 students of Thiagarajar College of Engineering in Madurai, 515 students of Velammal Group of institutions, 500 of Sairam Group of Colleges and 645 of RMK Group of Instuitutions, all in Tamil Nadu. Cognizant has offered jobs to 807 students of Anna University's Guindy campus, Chennai, and 703 to students from PSG College in Coimbatore. Cognizant also offered jobs to 500 students of Birla Institute of Technology, Mesra, Ranchi. Accenture has signed offer letters for 417 candidates from Sona College in Salem. Wipro has offered job letters to nearly 700 students of Amity. "When we saw the situation created by the US debt deal we thought it would impact placements. But it has not reflected in the placements in our college. It has been better than last year, with 642 students being recruited this year while TCS absorbed 477 of our students in 2010," said Sivagnana Prabhu, head of training and corporate affairs, RMK Group of Institutions. "The students are usually asked to join around July or August. Our students have not faced delays in previous years, so we don't expect them to happen this year either," he said. Andhra Pradesh leads the supply side of students with nearly 2 lakh a year, followed by Tamil Nadu with a 1.8 lakh students. Karnataka and Maharashtra supply about 80,000 students a year to the job pool. Most of the companies were not willing to confirm the offer letters or their recruitment plans citing confidentiality. "This year the industry will ensure good recruitment numbers as we started the process in the seventh semester itself. This will result in good input for the industry. We are also witnessing interest from a lot of emerging companies to recruit from campus," K Purushothaman, regional director, Tamil Nadu, Nasscom said. Smaller and niche IT companies like Thoughtworks, muSigma, Robert Bosch have also joined the campus rush this year. Pay packages offered by companies will, however, remain at last year level of Rs 3 lakh to Rs 3.25 lakh a year for these engineers. "We are not revising that this year," an industry official said. "Cognizant has kick-started its hiring across campuses in India. Being the fastest growing consulting and IT services company, Cognizant continues to aggressively hire fresh graduate talent from premier institutions. It's widely acknowledged that faster the company growth, faster the career progression of an individual. Cognizant demonstrated this in the previous promotion cycle where we promoted over 30% of our global workforce. This performance and promise has helped Cognizant get slot 1 in pretty much all the premier campuses we recruit from, helping us attract the choicest from among the best," said Shankar Srinivasan, chief people officer, Cognizant.

IT hiring down 49% in Aug amid US, Europe crisis

NEW DELHI: Recruitment by Indian IT companies witnessed a slowdown in the month of August, owing to the crisis in the US and Europe region, but the overall hiring mood in the country is upbeat, says a survey. It might take 2-3 months for recruitment activities in the IT sector to gain momentum, according to recruitment tendering platform MyHiringClub.com, which said that hiring activity saw a 49 per cent drop in the IT and ITes sectors in August vis-a-vis the previous month. The US accounts for almost 60 per cent of the revenues of the $60 billion Indian IT industry. In contrast, other industries such as FMCG, banking, telecom and automobiles saw 14 per cent more recruitment in August, compared to July. "This data shows the strong impact of the US and Euro crisis in Indian IT sector hiring. We had seen the overall hiring trend was healthy in the previous month, except the IT and ITeS sectors," MyHiringClub.com CEO Rajesh Kumar said. "When discussed with some employers, they indicated it will take 2-3 more months for hiring from these sectors," he added. A city-wise analysis shows that most cities experienced a lull in hiring activity in the IT and ITes sectors in August, 2011. The IT hub of Bangalore saw a 29 per cent decline in hiring vis-a-vis the previous month. Among the metros, the Delhi/NCR region saw a 19 per cent drop in hiring in August compared to the preceding month, while Chennai witnessed a fall of 15 per cent. Mumbai and Hyderabad saw a drop of 13 per cent and 8 per cent, respectively, in August. The survey was conducted among 353 employers, including 127 employers from the IT and ITeS sectors.

Infosys: India leading IT services market

THIRUVANANTHAPURAM: In an otherwise sunny outlook for the IT industry worldwide, there are little dark clouds like the unrest in the Arab world, but Infosys CEO and MD Kris Gopalakrishnan foresees a long-term growth for the industry worldwide, and a continued leadership position for the Indian IT sector. His own company is poised to grow at a fast clip of 25-26% this fiscal, significantly ahead of the Nasscom-projected growth rate of 16-18% for the domestic industry. "India will continue to lead in the IT services sector in the near term, at least for 5-10 years", Gopalakrishnan said here, shortly after his company's newest software development block was opened near the Technopark here at a 50-acre campus. The facility has capacity to seat 1,600 staff, and involves an investment of Rs 180 crore. To underline his bullishness about the Indian IT sector, the Infy chief pointed out that almost all MNCs had the most number of staff based at their India facilities. Another reason for his faith in the Indian market is the increasing number of engineering graduates in the country. "Ten years ago, we had 4 lakh engineering students passing out per annum, now we are witnessing 14 lakh students joining each year for engineering education. In the US, these numbers are stagnating", he said. Infosys presently has the North American market contributing 63% of its revenues, while Europe contributes 23% and the rest of the world accounts for 14%. "We are aiming to turn this into a 40-40-20 ratio, or a 50-30-20 ratio", Gopalakrishnan said. He said the visa issue in the US market had led to an increase in costs, but added that the issue was being partly addressed by hiring locally, which also gave the company the benefit of some local knowledge and skill sets. On the international scene, Gopalakrishnan pointed out four broad concerns, namely the unrest in the Arab world, the unemployment in developed countries, the sovereign debt crisis in Europe, and the financial volatility across the world. "But having said that, I feel the industry is poised to grow in the coming years", he said. He said Infosys grew only 3% last year, while it was poised for a 25-26% growth this fiscal, and the projected recruitment level of 2 million for the upcoming year was another positive signal of the industry's health. On the likelihood of himself relinquishing the CEO's role, Gopalakrishnan said it was for the board to decide. "Executive positions in the company have an age limit of 60 years, and I am some way from there", he said.

'Hiring in IT Inc not to remain robust'

BNP Paribas analysts Abhiram Eleswarapu and Avinash Singh say that for Infosys to achieve a 20% compound annual growth rate in revenue at current productivity levels, it would have to employ a million people in the next 10-12 years. Nobody thinks that's feasible. Rising wage costs, complexities in handling large organizations, huge capital expenditure on infrastructure for the employees and the lack of employable engineers are major impediments to such massive levels of hiring. So if Infosys, and other IT biggies, have to continue growing their revenues at the current 20% or so levels, they would have to find ways to raise employee productivity. Till now, it's been a linear model, with revenue growth strongly correlated to the number of people employed. Five years back, the entire IT industry employed seven lakh people. Today, the top five companies alone employ six lakh and the entire industry about 20 lakh, making it the largest private sector employer. But the next decade will be different, as companies seek to implement non-linear models. Arup Roy, senior research analyst at Gartner, says such models accelerate growth with a significantly lower number of employees required than was the case in the past. They involve a move into products and platforms, and greater levels of automation and standardized processes that could be replicated with the same number of employees over a larger client base. Already, top-tier companies like Infosys, Wipro, TCS and HCL have about 10-12 % of their earnings coming from non-linear initiatives. Most are looking to raise this to a quarter of revenues over the next five years. "To survive and compete against the global biggies, IT companies do not have a choice but to adopt nonlinear models. This will lead to the moderation of recruitment over the longer term," said IIM professor R V Seshadri. Seshadri recently led a study on Wipro's initiatives at achieving greater non-linearity. The study says that Wipro has set up a non-linear initiatives group to build a business model to limit the company's headcount growth as it sets to achieve its $10 billion revenue target. "This shift requires not just change in tools and processes but also change in mindset from a pure services orientation. Therefore I expect the real decline in hiring rates to start taking effect after five years," Seshadri said. Subhash Dhar, head of business innovation at Infosys, said that the need for domain specialists would rise now as the company plans to achieve a target of one-third revenues through innovations by 2015. This also means that in the longer term the need for large volume recruitments for low-end processes would reduce (such process work may move to smaller companies in tier II and III towns). Innovations are driven by initiatives such as developing products, platforms and IP frameworks. This

typically requires fewer experienced hires unlike pure play IT services that are driven by mass hiring. S Premkumar, president for the financial services & healthcare vertical in HCL Technologies, said that nonlinear initiatives are not just driven by the need to control employee numbers. "It is a consequence of us moving up the value chain to meet the clients evolved needs," he said. Specialized solutions enable clients to get better returns on investment, improve process efficiencies, achieve faster time to market and enhance their offerings. HCL's attempt to move up the value chain is also reflected in its acquisition strategy, such as that of Axon, which is into SAP consulting. Gartner's Roy said that non-linearity is also driven by external factors like the need to remain differentiated amidst rising competition and to maintain higher margins. Here are some ways in which IT companies are trying to raise employee productivity: Differentiated service offerings: Using a company's intellectual properties or domain knowledge to solve a client's business, technological or operational challenge. Productised solutions: Platforms and products that address a niche area with replicable solutions across multiple customers. Flex delivery models: Leveraging economies of scale by the consolidation of similar work across multiple clients through well-defined processes, tools, interfaces and a centralized scalable team. Lifecycle accelerators: Pre-developed software that automates a particular business process or an aspect of product development, where 30% to 70% of the code can be reused across clients. Alternate commercial models: Outcome-based pricing models that ensure clients pay only for services that deliver business value. This enables IT companies to transform its client relationship by becoming a strategic business partner instead of just remaining a technology partner. Some products and platforms Infosys Flypp - application platform for mobile operators that enables monetization through ready-touse experiential applications across devices. TCS analytics platform for BPOs - fully managed, hosted, integrated, pre-built, multitenant analytic solutions for BPOs. HCL Content 2.0 - provides end to end solutions to the publishing industry through collaboration and agile processes, products, tools etc. Wipro mortgage fulfillment platform - a platform to meet the needs of regulation, volume fluctuations, and increasing market share in the mortgage industry. Cognizant mConcierge mobility platform - connects mobile devices seamlessly to billing and loyalty reward applications for companies in the hospitality sector. --Pranav Nambiar

Future tense: IT scrips near two-year low

MUMBAI: Fears of another recession in the US is pushing investors to factor in the worst-case-scenario for Indian software stocks, leading to heavy selling in these counters over the last few weeks. As a result, several leading IT stocks are now trading around their two-year low levels. And with the US and the European economies unlikely to turn around in a hurry, analysts expect some more pain in these stocks. On Friday, among the frontline IT stocks, TCS, Infosys and Wipro all lost over 2% each, while the IT index on the BSE closed 4.4% lower, the worst performer among the 13 sectoral indices on the bourse. On a monthly basis, the IT index is now down 19.4%. Compared to this, the sensex has lost 13.5% during the same period. Analysts are taking a bearish view of the top-tier technology stocks on fears of a double-dip recession in the US and the debt crisis in Europe. Although top officials at several software companies have been saying that their clients are now better prepared than they were during the 2008 crisis, not everyone is ready to buy such confident words. "We are not in the 'this time it's different' camp and expect the worsening economic scenario to lead to a slowdown in volume growth of Indian IT firms in fiscal year 2012-13," Harit Shah of Nirmal Bang Equities wrote in a recent report on the sector. Shah believes a global slowdown would inevitable impact export-driven frontline Indian IT companies and has cut target prices of TCS, Infosys, Wipro and HCL Technologies by 20-37%. IT analysts believe that key economic data in the US fails to inspire confidence about any economic recovery in the medium term, while Europe too is under severe economic stress. Since the two regions account for about 80% of revenues for Indian software companies, they would feel the pinch of economic slowdown. In another sector report, Ashish Aggarwal of Tata Securities noted that of late frontline IT companies have given mixed signals on future growth. "While Infosys indicated a slowdown in decision making and lack of growth in discretionary spending, TCS and Cognizant remained confident on the demand environment," Aggarwal noted. Though HCL Tech indicated that many of its clients could renew their contracts, it believes software budgets of clients may not be spent fully. "We note that some tier-II vendors were able to sign large deals in the past few quarters, which indicates a good demand environment. However, we also note that during the last slowdown, companies' revenue growth slowed down suddenly and management comments changed from being cautiously optimistic to pessimistic," Aggarwal wrote. Analysts also pointed out that other than the current economic headwinds, visa-related issues and protectionist voices against offshoring of IT services could also affect the business of Indian IT companies, which could in turn weigh on their stock prices.

Global retailers revive India plan

MUMBAI: Famous Manhattan address Saks Fifth Avenue is back at work, reviving plans to enter India. The American luxury store chain isn't the only one braving an environment roiled by global economic uncertainties . The list of international retailers looking at India as a priority market for business expansion include South Korea's Lotte, Thailand's Central Group and Myer of Australia, said multiple industry sources briefed on the developments. Even Spanish retailer El Corte Ingles, which is the world's fourth largest department store chain, send their strategic consultants to explore the local market. India's relatively robust domestic economy and fresh moves to allow foreign direct investment (FDI) in general retail have galvanized their interest despite bruised consumer sentiments worldwide. A Saks team, including representatives of its Dubai franchise Style Avenue Middle East, has been traveling to India holding discussions to rejig the entry plans. Six years ago, Saks had booked space at DLF mall in Delhi as well as at UB City in Bangalore. That did not take off and India entry went to the back burner. Still awaiting FDI, Saks may route investment decisions through the Dubai partner which brought Damas stores to India in the past. Thai retail and real estate major Central Group has been furiously at work to break into the Indian market. Central, a family-owned conglomerate , controls a big pie of Thailand's retail industry besides having interests in mall development and in hospitality business. It has had talks with Bharti Realty as it looked entering the country as a mall developer in the past. The group owns flagship department store chains under Central, Robinson and Zen brands but would prefer to come with FDI. As a prelude, Central wants to license its smaller formats in electronics retailing called PowerBuy and book store chain B2S. In July, a committee of secretaries cleared a proposal to allow foreign direct investment in multi-brand retail , marking an important step towards opening up India's $700 billion retail market to global investors. It, however, needs the Cabinet approval. The world's top three multi-brand retailers Wal-Mart , Carrefour and Tesco have entered India but are waiting for FDI to make the big moves. "India has been one of the happening economies both from the retail and consumer perspective. Several international players have been holding back their plans due to government regulations . But recent statements about opening up the sector have raised the hopes of most foreign retailers," said Pinaki Ranjan Mishra, who heads the retail and consumer practice at Ernst & Young. "We see Wal-Mart and Zara executives recognizing India as a big market in international retail conclaves. This adds momentum to the plans of other retailers who have had India on their radar for a while," said Amit Bagaria, Chairman, Asipac, a retail consultancy. Korean chaebol Lotte, which has significant shopping interests, may take the electronics retailing route to India. Lotte comes with the belief it could work with Korean brands Samsung and LG providing better value to the Indian customer. Australia's Myer is making moves through government trade channels to tap India's growth, and like that of El Corte Ingles, this move is still tentative and in early days.

IT sector pegs service tax refund at Rs 3.5k cr

BANGALORE: The IT/BPO sector says the government owes the industry over Rs 3,500 crore in service tax refunds for the past three years. With the amount continuing to grow, the matter is now being taken up by industry bodies Nasscom and CII. Since 2008, companies have been paying a 10.3% service tax on input services like rentals, leases, telecom links, repairs and maintenance, canteen services, HR audits, CA charges, management consulting, couriers, and transportation. Export-oriented units (EOUs) are allowed a refund of service tax paid on these input services that directly/indirectly support their output services like exports of software/services. Such refunds are a common practice, and are done to ensure that exports are globally competitive. But the refunds have not happened. The government reportedly owes Infosys Technologies Rs 530 crore, Mphasis Rs 250 crore and Wipro Rs 200 crore. Mphasis says that in the last quarter it submitted 30 box files, each box file comprising of 500 individual invoices, so a total of 15,000 invoices. But the tax authorities rejected the entire lot. Ganesh Murthy, CFO, Mphasis, said, "They are rejecting refund on frivolous grounds. They say the documentation is not sufficient or the invoices are not issued in the right format." V Balakrishnan, CFO, Infosys Technologies, said the department is looking for one-to-one correlation between input and output services, which will never be the case considering the nature of the services consumed locally and exported. "In a manufacturing scenario such co-relation may be possible but not in software exports," he said. Some input services are clearly linked to output while some are not. "The trouble is that there are no guidelines on what kind of input services are eligible for refund against export of software/services," said K R Girish, senior partner in law firm BSR & Co. Suresh Senapaty, CFO, Wipro Technologies, said too many rejections were leading to litigation.

Infosys, Wipro may have to sacrifice margins to compete

BANGALORE: It is not Cognizant's strong growth that leaves it as the odd one out in the industry. Rather it is the lagging performances of Infosys and Wipro that diverge from the larger industry growth trajectory. While Wipro's revenues in the June quarter grew 17% and profits 0.9%, for Infosys the corresponding numbers were 23% and 15.6% respectively. This comes at a time when leading players in the industry are seeing over 30% revenue growth and over 20% profit growth. Some analysts say that Infosys's limited success in either moving up the value chain to higher billing rate services (consulting, enterprise application services etc.) or scale businesses at the low end of the billing rate spectrum (remote infrastructure management, testing, BPO) are affecting its growth. The company also has a large exposure to the telecom sector, a vertical that has seen tepid spends in recent times. It has a small exposure to the fast growing healthcare vertical. Infosys has more recently introduced a strategy that seeks to address these concerns. It aims to achieve a revenue mix that is equally split amongst traditional strategic global sourcing, consulting & business transformation, and innovation (involving products & platforms). The company says it is transitioning from a technology solutions company to a business solutions company , proactively helping clients build their enterprises. It is also focusing on fewer verticals including banking, financial services and insurance (BFSI), manufacturing, energy, utilities and telecom, retail, consumer packaged goods, logistics and life sciences and public services and healthcare . Karthik Ananth, director in management consulting firm Zinnov, said that the restructuring is focused towards customer centricity and innovation . "This is definitely in the right direction . But like all restructuring efforts, it will take time for one to assess the true impact of the changes made," he said. Analysts also say these changes necessitate higher investments in the medium term in sales and marketing, and higher salaries. But this could imply lower margins for a while, something that Infosys has been averse to. How the company manages this apparent contradiction remains to be seen. "Although, management continues to indicate that it is business as usual and the company has performed well, we feel investors should assume a longer road to recovery in performance ," a report by brokerage firm Ambit Capital said. Wipro's primary effort has been to simplify what it sees as a complex organization structure. The

company discontinued its joint-CEO system, reorganized its structure (which led to the exit of many executives) and narrowed its vertical focus. The attempt is to become more nimble and increase speed of decision-making . Wipro has had relatively low exposure to higher growth verticals like BFSI (27% of Wipro's revenue in FY11, compared to 40% for TCS and Cognizant ) and relatively high exposure to lower growth verticals like telecom (17% of revenue). Likewise, it has a relatively high exposure to R&D services (14% of revenue), where spends have lagged IT services. Kuldeep Koul and Ashish Chopra, analysts in brokerage firm Motilal Oswal , said in a recent report that Wipro's more diversified exposure to verticals is beneficial to it from a long-term perspective . "However, inthe context of current spends, its exposure puts it at a disadvantage ," the report said, implying for instance that it has been adversely hit by its low exposure to BFSI. Some also see Wipro as the least aggressive amongst its peers in new client acquisitions. An industry analyst said that the company's commitment to maintain high margins has affected its ability to invest in customer relationships , business expansion, building sales teams and marketing engines. "The company must give greater emphasis on marketing spends if it has to keep up with the rest of the top-tier companies ," the analyst said.

Infosys: Europe biggest concern

Infosys Ltd sees the grim economic situation in Europe as its biggest concern and is diversifying actively into fast-growing markets such as China

CHINA: India's second-largest software services exporter, Infosys Ltd, sees the grim economic situation in Europe as its biggest concern and is diversifying actively into fast-growing markets such as China, a top executive said on Thursday. While the US and Europe markets are too big to ignore, Infosys, which competes bigger rival Tata Consultancy Services Ltd and smaller Wipro Ltd, is expanding in neighbouring China, planning to roughly triple its staff headcount to 10,000 in 2-3 years. "Right now, of course, the economic situation is the biggest concern because it's something that's outside our control, but will have an impact on the global economy and hence our industry," Executive Co-Chairman Kris Gopalakrishnan told Reuters on the sidelines of the World Economic Forum in the northeastern Chinese city or Dalian. Infosys derives more than 70 percent of its revenue from the United States and Europe. Slowing US and European economies, volatility in the rupee, severe competition, rising wages, high staff turnover rates and management shakeups at Infosys and Wipro have been hampering growth in India's $76 billion software services sector. The United States alone accounts for about half of the revenue of India's IT outsourcing industry.

Wipro to develop Saab's LEDS system

BANGALORE: Wipro Ltd has entered into an alliance with Saab AB to develop a market protective software for the Swedish major's Land Electronic Defence System (LEDS) in the country, the IT bellwether said. LEDS provides protection to light and medium combat vehicles and main battle tanks against rocketpropelled grenades, anti-tank missiles, mortars and artillery shells. "We will pursue opportunities for LEDS in the domestic market with Indian defence establishments and original equipment manufacturers," Wipro infrastructure engineering division president Pratik Kumar said on the margins of the Defence & Security Equipment International (DSEi) 2011 trade fair being held in London. DSEi is the world's largest integrated defence and security exhibition providing a single platform to showcase the latest equipment and systems. Wipro will develop, manufacture and integrate the equipment to address the Indian market for landbased active protection systems (APS). "The primary objective of the partnership with Saab is to serve the Indian market with state-of-the-art APS solutions. The partnership will include component sourcing within the country, technology transfer and manufacture and integration of APS," Kumar said. The global software major hopes the strategic alliance will put India on the global map as a costeffective and reliable defence manufacturing hub. Both the firms also partnered in 2008 and 2010 to address the Indian survivability technology market. "India is an important market for us and a cornerstone of our global strategy. The new collaboration marks our next step towards consolidating our position in the Indian defense market," Saab's business head for LEDS Micael Johansson said on the occasion. The e-warfare system combines active signature management and soft-kill and hard-kill mechanisms to provide full spectrum active protection to land vehicles. The specifications include hemispherical coverage to detect incoming threats and alert the crew.

Wipro's new group to create complete products

BANGALORE: IT major Wipro Technologies has just launched a new team to conceptualize and develop complete products that clients may need. Sanjay Gupta, global head of PES ( product engineering services) at the company, told TOI that clients are increasingly shifting towards handing over the entire product lifecycle responsibility to Wipro. This includes conceptualizing the product and its go-tomarket strategy, designing the technology architecture and delivering the integrated product. "The trend started emerging towards the end of the recession and has strengthened now. This has prompted us to start this new group," he said. He added that clients from the consumer electronics, personal device segment, medical electronics and telecom sectors are driving this trend. The new team, called integrated product group, was spun off from Wipro's product engineering service (PES) practice, which has been ranked by consultancy firm Zinnov as the No. 1 outsourced product development group in the world. The team has a mix of engineers from the existing PES team and also a bunch of new recruits. Currently the team forms around 1,000 of the 18,000 engineers in the PES business. The team is divided into three practices-consulting, architecture and delivery team. Most of the PES or outsourced product development work done in India today is co-engineered, where clients give specifications and the service provider offers technical solutions. Therefore Indian IT companies typically do not start working on products from scratch. Wipro's integrated product group works like a system integrator by working on the software and chip components, while also creating an ecosystem with original design and hardware manufacturers to integrate the final product. The company has just won a contract from an USbased consumer electronics company with a brief to develop a Christmas television for the holiday season. The integrated product group contributes about 10% of the PES revenues for the company, and the PES team contributes around 8% of Wipro's overall IT services revenues. The company plans to further expand the integrated product group, particularly with lateral hires. A recent Zinnov report on global R&D service providers said that Indian IT companies are increasingly being looked at as partners for front-end collaboration with a shared product vision. This is being driven by trends such as such as virtualization and mobility where Indian vendors have developed capabilities, faster go-to-market time frames, cost efficiency etc. Also, the ageing population and shrinking engineering teams in the West is keeping Indian IT companies in demand.

Besides Wipro, other major players in outsourced product development include MindTree, HCL Tech, Infotech and Persistent.