As if the global recession wasn’t bad enough, the year had started on a downer almost immediately with the Satyam scandal: the chairman of India’s fourth largest outsourcing service provider, Ramalinga Raju, resigned on 7 January 2009 after notifying board members and the Securities & Exchange Board of India (SEBI) that Satyam's accounts had been falsified (cash on its books inflated by $1bn; $253m liability incurred on funds personally arranged by Ramalinga Raju; quarterly revenues for the period ending 30 September 2008 overstated by 28% and earnings overstated by $125m). This sparked a huge crisis of confidence and sent shockwaves around the outsourcing world placing major question-marks against India’s position as a premier destination for outsourcing IT services - plus the role of its auditors, PricewaterhouseCoopers, in the whole saga.
I think the year will also be remembered for its merger and acquisition activity, following in the footsteps of HP’s purchase of EDS in 2008, a trend that I can see continuing into 2010. Deals included:
- Oracle stepping bravely into the ‘open-source’ systems market with its $7.4bn acquisition of Sun Microsystems in April 2009 after Sun’s discussions with IBM broke down.
- Tech Mahindra picking up the ashes of Satyam by taking a controlling interest in April 2009, initially operating them as an independent company under the name of Mahindra Satyam before bringing them under the group umbrella.
- Dell’s $3.9 billion acquisition of Perot Systems in September 2009 giving them a stronger position in the IT services market and deep government / healthcare experience.
- Xerox launching into full blown BPO most recently with their acquisition of ACS (October 2009) helping them in their transformation from a document company into higher value end-to-end business processes.
ANZ Operations & Technology Pvt. Ltd
- specific industries like travel were really hit and anyone doing back office work for this had to look at other options;
- as predicted at the beginning of the year, we saw a drop in profits making PE investors force companies to offshore/outsource more;
- the volatality of the dollar was so high and across different currencies, that it got a lot of companies off guard. Of course, many banks made money;
- many companies moved hard on productivity, salary cuts, no raises, lower bonuses, no promotions to higher level jobs, etc.
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KellyOCG - RPO
HR SSO Director
HR Shared Services
WNS Global Services
- Companies now recognize that business process outsourcing is an appropriate operating model for both good times and bad. Companies, both veteran and new industry entrants, are now embracing outsourcing with more alacrity. This year we saw historical outsourcing ‘laggards”—new industry entrants such as CPG, retail, logistics and media and entertainment start on outsourcing journeys side-by-side with more experienced industries such as financial services, who ramped up their initiatives in response to the worst economic conditions in 60 years.
- The second trend is the increasing globalization of service providers in response to more global programs of the buyer sector. During 2009, the provider community aggressively expanded their footprints to serve the needs of their clients.
- The third discernable trend is the pronounced waning of the era of captive centers. Many clients revisited their captive shared service center strategy with the recognition that third party providers can deliver the same or better levels of service at lower cost with less administrative hassle.
Shared Services International Inc.