Information Technology, India: I
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Contents |
Financial services
Banks’ in-house staff replaces outsourcing, hurts Indian IT/ 2018
From: Shilpa Phadnis, Avik Das & Sujit John, New enemy of outsourcing: DIY by banks, August 15, 2018: The Times of India
From: Shilpa Phadnis, Avik Das & Sujit John, New enemy of outsourcing: DIY by banks, August 15, 2018: The Times of India
Here’s the big reason why most of the big IT services companies are still struggling to accelerate: Many large banks have got into a do-it-yourself mode for their IT. Where once they outsourced work, they are now choosing to do more of it in-house, mostly in their own global inhouse centres (GICs) in countries like India.
The financial vertical has long been the bread & butter of the IT services business, but the sector’s contribution to overall revenue has fallen for most of the big vendors over the past few years.
For TCS, financial services was 33.4% of overall revenue in 2016-17 — it was down to 31.1% in the last quarter. For Cognizant, it’s down 3 percentage points in the past two years, and for Infosys it’s down 1.4 percentage points.
There are also no signs of a reversal in this trend. In the last quarter, TCS’ financial services vertical grew at 4% year-on-year, when its overall revenue grew 10%. The corresponding figures for Cognizant were 4.5% and 9.2%, and for Infosys 2% and 6.8%. Compared to the preceding quarter too, growth was anaemic, far lower than the overall quarter-on-quarter growth, suggesting that the sector continues to weigh on the IT industry.
At the last quarter earnings announcement, Infosys COO U B Pravin Rao admitted as much when he said the company had a negative impact in the quarter from two of its clients due to insourcing. The company’s revenue from financial services declined by 1.5% compared to the preceding quarter. HCL Technologies’ revenue from the financial vertical shrunk by 1.4% in the June quarter and the company said it was due to some of its clients insourcing work Neither Rao nor HCL named the clients that are insourcing, but it is possible to make some guesses based on who outsources to whom.
‘Bank IT staff more efficient than outsourced employees’
Deutsche Bank, Bank of America, Citibank and UBS have been some of the biggest outsourcers of IT, according to IT advisory firms TOI spoke to. Deutsche Bank has an annual outsourcing spend of $6 billion and counts DXC, IBM, Atos, Wipro and Infosys as IT partners. Bank of America outsources $5 billion of IT annually and has contracts with IBM, Accenture, Infosys and TCS, among others. Citibank is estimated to outsource between $1.1 billion and $1.5 billion, to vendors including TCS, Wipro, HCL and NTT Data. UBS outsources about $1 billion and its vendors include Capgemini, Epam, Luxoft, HCL and Genpact.
All of these financial institutions are now insourcing, as also those like RBS, Credit Suisse, ANZ. “Citi had sold their captive business to TCS and Wipro (in 2008) and now they again have a captive business with 4,500 people in Pune alone, and plan to be 8,000-strong there,” said an industry executive who did not want to be named. Citi has centres in Pune, Mumbai and Chennai, employing about 16,000 people, and is growing everywhere. Citi declined to provide a comment for the story.
A UBS spokesperson disputed the outsourcing figure provided by third parties to TOI, but acknowledged that the bank had insourced around 2,000 jobs in the last six months, with the primary objective of improving effectiveness and efficiency. The spokesperson said, “UBS’ business solution centres abroad and in Switzerland have grown in recent years. We now have a global and consistent network that includes India, the US, Poland, and China, as well as the nearshore centres in Switzerland (Schaffhausen, Biel and Ticino). This has created the conditions for insourcing where it makes sense.”
The bank told TOI that one of the main reasons for insourcing is that it wants to retain and strengthen strategic and market-differentiating expertise within the bank — activities that differentiate the bank as a financial services provider from its competitors. “In the technology area, there are topics such as blockchain, digitisation or artificial intelligence. Or operational activities that generate added value for our clients. Or also positions in research, analytics, finance and risk management,” the spokesperson said, with reference to strategic and market differentiating areas.
Deutsche Bank declined to provide a comment for this story. But former Deutsche Bank COO Kim Hammonds told TOI last year that when she came to the bank in 2013, about 80% of the tech was outsourced, and she had since brought it down to 50%. The bank had during that period hired some 4,500 engineers, many of them in its India technology centre. Hammonds, who left the bank in May, had told TOI that she intended to insource some more.
Deval Shah, MD of Danske Bank’s IT and support services centre in India, said a lot of the banks have started realising that their productivity is much higher when they insource. “In this day of digitisation, the time to market is very important. So now when we are working in a very agile environment, with the business, with IT, the ability of your own IT staff to comprehend the business is 10 times more than the ability of a contractor to understand the business. I don’t see vendors building that kind of expertise to help any bank reduce their time to market,” he said.
As for the traditional areas of IT, where vendors have expertise, much of it is getting automated. And even that work some banks are choosing to do in-house. “Service providers that do billing on FTE (hours worked by one employee on a full-time basis) have no motivation to do automation. We (Danske India) are not a revenue centre, but a value centre. From our perspective, we are always focused on automation,” said Shah. The Danish bank had in 2006 outsourced much of its IT to L&T Infotech, but took back the entire operation in 2014, and has since been building up its own centre in India.
Phil Fersht, CEO of IT research firm HFS Research, said a study they had done with KPMG on the state of outsourcing found only 30% are seeking to renew similar contracts with their current providers, while a similar percentage will only stay with their current provider if they can shift to more outcome-based pricing and have more automation to reduce cost and headcount. Another 44% will either pull work back in-house or change provider.
Peter Bendor-Samuel, CEO of IT research & consulting firm Everest Group, said the Indian players have been living in denial. “They have all been forecasting good years in banking and we have been telling them that for many reasons this was unlikely to happen. The banks’ GICs have matured and they are clearly growing them at the expense of third parties. For some functions, they are also bringing work back on-shore and this work they are keeping in-house. They have largely decided that they like the big Indian firms as their legacy (partners to maintain their traditional IT),” he said.
Bendor-Samuel said that even when companies are seeing some growth in the financial services vertical, it’s coming from areas other than banking — for instance, TCS’ deals in insurance, including the $2-billion Transamerica deal.
However, K Krithivasan, president of the banking and financial services business unit of TCS, said that things are changing even in banking, with players moving from a compliance mindset to a growth mindset. Banks, especially those in Europe, have been bogged down in dealing with compliance issues, including the General Data Protection Regulation (GDPR), forcing them to take their eye away from IT investments. “Banks that are focusing on leveraging technology for growth and transformation are engaging with us very strongly because of our investment in cloud, AI, automation and location-independent agile,” Krithivasan said.
But as the European banks return to IT investments, the big question is, will they prefer to do more of it in-house? The message from Deutsche, Danske and UBS — as indeed the American banks — isn’t good for Indian IT.
Lobbying
USA, 2015-17
From: Rachel Chitra, Indian IT cos’ lobbying spends jump nearly 40% in Trump era, December 10, 2018: The Times of India
The Indian IT industry’s lobbying spends have increased sharply from the time Donald Trump became US President. It rose by nearly 40% in the first three quarters of fiscal year 2018, compared to the same period in the previous year. The spends are largely going toward dealing with immigration issues, including the higher rejection of H-1B visa applications.
A report by investment firm CLSA shows that IT majors TCS, Wipro, Cognizant, Infosys and industry body Nasscom were collectively spending up to $2.4 million for lobbying in the US in fiscal year 2015. That number increased to $2.9 million in FY16 and then to $3.3 million in FY17 — the fiscal year when Trump assumed power. In the first three quarters of FY18, the figure is already at $3.2 million (it was $2.3 million in the same period in FY17).
The need for such lobbying efforts might increase going forward as the Department of Homeland Security (DHS) last month proposed to make certain changes for filing new H-1B visas. The focus appears to be on ensuring H-1B visas go to the most skilled or highest paid petition beneficiaries.
Analysts also point out the increased difficulties with administrative processes for Indian companies. “Overall, the visa environment is becoming onerous and eventually, if the cost of doing business in the US increases, it could be detrimental to margins (of IT majors),” said Parag Gupta, equity analyst, Morgan Stanley.
Nomura analyst Ashwin Mehta sees “pressure from pricing in legacy, onsite staffing due to immigration tightening and recent appreciation of the rupee”.
CLSA notes that for Infosys and Wipro, lobbying spend has gone from negligible sums to a run-rate of $320,000 and $200,000 a year respectively. “While TCS has increased its lobbying 4X to $380,000 from $80,000, Cognizant has long outspent Indian peers with a $3-4 million budget and extensive engagement at senior levels in Washington. It has had the most extensively staffed immigration office and is the largest sponsor for green cards,” said Ankur Rudra, analyst, CLSA. Citi analyst Suvendra Goyal said the visa renewal process is already creating cost/ flexibility challenges.
Salaries
Specialisation in languages fetches top dollar
Shilpa Phadnis, June 2, 2018: The Times of India
From: Shilpa Phadnis, June 2, 2018: The Times of India
HIGHLIGHTS
Techies who can code in languages like Clojure, Erlang, and Haskell are poised to earn the most in the industry, according to a survey
India reportedly has 5 million developers, only a 5 per cent of which know these languages
If you’re a programming ace in Clojure, Erlang, and Haskell, then you would be earning top dollars in India, according to the developer survey by Stackoverflow, an online community for developers. This small, exclusive club of developers currently get fat paycheques because of the demand-supply gap and a steep learning curve. Undergrads in India are still not exposed to these languages.
Most are still largely in the Java and C++ environments, though many are also now beginning to use languages like Ruby, R and Python.
Stackoverflow did not call out salaries of Indian developers separately this year, but in the 2017 report, it said the survey respondents using Python received an average of $8,809 (Rs 5.8 lakh) annually, those using Java got $7,341(Rs 4.8 lakh) and Javascript $7,047 (Rs 4.6 lakh). Stackoverflow surveyed 1 lakh respondents from 183 countries with European developers making up for 39,000 respondents, followed by North America and Asia with 25,016 and 24,700 respondents respectively.
In the US, Erlang and Scala developers are the highest paid, at $115,000. Globally, respondents who use F#, Ocaml, Clojure, and Groovy earn the highest salaries, with median salaries above $70,000. Python respondents get $56,000. F# is an open source cross-platform programming language that runs on Linux, Mac OS, Android, Windows and iOS.
Erlang, Haskell and Clojure are a smaller community in India, for several reasons. These are called functional languages and follow a different coding paradigm. A Quora post two years ago by Tikhon Jelvis, a professional Haskeller, said that Haskell is increasingly used in the financial sector. He gave examples of how Haskell is used by JP Morgan for projects in the new product development group and, Barclays in their equity derivatives quality assurance group.
Viral Shah, CEO of Julia Computing and co-creator of the Julia programming language, said that most Indian developers are still focused on Java and C++ that power a majority of the world’s infrastructure. “Languages like Erlang, Scala, Haskell, and Clojure are not mainstream. I believe that the number of programmers is naturally small compared to the popular and widely used tools, and they usually attract programmers who are passionate about computer science and like to experiment with new ideas. The kinds of systems implemented in these also tend to be special purpose and mission critical,” he said.
Vivek Prakash, co-founder of HackerEarth, a hub for 1.5 million developers, said these specialized languages are not taught to undergraduates in engineering colleges. “These languages are still new to the Indian developer ecosystem. These languages (Erlang, Haskell) are functional languages with a different programming and learning curve compared to Java or Python,” he said. Prakash said that India has 5 million developers out of which less than 5% know these functional languages.
Software developers in India
1/3rd of developers are self-taught/ 2017
Shalina Pillai, 1/3rd desi developers self-taught: Survey, January 25, 2018: The Times of India
From: Shalina Pillai, 1/3rd desi developers self-taught: Survey, January 25, 2018: The Times of India
See graphic:
Top languages, modes of learning to code and preferred resources used by software developers in India, as in January 2018
The majority of Indian developers are learning to code through websites like YouTube, coding sites like Git-Hub and Stack Overflow, and online courses, rather than relying on educational institutes. As high as 70 per cent of around 3,700 Indian developers surveyed recently said they had taught themselves how to code, either exclusively, or in addition to school. And 33 per cent (around 1,217 developers) said they were exclusively self-taught, without any academic help.
The survey, done globally among 40,000 developers across 42 countries, was conducted by talent evaluation company HackerRank. HackerRank is a technical hiring platform that helps businesses evaluate software developers based on skill. It has a leader board that hosts talented coders with a live score board that gets updated on a real time basis. Most industry biggies, including Amazon, LinkedIn, Quora and Facebook, keep an eye on this leaderboard to hire the best of coders across the globe.
Stack Overflow, an online community of developers to code and learn, was the most popular platform to learn coding, with over 70 per cent of Indian developers and students choosing it (over 8,000 deveopers and students were surveyed for this). This was followed by YouTube.
MOOCs (massive open online courses) like Udemy, Udacity, Coursera, and online tutorial websites like Pluralsights and Lynda were also more popular than books among students trying to learn coding.
About 11 per cent of Indians start coding before they are 15 years old (that's lower than the global figure of 31 per cent), and 71 per cent do before they are 20.
India is somewhat old school in terms of the programming languages that developers know. C, one of the oldest known programming language, was the most known language among Indian developers - 80 per cent of the 3,700 surveyed knew the language. C++, Java, and JavaScript were languages that more than half the Indian developers knew.
Vivek Ravisankar, co-founder & CEO of HackerRank, said that it is good that Indian developers were still wellversed with the old languages. "Languages like Python is easier to learn since it's the closest programming language to English. But C and C++ are tougher and it's good that Indian developers know those basics," he said.
However, 42 per cent of Indian programmers also know Python, though that is less than the average of 54 per cent for all other countries surveyed.
Technology hubs
2012, 2014-17
July 29, 2018: The Times of India
ii) 2014-17: growth/ decline in investment in start-ups in the Technology hubs of the world;
iii) 2014-17: Major deals closed in Bengaluru, New Delhi and other major Technology hubs; iv) Fate of investments in Bengaluru, New Delhi and other major Technology hubs.
From: July 29, 2018: The Times of India
See graphic :
i) 2012-17: There were 3 Indian cities among the world’s Top 18 Technology hubs;
ii) 2014-17: growth/ decline in investment in start-ups in the Technology hubs of the world;
iii) 2014-17: Major deals closed in Bengaluru, New Delhi and other major Technology hubs; iv) Fate of investments in Bengaluru, New Delhi and other major Technology hubs.
