March/April 2009 www.FAOToday.com

News
Mergers, Deals, and More
STATISTICS &
STUDIES
Hackett: Save by Controlling
Indirect Spending
According to new research from the Hackett
Group, the average Global 1000 company can
save as much as $74 million in annual procurement
costs by improving their control of projectbased
indirect spending. The study looked at how
effectively procurement organizations manage and
control non-recurring project-based indirect supplier
expenditures in IT-Telecom, HR, Sales &
Marketing, Finance & Corporate Services, and
Capital Equipment & Services.
By polling both procurement organizations
and the budget-owning functions, Hackett
learned that project-based spending represents
up to 35 percent of all the total procurement
spending, and is often not well supported by the
sourcing resources or processes of purchasing departments.
In fact, dedicated sourcing professionals
with specialized expertise are managing the
process only 17 percent of the time.
Insufficient procurement staff resources, the
need for specialized functional expertise, and the
requirement of fast turnaround are three of the
most common reasons for limited procurement involvement
in managing project-based spending,
according to the study. But the support gap creates
a “lose-lose” situation where procurement best
practices are not applied. As a result, both purchasing
and budget owners are generally disappointed
with the results. Budget owners are particularly
dissatisfied with resulting pricing, contract flexibility,
and the ease and timeliness of the process.
According to Hackett Research Director Pierre
Mitchell, "In today's economic climate, there's
more pressure than ever before to get the most
from every purchase. At the same time, businesses
are trying to meet ever more aggressive operational
goals. Yet a disturbing amount of ad-hoc spending,
for projects ranging from IT infrastructure to trade
shows to executive search and recruitment, is slipping
through the cracks, and established procurement
practices are simply not getting applied.
“Procurement organizations have a tremendous
opportunity here, both in terms of demand management
and also to utilize a sourcing process and
capability that better accommodates this type of
one-off project-based spend,” said Mr. Mitchell.
“Otherwise they set themselves up for failure, and
miss a tremendous opportunity to reduce spending,
improve contract flexibility, and generally
better support their company from a strategic
business perspective.”
Gartner: Indian BPO Will Double
Market Share by 2010
According to a report published by Gartner, the
market share of Indian BPO industry in the global
BPO market is estimated to grow two-fold in the
next two years despite the global economic slowdown.
The report cited that the Indian BPO
providers have proved to be tough competition for
the western BPO vendors.
Arup Roy, senior research analyst at Gartner,
stated that the Indian BPO industry has evolved to
handle its exposure to vertical industries and issues
pertaining to currency and legislation. The key
strategies of Indian players include making investments
on onshore and nearshore delivery centers,
and pioneering new area of analytics services or
knowledge process outsourcing (KPO).
North America and the UK have been the most
successful markets for the Indian vendors. The
top-20 India-centric BPO providers generate revenue
worth $2.2 billion from serving clients in the
North America region, while Western Europe contributed
$1.4 billion in revenue to the top 20 Indian
BPO providers in 2008. In addition, the
India-centric BPO vendors achieved more success
in serving the non-traditional sectors, such telecom,
manufacturing, insurance, and banking, than
in government and retail sectors.
The key reason behind the success of Indian
BPO vendors is their ability to serve as reliable
services providers to their clients. The Indian BPO
vendors also continued making acquisitions of
shared-service centers across Europe and North
America to offer services from nearshore locations.
Moreover, most of the players have also started expanding
operations in continental Europe via partnerships
to understand local business cultures.
Gartner also expects that contact centers and analytics
services will witness maximum growth as
they have the lowest entry barriers.
Romania Gains Ground as an
Outsourcing Destination
Romania is increasingly becoming a popular
outsourcing destination in Europe, especially for
business process outsourcing, offshore software
engineering, and contract manufacturing services.
Reportedly, Ericsson is in talks to establish
its operations in the country and planning to establish
a 200-setare development center. Among
the other companies interested in developing
their businesses in Romania are Nokia and
Hewlett-Packard.
Recently the KPMG group included the Romanian
city of Cluj-Napoca in its list of the future
hotspots for business process outsourcers. The city’s
attraction is Babes-Bolyai University, which is a
home to the largest student base in the country.
Adding to that are the forecasts made by Frost &
Sullivan that Romania will also emerge as a strong
player in the electronics outsourcing industry. The
city’s strength lies in its favorable location, abundant
and cheap pool of talent, and low corporate
taxation policies.
MERGERS &
ACQUISITIONS
Satyam Accepts $354M Bid from
Tech Mahindra
Beleaguered Indian services provider Satyam
Computer Services announced last month that it
has selected Tech Mahindra, an Indian IT services
provider to the telecom industry, as the highest
bidder. The company submitted its bid
through a subsidiary, Venturbay Consultants Private
Limited, at $354.2 million for a 31 percent
stake in Satyam. The transaction is subject to approval
from the Company Law Board. According
to the agreement, Venturbay Consultants will
purchase about 302.76 million shares and make
an open offer to acquire an additional 20 percent
in Satyam at a minimum price of $1.2 per share.
The company was expected to submit the bid
amount by the end of April.
With this, Satyam will have a market capitalization
of $1.1 billion. The move will assist Tech
Mahindra to expand its services portfolio in new
domains, and diversify its software services operations.
The acquisition will also help Tech Mahindra
aggressively compete with its rivals, such as
Tata Consultancy Services, IBM, Infosys Technologies,
and Wipro Technologies. In addition,
Tech Mahindra aims to gain $800 million to $1
billion in annualized revenues following this transaction
even if some clients shift to other vendors.
Other bidders included Larsen & Toubro and
Wilbur Ross (a billionaire investor), which submitted
bids of $1 and $0.4 per share, respectively. Bidders,
including Cognizant, BK Modi’s Spice
Innovative Technologies, IBM, Hewlett-Packard,
and KKR Private Equity Investors, withdrew from
the final process, citing non-availability of ade-
6 FAO Today March/April 2009 www.faotoday.com