Feature

The BPO piper’s back

India’s premier IT show spotlights animation, BPO and the digital lifestyle in its seventh coming, says Vinutha V

We will take the opportunity to showcase our 64-bit processors. Sanjeev Keskar Country Manager AMD Far East Ltd (India)

Bangalore IT.COM opens amidst statements from several IT companies that they intend to boycott the seventh edition of the seminal IT show in view of the city’s poor road infrastructure. Despite this, the IT department is optimistic that

the event will be a success. M K Shankaralinge Gowda, Karnataka IT secretary says, “The image that Bangalore IT.COM has created over the years cannot be wiped out because of road infrastructure problems. In fact, this year there are new avenues in terms of networking, participation and content of the event. However, steps were being taken by the Government on a war footing to improve the city’s infrastructure.” Recalling the previous year’s event, Gowda adds, “Last year’s event contributed to as much as $500 million investment in the IT sector in Karntaka. The number of IT companies starting their operations has increased to three companies a week against two companies a week in 2002 in the state.” This year’s IT.COM is focused on IT, communications and media technologies. There will be separate pavilions for animation, games and media and BPO employment opportunities.

B V Naidu, director, Software Technology Parks of India (STPI) says, “The quality of IT.COM is improving every year. The event is becoming more effective in terms of international networking.” Incidentally, Spain and Australia will be participating in the event for the first time along with other dozen countries including Russia, Germany, UK, USA, China and Canada. Besides, participation with a large delegation, Australia will a sponsor a networking evening on Nov 2nd called Nation Night. So far, eleven states have confirmed their participation such as Tamil Nadu, Chandigarh, Madhya Pradesh, Himachal Pradesh, Gujrat and Orissa among others.

Animation and BPO

The Chief minister of Karnataka, Dharam Singh will be the chief guest this year. Starting from networking dinner – Karnataka the Gateway of India, the event will host a CEO Conclave to address survival methods in the current business scenario.

Animation and Games, which is considered to be the next boom segment in India, will get more attention at this year’s IT.COM. More than nine animation companies including jadooWorks, Animaster and Toons Kool. This pavilion will attract attention from the advertising, media and electronic gaming industries. This year, to support the BPO segment, there will be a special pavilion called BPO and Career Mart. Keeping in mind Bangalore’s success in this high potential area, the pavilion will feature around 10 to 15 BPO companies including ICICI Onesource, Transworks, Progeon, PeopleOne and Naukri.com, government, members of the training programme will take part in the pavilion. B-SAT (BPO Skills Assesment Test), a test to identify the existing talent pool for BPO sector, which was conceptualised by BITES (Board for IT Education Standards) will be officially launched at the event. Hiring consultants, MeriTrac and Eduquity will conduct the tests and the database of the candidates will be available with the IT department which will in turn be provided to the BPO companies. “The availability of manpower has stepped up and there is a necessary to create awareness amongst people that BPO job opportunities can provide stable employment,” adds Gowda.

To showcase, how IT has integrated in a daily life; there will be a special pavilion, Digital Lifestyle and Spectrum, where companies such as Sony, Samsung, Intel and Protocol will be displaying next generation products. Peripherals such as Smart Desktops, Web machines, laptops, handhelds, UPS, modems, scanners, printers, digital cameras and support systems will draw crowds.

The Participants

Already 270 companies including Infosys, Cisco Systems, Accenture and AMD have confirmed the participation. Sanjeev Keskar, country manager, AMD Far East Ltd (India) says, “Last year’s event was very well organised and there were many participants. AMD was the platinum sponsor for last year’s IT.Com. In 2003, AMD’s first year of operations in India, IT.com gave us good branding and visibility the Athlon-64 bit processors. Being one of the biggest IT events, this year we will again take the opportunity to showcase our 64-bit processors—Opteron-64 and Athlon-64.” Satcom Infotech, an anti-virus company that took part in IT.Com, 2001 was successful in closing 220 deals with government, education institutions and non-profit organisations out of the 1,200 enquires it generated at the event. C Ramesh, manager, business development of Satcom Infotech Pvt. Ltd says, “In the past we had been selling our solution to the enterprise market. Bangalore IT.COM 2004 will be a perfect launching pad for our antivirus solution, SOPHOS for entering the Small Business Solutions segment.” The company plans to introduce user licences starting from a five-user licence for Rs 10,000.

Srinivas Uppaluri, global head-corporate marketing, Infosys Technologies says, “Along with many other industry players we have worked hard to build a global brand for Bangalore. We feel that events such as IT.COM provide a common forum to promote Bangalore and Karnataka as significant

IT destinations. Bangalore IT.COM is also a platform where industry leaders can come together to network and focus on business issues faced by the industry. Such events play an important role in further establishing the brand value of Bangalore.”

For the first time, all the industry associations have come together and joined hands with IT.COM. CII, IDC, NASSCOM, TiE and VLSI will hold conferences and seminars on sharing technology information explore business opportunities and insight to tackle issues confronting the enterprises of today. It’s going to be a networking platform where every individual, entrepreneurs or corporate or academician or financial institute can find relevant information. The content and packaging of the entire IT.COM conference has been very good this year, according to Naidu.

The Indian semiconductor industry has come a long way. Despite the admirable progress it has made, the Indian semiconductor industry hasn’t received the kind of acclaim it deserves. To explore the potential of the semiconductor industry, all the semiconductor companies of India will come together, under a common representative forum – India Semiconductor Association (ISA) at IT.COM 2004. On November 2, 2004, ISA will be formally launched. The day long program will comprise of invited lectures, panel discussions. Uma Mahesh, director of insilica Semiconductors India Pvt Ltd says, “It’s the time for India to identify itself as a hardware destination, especially in chip design. We want to show the potential of Indian chip design companies such as Magma, Logic Vision and insilica.”

Participation at ISA’s event in IT.Com 2004 for semiconductor companies will make possible for companies, investors, academia from all parts of the world, to learn more about how India is poised to make a substantial contribution to this space.

Students Internet World

IT.COM 2004 has gone a step forward by conducting Students Internet World (SIW) across all the districts including Hubli, Dharwad, Mangalore, Mysore and Chitradurga. Targeting 1.5 lakhs students against 48,000 in 2003, the event will provide 50 to 100 computers at each district. The entire SIW programme is sponsored by TCS. The final round of the Rural IT Quiz will take place in Bangalore.

Cold shoulder

Some old exhibitors aren’t reappearing at Bangalore IT.COM 2004. Iomega who participated in 2003 with the intention of getting exposure for its networked storage products has decided to give it a miss this year citing that the event [IT.COM 2004] has lost its charm. The company’s experience was that the event has no serious business crowd. Gururaj K Upadhya, director-technical support, Cerebra Integrated Technologies gives a similar reason for missing out IT.COM twice in a row. He says, “There are no serious business leads that are generated from this event, which can be later followed upon.”

R Manikandan, DGM-Sales & Marketing, LG Electronics India says, “We have decided not to take part this year as we have better investment opportunities for getting visibility for our products. We are now looking at ‘more serious focused activities’ such as participating in BPO seminars.”

Sify which showcased its wireless broadband capability and had set-up 120 wireless hotspots making a Wi-Fi Zone at the pavilions in last year’s event [Bangalore IT.COM 2003] did not find any serious contenders for their services and hence decided not to participate this year.

TI India had been participating in Bangalore IT.com for quite some time until last year. Last year it did not participate because the IT.com clashed with the hardware summit organised by CII-MAIT and the government of Karnataka. This year also TI India has found its focus elsewhere. M Harish, business development manager, TI India, “We have prior commitments to address around this time of the year. We are busy preparing for the VLSI conference coming up in Kolkata in January 2005. As we are part of the VLSI chair and are driving this event we are totally commited to it.” At the same time TI India is also organising its developer conference in December 2004, where 900 of its engineers are expected to participate. “All our resources are concentrated towards these two events. Moreover we also feel that IT events such as Bangalore IT.com events are more beneficial for IT services companies as they are able to showcase their strengths and prowess. Being involved in the design and development of the VLSI space we feel that events related to VLSI are more important for us.”

India as a ITeS-BPO hub

Despite stiff competition from China and Philippines, India’s competitive advantages in the BPO sector are intact. The sector is planning to consolidate and maximise its potential by creating adequate infrastructure and retaining existing clients

Over the last few years, the information technology enabled services (ITeS) industry has undergone a rapid transformation. Continuing pressure on cost at a time of growing competitiveness is driving companies abroad to look at offshore outsourcing as a strategic alternative. In 2003-04, according to Nasscom estimates, the Indian ITeS-BPO industry is likely to grow by about 54 percent to reach $3.6 billion. In 2002-03 this industry grew by 59.1 percent to $2.3 billion. India has maintained its global competitiveness by providing a wining combination of cost-quality-scalability versus competing offshore destinations namely China and the Philippines.

Value proposition

Focus on margins and cost pressure: Outsourcing to India has helped companies achieve 40 to 50 percent cost savings, says Nasscom. Companies are also able to generate higher free cash flow due to reduced investments in infrastructure and telecom. Wage arbitrage has also led to increased cost savings.

Growing demand for high quality skilled workforce: India has a large pool of skilled and English-speaking manpower. This has placed India favourably over other offshore locations, since other than wage arbitrage, companies benefit from higher productivity.

Increasing focus on core competencies: The need to focus on core competencies to remain competitive is driving more companies to offshore outsourcing. Offshoring helps free up resources and enables managers to focus on their core business. It also allows accessing of new technologies and talent to help strengthen business offerings.

Quality driven: In an increasingly competitive economy, customers demand and expect the highest-level of quality. Most developed countries face high attrition rates as well as poor execution quality, since undergraduates and part-time employees manage most ITeS-BPO activities. Indian vendors are quality centric and have adopted several industry standards such as SEI-CIMM, ISO, TQM, six sigma quality and COPC (Customer Operations Performance Centre).

Indian ITeS-BPO market

The Indian ITeS-BPO industry caters to various business processes such as customer care, finance, HR, billing & payment services, administration and content development. For verticals such as engineering & design, knowledge processing and logistics, it offers higher value-added services. Customer care is the largest segment, while finance and administration are expected to grow significantly in the next few years.

Customer care: In 2002-03 customer care and support services witnessed significant growth reaching $810 million. The customer care services offerings include technical support and monitoring, queries pertaining to products and services, order status, accounts and service support.

Finance: The financial services vertical grew by 70 percent to cross $510 million mark. Indian ITeS-BPO companies offering financial products are moving up the value chain with services such as equity research and insurance claim processing. Typically financial services include billing, accounting transactions, general accounting, tax consulting and compliance, risk management, financial reporting and analysis and financial management.

HR services: The growth of HR services in India has been slow due to lack of vendor domain expertise. It [HR] includes benefits administration, education & training, recruitment & staffing, payroll services and records management. The growth of HR services globally represents a huge opportunity for Indian vendors.

Payment services: Revenues from payment services grew by 91 percent in 2002-03 to reach 210 million. The service includes credit/debit card service, cheque processing, EDI, customer interactions, customer case, database marketing, customer analysis and Web sales.

The digital lifestyle

ITeS BPO market

The future is increasingly turning digital and Bangalore IT.com is focussing on the key segments which will drive this growth. The event will also highlight the potential of the animation and gaming.

The Smart Handheld Devices (SHD) market is divided into pen-based and converged (data & voice) variants. This market grew by 108 percent in 2003 to reach 54,000 units. Analyst firm IDC is expecting similar growth in 2004. Sales of pen-based devices are being driven by enterprises for data collection purposes and the government is also purchasing handheld devices as it is using them for collecting data in far-flung areas. Pen-based SHD devices are primarily driven by applications such as data collection for enterprises. According to the technology research firm Gartner Dataquest, 70 percent of Indian SHD sales are accounted for by the enterprise segment and the remainder from the consumer segment. Globally, the trend is just the reverse.

Smart Phones (connected smart handheld devices(SHDs)) are also becoming popular these days in India. These devices sport features such as large colour screens, multimedia playback and wireless access. Some banks and insurance companies provide colour handhelds to managers for maintaining daily schedules and keeping track of meetings. Some enterprises are demanding connected SHDs and smartphones. In 2004, entry-level phones with organisers and features such as appointment reminders and calendars are going to be a major attraction for professionals. Smartphones are considered as a fashion statement by early adopters. However it has been observed that ‘real’ smartphones are yet to find traction in India and will be limited to as high networth individuals (HNIs).

With GPRS connectivity available from various service providers such as Hutch, corporate executives are hooking on to high end SHDs such as the Sony Ericsson P-900 and Palm’s Tungsten-T, Casio. Palm and Sony are the leading vendors in the space. Recently BlackBerry also ventured into the smart handheld device market and has associated itself with Airtel to target corporate users.

Digicam sales are buzzing

The digital camera (digicam) market in India doubled in 2003 to reach 75,600 units. Analysts are predicting that this market will grow further in 2004 due to the falling prices of entry-level digicams. Corporate buying was a big factor in this segment in 2003 and the market is shifting towards consumer purchases this year. Digicams are also becoming more affordable and prices are dropping 30 to 35 percent year-on-year. Today digicams start from Rs 6,200 for a 2 mega-pixel model. Printing costs are now comparable to those of film-based cameras. Getting prints from a film roll costs about Rs 315 (including the cost of film, washing and development) and the effective price per print is roughly Rs 8. In the case of a digicam that’s about Rs 10 (4x6 paper plus colour printing). The price of digital prints is expected to fall further in 2004. Of the projected sales of 1,63,000 units in 2004, 60 percent are expected to be 3-megapixel models. Some companies such as Kodak are offering digicams on monthly instalments at the entry-level.

The digital SLR market in India is also expected to do well. The digital SLR has features such as high-speed optical zoom (40X and above) that lets professionals optically zoom in seconds to capture moving pictures/objects from afar. (Professionals in sports and wildlife photography use this feature). This technology magnifies the picture two (2X Optical Zoom) or more times without distorting picture quality as with digital zoom.

Mobile phones

Mobile phones have topped fixed phones. According to Gartner the cellular penetration in India was 2.7 percent in 2003 and is expected to double to 5.2 percent by end-2004. According to a Telecom Regulatory Authority of India (TRAI) report, fixed line numbers including WLL fixed lines had crossed 42 million or 4.2 percent by end 2003. Mobiles are expected to number 65 million by end-2004.

Mobile phone consumption is primarily driven by network operators (GSM/CDMA) and not by manufacturers. This means that mobile penetration is dependent upon how operators drive their strategy to increase their customer base. Cellular providers such as Reliance have subsidised handsets and are bundling the CDMA connection at a lower price significantly reducing the entry barriers. BSNL’s entry into the market by providing connections across a wide geography and getting into areas where other carriers have not ventured has also helped capture untapped potential in these markets.

Cellular networks cost around Rs 5,000 per line to deploy. For wireline networks the cost of deployment is five times higher. In fixed networks, a significant portion of expenditure, around 50-65 percent of the cost of laying a fixed line, goes toward providing last mile access to customers. For increasing tele-density, carriers need to expand their networks across India. In this context, cellular is probably the optimal technology keeping in mind the ease of deployment and low cost.

It has also been observed that colour phones start as low as Rs 5,600. There has been significant demand for enhanced handsets with colour screens and embedded cameras from teens or those in their early twenties. This is a segment that is willing to experiment with new entertainment-driven applications such as ring tones and messaging. With the call centre market booming, a large number of youngsters are earning well. Since most of their basic needs are taken care of, whatever they earn is disposable. The growth in new connections will also come from the mass market consisting of subscribers with low disposable incomes. This segment wants basic phones.

Animation—sunrise sector

The animation market is getting its due attention and provides great opportunity for Indian companies to profit—on its two great advantages namely cost advantage and quality work. This sunrise sector has attracted a lot of global companies. In the Asia-Pacific, India has been considered an important outsourcing destination. Animators are aplenty; the heritage of traditional literature helps content-based partnerships. The cost of creating animation in India is among the lowest when compared to other destinations such as Canada, Korea, Taiwan and the Philippines.

India is fast emerging as an important destination for outsourcing assignments from global studios such as Walt Disney Pictures and Cartoon Network. Besides serving clients in the local market, Indian animation companies are gearing up to meet requirements by moving up the value chain.

A recent study on the animation industry by Nasscom shows that the global animation production market is set for major growth. The study, based on statistical projections from industry sources, Pixel Inc and Arthur Andersen forecasts that the global animation market will generate revenues worth $50-70 billion by 2005. According to the study, revenues are expected to touch $15 billion by 2008. Total animation production by Indian producers is expected to touch $1.5 billion by 2005.

Domestic opportunities

A key driving factor for animation is the Indian advertising industry. In the recent past, it pioneered the use of animation in India. The increasing use of animation in advertising to enhance creativity has given a major boost to the industry. Another area, where animation is required is gaming. Here both software and animation are required to a large extent. Once the constraints on bandwidth are resolved, animation will be used on the Internet too.

However, there are plenty of opportunities in the domestic market for animation such as feature film production, TV programmes, online education, CAD/CAE, and industry specific applications (architecture, medical, legal or insurance, etc.). Recognising the potential, a number of Indian software players are turning their attention to animation.

Animation—career options

Despite the availability of huge opportunities in the animation industry both in the domestic and overseas markets (especially from the US, Europe, and Canada), the main concern is with regard to the availability of skilled animators. Currently, India has only 10,000 skilled animators. To meet the global demand, the country requires 30,000 animators by 2005 and 3 lakh by 2008, according to a Nasscom report. Although the animation industry in India is in its infancy it offers considerable scope for career growth.

“After IT, animation is going to be the next big thing in India. But the challenges for this industry is that people keep animation as a last career option and jobs in animation are considered as socially unacceptable, which is not the case in other countries. Both the government and the industry need to work together and take steps to make the sector more popular,” says K Chandrashekar, head of Visual Computing Labs, a Tata Elxsi arm.

WHO’S IN, WHO’S OUT
Company	In	Out	Reasons for participating/opting out
IBM			-
AMD	4		AMD will be showcasing its leadership in 64-bit computing; the emphasis will be on Opteron and Athlon
TCS			TCS is sponsoring the Rural IT quiz
Ramco			-
Iomega			Not interested in this year’s IT.com
LG Electronics India			LG Electronics India is now looking at 'more serious focused activities' such as participating in BPO seminars, which offers better investment opportunities.
Sify			Bangalore IT.com has lost its charm.
Texas Instruments			TI India is involved in more focused events. This year it is organising its developer conference in December 2004 followed by a VLSI conference in Kolkata in January 2005. All its resources are concentrated on these two events.
Infosys			-
WeP			Providing printing service at Bangalore IT.com
Transworks			To create an awareness about the BPO sector and to built a brand for itself
Animaster			To showcase career opportunities in the animation industry
Toons Skools			To create awareness in the animation industry and to attract talent
Source: Participants

Animation and games at IT.Com

With a view to highlight the potential in the animation and games sectors, this year’s IT.Com is focussing on these two segments. A separate pavilion has been allocated at the event to create awareness about animation. “The animation companies in the country have not been well projected. Hence, we are packaging and projecting them well so that outsourcing in these areas will increase,” says B.V. Naidu, director of STPI, Bangalore. The pavilion will comprise around nine participants including, Animaster, jadooWorks, Toons Skool and Animation Training School. “Animation is something which is required in every walk of life. It plays a crucial role across segments such as education and various other industries. We want to create awareness among people at the event. We are targeting both B2B and B2C consumers,” says Nishith K Bhandarkar, head of marketing, Toonskool Advanced Animation Academics. Toon Skool aims to create networking with colleges and franchises to offer educational courses in animation. Animaster plans to use IT.Com to create more awareness about the company and the animation segment. “We are targeting people who see animation as a career opportunity,” says Reshma Kachroo in-charge of brand building, Animaster.

ITeS-BPO drivers
$ costs per full time employee		India as % of the US		Philippines as % of the US
	US	India	Costs	Philippines	Costs
Personnel	42,927	6,179	14 %	7,793	19 %
G&A expenses	8,571	1,000	12 %	1,200	14 %
Telecom	1,500	2,328	55 %	1,862	124 %
Property rentals	2,600	847	33 %	762	29 %
Depreciation	3,000	1,500	50 %	1,500	50 %
Total expenses		58,598	20 %	13,117	22 %
Source: Industry & ML research

Animation: what needs to be done

While India appears well positioned to play an important role in the global animation production market, a Nasscom study suggests that much remains to be done. Its recommendations include Increase the level of interest of audiences in the domestic market in animation. Enter into co-production tie-ups with countries such as Canada to develop animation content. Increase the range of applications for animation such as documentaries, etc. Develop ‘national brand identification’ in animation. Strengthen the interface between local studios and producers. Have a representation in major international animation markets and festivals. Domestic broadcasters must create an assured market for locally produced original animation productions. Provide relevant funding and infrastructure for animation product development. Set up animation parks on the lines of STPs. Take a series of strategic initiatives to build a body of manpower talent to fuel the growth of this market.