S E P T  E M B  E R     2  0 0 6 

Excitement and thrill filled the air as the winners of the 3rd P@SHA ICT Awards were announced on the evening of September 14, 2006. In addition to the usual categories, there were 4 additional categories – Best IT/ITES Employer, Best in Brand Development, Best Revenue Growth and ICT for Special Needs. Si3 and Netsol Technologies took away more than one award as did Etilize Pakistan. Winning companies were based in Karachi, Lahore and Islamabad. The tertiary student category was also well contested. This year these awards were held in Karachi and Pakistan Software Export Board was the platinum sponsor for event.

PASHA is leading IT industry association of software houses and organizes ICT awards on yearly basis. The objective of the P@SHA ICT Awards is to provide recognition to software and service applications that have been developed in Pakistan. It is meant to acknowledge creativity, innovation and excellence in the Pakistan Information and Communication Technologies sector. 

Both the games are also translated in English with the name of Logger and Storm Spy respectively and are sold successfully by the International Counterpart of Micromiles, Altal8Limited, UK. These games are ranked in tier 1 by international game ranking bodies. A game is usually rated on the basis of three factors; game play, graphics and sound. Game Play is the whole script or story on which the game is based and is the key factor in evaluating any game. Loggers (Sarak Paar) and Storm Spy (Toofan) scored 8 and 7 in the game play respectively.

Micromiles is one of very few Pakistani IT companies that has recently been accepted as a member of IGDA, International Game Development Animation Society. IGDA is a renowned international body for game development with its offices around the globe. Companies like Micromiles are a matter of pride for Pakistan IT industry.
....

For most of us, failure represents our nightmares. What will happen when there is no money in the bank account? Who will cover the bills? When will they cut-off electricity, phone, natural gas and water? How bad is that eviction notice?

Starting with this list of questions Jawwad weaves a tale that takes readers from New York to California in search of the deepest fear of a new entrepreneur - What if I fail? I

A touching confession that alternates between the bittersweet reality of a dying venture and the promise of multi million dollar valuations, the Blue Screen of Death is a journey of self discovery that every entrepreneur can relate to. It is a book of questions and answers that will force us to re-examine our personal prejudices against failure.
(Inspired by Cory Doctorow , the Blue Screen of Death is now available for Free Download under the Creative Common License)

About Jawwad :-
Jawwad is the Chief Executive and Actuary at Alchemy Associates, a fast growing risk management and financial advisory firm.  He is a Fellow Society of Actuaries, an MBA from Columbia Business School (New York City) and a computer science graduate (FAST ICS).  During the last thirteen years, he has worked as a consultant in North America, Pakistan and the United Kingdom with a number of blue chip clients including Hartford Life, Aegon, Goldman Sachs, ING, Manu Life, Safeco, Merrill Lynch, Met Life, Sun America, Nationwide, Sumitomo Mitsui Bank, AllState, Fidelity Investments, Transamerica, Skandia, GE Financial Assurance, AXA Equitable, Washington Mutual Bank, Riyad Bank and Dubai Islamic Bank.  His domestic client list includes State Bank of Pakistan, State Life Insurance Corporation of Pakistan, National Bank of Pakistan, Muslim Commercial Bank, Pakistan Kuwait Investments, Union Bank, Prime Bank, KASB Bank, Shell Pakistan, JSIBL and others.

LAHORE– September 13, 2006: Najeeb U. Ghauri, Chairman NetSol Technologies, Inc. (NASDAQ:NTWK), a U.S.-based multinational provider of enterprise software and services for equipment financing, rang The NASDAQ Stock Market Closing Bell in New York on September 13, 2006 along with John McCue, the company’s CEO of U.S. operations. 

It is worth noting that Chairman NetSol is second Pakistani having the opportunity to ring the closing bell at NASDAQ after Prime Minister Shaukat Aziz during his visit to the US in January 2006. 

Founded in 1997 by Najeeb U. Ghauri, Naeem Ghauri, NetSol Technologies Chief Executive Officer and Salim Ghauri, NetSol’s President, NetSol has grown to over 500 employees with offices in the U.S., Europe, China, Australia, Canada and Pakistan. 

Nextech Soft is one of the largest “Computer Based Training (CBT) software development house in Pakistan, serving Defense and Private organizations throughout the Country.

Nextech Soft is working for a highly distinguished clientele on the basis of CBT Software, not only to train the maintenance personnel but also to train the operators and supervisors at different levels to fulfill the complete range of training needs. Nextech Soft has developed: 

All training modules are developed using state of the art CAD, 3D Max, Mechanical Desktop, Solid Edge and other multimedia technologies. These products have the capability of cross section views, customized zoom levels, color differentiations as well as virtually assembling and dissembling of products. As a matter of pride, the CBT’s developed are highly appreciated by the original manufacturers and importers of these products in China. The manufactures actually provide only 2 D engineering diagrams, which were hard to understand. But these interactive 3D CBT’s enhance the learning curves of all the engineering audience.

Not only the skill set and the technology is unique feature for Pakistani IT companies like these, it also demonstrates the cost competitiveness of the sector. Similar CBT’s if developed in any other country of world would cost 4- 5 times higher than being developed in Pakistan.
....

This project has been built using IBM’s Portal, Middleware and Content Management Technologies.....

“We have been working hard through the years for our success in the market. With such a skilled and hardworking team, we will be winning many more awards in future. Most of all, I am glad to represent Pakistan in the conference and win an award among many rapidly growing and technologically advanced countries of Asia Pacific”, said the President and CEO of Techaccess Pakistan. Techaccess Pakistan was ranked first among all the partners in SAGE region in support renewals during 2004-05. 

Moreover, Techaccess Pakistan was awarded by Sun Microsystems for generating the largest revenues in MENA Region during 2004-05. .

The call centre space of Pakistan just become more attractive with entry of world’s leading contact centre and predictive dialer solution by Stratasoft, a TRG subsidiary. This solution is being offered in partnership with local technology partner, UBM.  

International call centers can host their dialer solution in Houston NOC. This NOC is owned and operated by MCI/Verizon and is a hardened data centre offering E911 for city of Houston as well as NASA circuits. Several Indian call centers are hosting their dialers with Stratasoft because large US/UK/Canada based companies are more willing to give business if their customer data resides in Houston. 

Domestic call centers now have a choice of having world class contact centre solution available with local expertise and domestic rates. 

Since 1995, Stratasoft, Inc. has been a premier global provider of essential Call Center Software solutions with over 28,000 seats worldwide in 25 countries. Stratasoft offers a comprehensive product suite including a Predictive Dialer, Inbound ACD, IP Dialers, Remote/Home Agents, Automatic Dialer, Quality Monitoring, Advanced IVR, VoIP Call Center and Virtual Call Center Solutions. 

United Business Machines (UBM) has been a business communication provider for over 28 years, and services clients nationwide. UBM in partnership with Stratasoft offers it’s clients a domestic or international call centre setup with world’s leading contact centre software with local support and prices.

Stratasoft itself is a subsidiary of The Resource Group (TRG). TRG is a multinational KSE listed company, providing business support services to high profile Fortune 500 companies in North America and Europe. With its ongoing growth and new acquisitions, TRG has established itself as the largest offshore – controlled call center company in the world. 
....

Bank Alfalah, the nation’s highly successful midsize bank has recently expanded its customer support contact center by setting up another location in Lahore to maintain its well known quality of customer services and support. 

This model of operating customer services known as Integrated Multi-node Contact Center and is the latest trend in the market. The new setup has been equipped with the latest state of the art Intel CTI contact center technology installed and supported by ZRG International; Pakistan’s leader in modern contact center solutions. 

Bank Alfalah customer service contact center is considered to be among the best customer services contact centers in the country. With the second location, the Bank intends to maintain its high quality customer care for its fast growing customer base. 

ZRG has completed the job well before time and has enabled transparent call transfers between two sites, load balancing and sharing, overflow traffic handling and coverage during disaster recovery.

Intel CTI based contact center solutions offered by ZRG are very popular among IT savvy professionals and organizations that understand the technology needs in a contact center. The cost effective open standards Intel contact center technology provides benefits such as multiple contact channel communication, support for VoIP, hardware independence and the freedom of total customization.

When a cyber crime is reported in India, the first reflex of the police is to impound the computer in question. The motherboard is treated as hard evidence and is dumped at police stations just like motor vehicles or murder weapons seized after crimes. Nothing wrong with the drill per se except that a CPU has very limited value in cases of cyber security breach. Rather than pieces of hardware, the real clues come from data footprints on the World Wide Web, for which neither police nor prosecutors seem prepared. India has a robust legal system and independent judiciary but it is a long way from establishing the rule of law on the Internet.

Very few FIRs are registered and hardly any figures of financial losses are disclosed to the media. But a significant drop in the industry’s growth rate is surely due to security reasons. India’s unsafe security environment could be costing its BPO and ITES industry more than $500 million annually by conservative estimates. According to Forrester Research, the Indian industry is losing up to 30 per cent of its growth rate due to reasons like data leakage and unsafe ethos.

The safety of private customer data is central to offshore outsourcing industry. Customer credibility and faith are built over time but leaving nothing to chance, the bigger foreign clients want to see high levels of compliance with global security certifications such as BS 7799, SAS 70 or ISO 17799. They also want a strong legal framework because with increasing threats and vulnerabilities, the benchmarks for control requirements are constantly moving up.  

The issue of data security is equally crucial for India’s growing e-commerce. Last year, 33 per cent of airline tickets were bought online. Banks also reported unprecedented rise in on-line trade of mutual funds, insurance and depository services.I

According to Euromonitor, the number of Indians using debit cards grew from 0.25 million in 1999 to 28 million in 2004. Today the total number of cards in circulation is over 50 million with Rs 1,000 billion in transaction value. Obviously Indian customers are getting addicted to online spending with very little idea of issues of personal data security.

A study by Carnegie Mellon University in 2004 found that when it comes to perceptions of individual identities, the Indians are largely stuck in the physical world. For example, the concept of privacy to most Indians pertains to physical territories such as personal or living spaces. To Americans, in contrast, privacy means above all protection of their information and identity.

This means that India will have to evolve, through trial and error, its own legal and security culture for the virtual world.

Source: The Asian Age September 17,2006 edition..............

The biggest boost to Pakistan's efforts to break into the global IT marketplace came on September 28, when India's finance ministry announced an income tax of more than 36 percent on foreign firms with software, R&D and customer service operations in India. This tax proposal had been in the works since the beginning of the year and is expected to prompt U.S. firms to follow GE's lead in selling off assets in India.

Why is Pakistan the hot new offshore information technology (IT) destination? This is because of a combination of favorable economic circumstances. Just when many Western managers are finally becoming comfortable with the idea of working closely with Indian IT firms, along comes Pakistan.

Why Care? 
Why should the average Western IT professional, businessperson or IT consumer care? Because we are all going to be buying and using more IT outputs from Pakistan. To be a smarter buyer and user of IT products calls for a familiarity with Pakistan, even for those who do not initially intend to do business with Pakistani firms. We are all part of a global economy and Pakistan is an increasingly important part of that global economy.

The issues that Pakistan faces as it gears up for the global high-tech marketplace are many of the same issues that both advanced and developing economies face elsewhere in the world. Pakistan is making no effort to gloss over its challenges, which makes those challenges easier to address.

India Helps Pakistan
Any Western business manager who initiated or approved the establishment of an IT production or R&D subsidiary in India in 2004 could find that decision to be a career-ending move unless they have built in financial reserves to accommodate both the tax scheme of September 28 and upcoming taxes still on the drawing board.

A proposal is under consideration in New Delhi to tax activities conducted over international private leased connections (IPLCs) that carry most of India's voice and data traffic to and from the outside world. There is also a proposal to replace state-to-state customs duties with a national value added tax. Both those tax proposals could be combined into a single scheme.

U.S. IT brokerage firms, their U.S. clients and domestic Indian IT operations will be largely untouched by the September 28 tax scheme. But the traditional offshore migration path of outsourcing to an offshore location first -- before setting up captive operations there -- has been disrupted in India until economic reforms reduce the role of the Indian government in the economy and consequently reduce that nation's revenue requirements.

For Westerners with long-standing personal ties to India, that country's September 28 tax scheme could have both personal and financial consequences. For new Indian workers who hoped for a position with a Western firm based in India, that country's revenue policy will alter careers, lifestyles and futures.

Pakistan's Advantages:-
Pakistan is the primary beneficiary of India's decision to tax foreign firms with captive IT operations in India. No other economy can match Pakistan's labor pool of educated English-speaking workers. No other economy can match Pakistan's scalability, reliability and low-cost environment.

Pakistan offers five advantages over India:

1. Western experience:

Executives at IT firms in Pakistan often have worked and gone to school in the U.S., which is Pakistan's largest export market. Indian IT firms whose managers have worked in the West are generally more expensive than similarly positioned Indian firms, without always providing noticeable differences in program implementation capabilities. The willingness of Pakistanis to return home from the West stands in marked contrast to most Indians who arrive for school or work in the West and never look back.

2. Professionalism and integrity:

The personal integrity of Pakistani managers is easy to identify and appreciate, especially by Westerners with business experience elsewhere in the region. However, the relatively open and trusting nature of Pakistanis has made them easy prey for Indian business brokers who have managed to cheat several Pakistani IT firms by offering to provide them with outsourcing contracts in exchange for up-front fees. The Pakistanis assumed that these Indians were open minded and charitable for coming to help less experienced firms in Pakistan gain access to international contracts, until the Indians took their money and disappeared.

3. Higher labor availability:

Fewer holidays in Pakistan means less slippage in staff availability compared to India. IT firms in India are advised to hire a diverse workforce so that members of one community can enjoy important festivals while members of other communities cover the phones and keep production going.

4. Good accents:

Pakistan's official language is English. Only Kolkata (formerly Calcutta) and the Punjabi areas of India can come close to competing with accents in Pakistan, where many families speak English at home and where accent neutralization for non-native speakers of English is substantially easier than in India. Language skills and accents provide Pakistan with a major advantage over all other Asian outsourcing destinations.

5. Low cost talent pool:

India's top-tier labor force for IT work has been stretched thin in many areas, especially Bangalore, where escalating wage rates, turnover and higher outsourcing prices are reaching critical mass at the same time that the urban infrastructure has exceeded its carrying capacity. Annual turnover rates reported for most merchant call center facilities in India at the beginning of November are approaching 100 percent. High turnover rates are causing a shift to second tier Indian cities and to Kolkata. Escalating turnover rates are one of the Indian outsourcing industry's dirty secrets. In comparison, Pakistan's top-tier talent pool is largely untapped and turnover rates are less than 20 percent.

About KDDI Corporation
KDDI is a diversified telecommunication operator formed by the merger of DDI, KDD and IDO in 2000, and is the only domestic company that provides both mobile communication service and broadband service. The number of subscribers to the mobile phone services are over 25 million, and fixed-line subscribers (MyLine) are approximately 7.2 million.

The KDDI group companies have turnover of 3,060 billion yen.

At KDDI, aggressive improvement of communications environment in preparation for the coming ubiquitous network society is underway and KDDI is aiming to become a "ubiquitous solution company" which provides high value-added solutions.

About BT
BT is one of the world's leading providers of communications solutions and services operating in 170 countries. Its principal activities include networked IT services, local, national and international telecommunications services, and higher-value broadband and internet products and services. BT consists principally of four lines of business: BT Global Services, Openreach, BT Retail and BT Wholesale.

In the year ended 31 March 2006, BT Group's revenue was £19,514 million with profit before taxation of £2,040 million.British Telecommunications plc (BT) is a wholly-owned subsidiary of BT Group and encompasses virtually all businesses and assets of the BT Group. BT Group plc is listed on stock exchanges in London and New York.

Enterprise applications vendor SAP and networking company Cisco Systems are touting their new marketing alliance on governance, risk and compliance (GRC) business processes as a major milestone in their 18-month-old partnership.

"This puts together two giants in their fields," Shai Agassi, President of SAP’s product and technology group, said during a Wednesday conference call. "It allows us to look at the GRC problem from top down with [SAP’s] processes and information, and from the bottom up with [Cisco’s] network and infrastructure, and then connect up the dots."

The two companies firmly cemented their budding friendship in May 2005 when Cisco signed up to license SAP’s service-oriented architecture (SOA) platform known as Enterprise Services Architecture (ESA).

The move brings together SAP’s upcoming trio of new GRC applications with Cisco’s service-oriented network architecture (SONA), which debuted in December. SONA aims to link together all the IT resources in an enterprise’s network including servers and storage, building more intelligence into the network through the use of services that operate across all the resources.

The new SAP products are GRC Repository and GRC Process Control, due out on Nov. 30, and GRC Risk Management, expected to ship sometime in December. Cisco hopes to come out with tools and adapters to make it easier for customers to use the GRC/SONA combination in the same time frame, said Bill Ruh, vice president of advanced services at Cisco.

“The relationship is initially focused on SAP and Cisco working with customers and partners in the United States and Canada, but the vendors plans to expand the deal to include other geographies”, Merritt said. When SAP’s products appear later this year, they will be available globally. The vendor has yet to release pricing for the new GRC applications, and although it’s offering them as separate products, Merritt expects them mostly to be bundled with existing GRC applications such as Compliance Calibrator and Firefighter.

SAP is planning other third-party vendor partnership announcements around its GRC offerings, but its executives Wednesday kept emphasizing the "unique" nature of the tie-up with Cisco.

The companies allegedly distributed either counterfeit software or software components or participated in hard-disk loading. Hard-disk loading is the installation of pirated software on computers sold to unsuspecting businesses or consumers.

"Microsoft is determined to protect its intellectual property, while also helping protect consumers and honest resellers from the deceptive and dangerous practices of counterfeiting and hard-disk loading," said Microsoft senior attorney Mary Jo Schrade in a statement. As a part of the Genuine Software Initiative, which Microsoft set up in March, the company announced research findings from a forensic analysis of counterfeit versions of Microsoft Windows XP acquired in 17 countries around the world.

The results, from a company that loses profit when people pirate its software, suggest that using pirated software is bad for your computer. According to Microsoft, of the 348 loaded disks studied, 34 percent could not be installed. Microsoft also said 43 percent of the pirated software includes additional binary code that might result in denial-of-service attacks, bypass of password protection and application memory corruption. 

....

That smells like an opportunity to IBM and Sun Microsystems, which last week introduced systems to help businesses protect sensitive customer data like credit card and Social Security numbers, which most companies store on magnetic tapes. Both vendors unveiled tape drives that can encrypt data as it's being recorded onto tape, an approach that's the most direct method yet for protecting it from prying eyes.

IBM has embedded new technology into its existing TS1120, so the storage system can encrypt data while recording it, making the data inaccessible to thieves or others who wrongfully come into possession of the tapes. "It's useless to whoever gets it," says Andy Monshaw, general manager of IBM's system storage group.

The tape drive on the TS1120 can encrypt data on the fly without compromising speed, using the same public encryption key methods employed by IBM's powerful zSeries mainframe computers. It supports the Encryption Key Manager for Java, which can help businesses generate and transmit encryption keys over networks. "The market doesn't want encryption you can only use yourself," Monshaw says.

Not to be outdone, Sun last week introduced tape-level encryption for its StorageTek T10000 systems. The Crypto-Ready drive for the T10000 supports multiple operating systems, including Solaris, Windows, and IBM's z/OS mainframe system. In addition to the T10000, Sun plans to add the encryption capability to its T9840 tape drive system by mid-2007. While encryption adds about 20% to the system price, most businesses are willing to pay for the added security, says Dave Kenyon, Sun's Director of Product Management, Data Protection and Archiving.

Kenyon expects government and financial customers will be the first to adopt the new technology. "It has been a hot topic in the past year with some very well-documented cases of agencies or businesses losing data on tape," Kenyon says

Oracle President Charles Phillips boasted in a statement that the company is "rapidly taking applications market share from SAP." "SAP appears to be rethinking their strategy as they lose application market share to Oracle and confront the difficulties of moving their application software to a modern Service Oriented Architecture (SOA)," CEO Larry Ellison said in a statement. "They've just announced that they are delaying the next version of SAP applications until 2010. That's a full two years behind Oracle's scheduled delivery of our SOA Fusion applications. And now Kagermann is talking about an acquisition strategy to augment SAP's slowing organic growth. These are major changes in direction for SAP." 

Oracle's results provided an upbeat ending to a rough day on Wall Street. Wholesale inflation was tamer than expected, but weak housing numbers and a warning from Yahoo raised fears of an economic slowdown and a coup in Thailand had traders worrying about a 1997-1998-style currency crisis.

Google is experimenting with the open-source version of Sun's Solaris operating system as a possible long-term prelude to replacing its massive global network of Linux servers, according to sources.

With dozens of data centers worldwide estimated to house hundreds of thousands of Intel servers supporting its flagship search engine, a Google move to OpenSolaris would be another of several recent votes of confidence for the platform.

Propelled by the release of Solaris' source code 15 months ago as well as new Advanced Micro Devices-based servers from Sun that run it, the nearly 2-decade-old operating system is experiencing something of a midlife resurgence. More than 5 million users have registered to use Solaris 10 since its release in January 2005, a figure that includes those paying Sun for support and those using it for free.

"Google, eBay, Yahoo -- pick your favorite," said Sun CIO Robert Worrall, whose internal IT team runs Solaris Express throughout Sun and has advised many customers on its deployment. Worrall confirmed that Google already runs a "significant amount" of Solaris in its data centers and is one of a number of customers "excited about the possibility" of moving more Linux servers to AMD Opteron servers from Sun running some version of Solaris

Google runs a stripped-down version of Red Hat Linux specially modified by its engineers. But another source, a Solaris systems administrator who recently interviewed for a job at Google, said he was told the company plans to create and test its own modified version of OpenSolaris.

"I am 100% certain that there are literally dozens of people horsing around with OpenSolaris inside Google," said Stephen Arnold, a technology consultant and author of The Google Legacy. Moving to OpenSolaris, he said, would be a natural move for Google, with its large number of former Sun employees and its never-ending drive to push the performance of its data centers to the hilt. But Arnold said he doubts that Google, which finished rolling out its highly-secret data centers in 2004, is deploying OpenSolaris widely yet. "Will it quickly replace Linux anytime soon? No," he said. 

To truly protect stored data, you've got to go beyond encryption. If two tape devices, the IBM TS1120 and the Sun StorageTek T10000, are compatible with a datacenter and a company’s budget, then the capability to encrypt data before sending a reel outside the company exists.

Tape encryption is secure since it doesn’t risk making headlines if one of your backup tapes falls off the delivery truck or is stolen in transit, but sensitive data can still trickle outside the company by other paths. Think of a laptop with a copy of the customer database, or a CD -- or a DVD, a USB key, a removable drive, an external drive. They all have similar potential to become an embarrassing and damaging piece of news if lost or misplaced.

According to startup BitArmor, its Security Suite can protect company data anywhere at anytime, including those uncontrollable mobile devices and personal storage systems. BitArmor Security Suite’s features list includes in-flight encryption; data protection regardless of the media used, and centralized control of security and retention policies. If that sounds impressive, there’s more: According to BitArmor Vice President of Marketing Mark Buczynski, the suite can also seamlessly maintain an audit log of changes affecting data security -- an auditor’s nirvana -- and remotely zap or physically delete expired data.

These last two features solve two important aspects of handling data: Making data that is detached from the network -- on a USB key, for example -- not accessible, and recovering the capacity used by old information.

BitArmor doesn’t rely on Microsoft Active Directory (“We can offer better security,” Buczynski says) and doesn’t use PKI (“For us, PKI is a four-letter word,” he says). Instead, it deploys a proprietary symmetric key processing system that, Buczynski suggests, is easier to manage and offers similar -- if not better -- authentication.

Trend # 2:-The Rush to Scale and Specialize
Falling unit revenues driven by intensifying competition and the rising share of offshoring are responsible for two opposing yet complementary trends towards scale and specialization. On the one hand, an increasing number of players will try to differentiate themselves by way of specialized services and domain knowledge, rather than scale.

At the other end of the spectrum, large, multi-service providers will look to aggressively add new verticals, service offerings and geographies. Moving towards the classic "one-stop" strategy, multi-service vendors believe that scale, coupled with diversification across geography, offerings and verticals will enable large, complex, multi-service contracts. At the same time, in order to compete with niche providers, they will seek to build specialization and scale in each chosen offering.

Trend# 3:-Consolidation amidst Fragmentation
In 2006, the BPO industry will be simultaneously pulled in two opposing directions: towards consolidation and fragmentation.

Acquisition activity reached new highs in 2005, and 2006 is expected to be much busier. However, apart from the news-making mega-deals, we will see a far greater number of small deals. This will be driven by acquisitions in the knowledge services space, as acquirers will find it worthwhile to do small deals to acquire specialized knowledge, capabilities and customers. Given the relatively small size of such "specialists", deal size will be small.

On the flip side, the hype around offshoring is attracting hordes of new entrants. Compelled by the exciting new opportunities, new firms, especially IT service providers and consultants will increasingly muscle into the BPO game.

Overall, during 2006, the forces of fragmentation will be stronger than those of consolidation, with even more players by 2007. The bad news for all these vendors is that the plethora of acquisition targets will lower valuations. Particularly so for the small, undifferentiated, multi-service outfits without the wherewithal or cash to scale. Leave alone valuations, there will be few backers or buyers at any price.

Trend# 4:-Offshoring Gains More Momentum
Offshoring will continue its relentless march, as both buyers and their vendors pursue global sourcing and labor arbitrage benefits. By 2007, almost every major BPO contract will include an offshore component. This incessant race to deliver lower costs via offshoring, in turn will accelerate the trend towards global delivery networks.

The ambitious capacity accretion plans of major US players such as Accenture, Deloitte, IBM, Sutherland and the like will pan out in 2006, when each of them will add a few thousand people offshore. More interestingly, during 2006 we expect the second wave - with medium-sized US and European owned BPOs significantly increasing their investments/capacity in India, China, Philippines and other offshore locations.

Trend#5:-Captives will become Integral to the Mix

As offshoring goes mainstream at large multinational corporations, 2006 will see a spurt in offshore investments by large corporations in fully owned captive centers. This will be guided by two factors. The first is the increasing sensitivity towards IPR, data security and confidentiality; all of which make captives the simpler choice. Secondly, many large companies that have been testing the offshore waters and are now looking to expand; will find captive operations more viable beyond a certain critical mass.

Interestingly, the evolving model of choice will not be pure captive or third-party, but a complementary mix depending on individual needs and risk perceptions. In such a "co-existence" model, in-house best practices will flow to vendors, even as cost efficiency metrics/learnings will flow from third-party vendors to captives. 

Trend# 6:- Investors will Loosen their Pockets 

Acquisition activity reached new highs in 2005, and 2006 is expected to be much busier. However, apart from the news-making mega-deals, we will see a far greater number of small deals. This will be driven by acquisitions in the knowledge services space, as acquirers will find it worthwhile to do small deals to acquire specialized knowledge, capabilities and customers. Given the relatively small size of such "specialists", deal size will be small.

On the flip side, the hype around offshoring is attracting hordes of new entrants. Compelled by the exciting new opportunities, new firms, especially IT service providers and consultants will increasingly muscle into the BPO game.

Overall, during 2006, the forces of fragmentation will be stronger than those of consolidation, with even more players by 2007. The bad news for all these vendors is that the plethora of acquisition targets will lower valuations. Particularly so for the small, undifferentiated, multi-service outfits without the wherewithal or cash to scale. Leave alone valuations, there will be few backers or buyers at any price.

...
the DDWP

Software continues to be largest investment focus
According to PricewaterhouseCoopers and the National Venture Capital Association, the software sector continues to lead all other sectors, even biotech, in terms of venture capital investment. In 2Q06, VCs invested $1.26B in 231 deals, compared with more than $1.31B in 215 deals in 1Q06 and $1.32B in 240 deals in 2Q05.

And this money is not funding pipedreams in garages. Seed and startup investment accounted for about $46M, and early-stage investment tallied about $128M. By contrast, expansion-stage investments were a whopping $579M, and later-stage investments were $511M in the quarter.

Content management, CRM, and HCM among the winners
Security software investment far outpaced other segments at $222M, or about 18% of total investment, followed by wireless at $97M, content management at $94M, human capital management (HCM) at $87M, CRM at $87M, and healthcare at $84M. Systems management software came in next on the list at $61M, followed by product lifecycle management (PLM) investment at $50M. Those security companies receiving the most money focus on network security solutions, defense, and risk management.

A focus on advances in mobile technology, such as the development of mobile communications software and mobile device software management solutions, dominated the wireless space. Search and content aggregation appear the focus of much of the investment in content management firms, while safeguarding the pharmaceutical industry stood out among healthcare investments. In the PLM space, many vendors are developing electronic design automation (EDA) software.

Strong HCM and CRM growth
AMR Research forecasts that the HCM applications market will enjoy a five-year CAGR of 10% through 2010. The new appreciation for the contributions that individual employees make to business success is driving HCM sales. CRM applications market will enjoy a five-year CAGR of 8% through 2010. Software as a service (SaaS) continues to drive growth in the market, and we project a CAGR of 24% for the next five years as the number of subscribers continues to increase. PLM applications market will enjoy a five-year CAGR of 9% through 2010. Market-driven innovation will increase as a priority for manufacturers as they improve processes that let them respond to new market opportunities with the right products.

Web services have replaced security at the top of the list of applications and technologies of importance to IT executives, according to research from the Society for Information Management

Reflecting the positive mood, security technologies fell to third in the list, behind Web services and business intelligence. The society said the interest in Web services shows increasing emphasis on technologies that allow more flexibility, such as virtualization, service-oriented architectures (SOA) and thin clients. Web services didn't even reach the top six in last year's survey.

Meanwhile, security fell from its place at the top of the list for the past two years. That shows companies believe they have made significant progress in protecting their systems from attack, the society said.

Members' budgets have stayed steady or grown over the past year, and for next year 84.6 percent expect budgets to increase. Seventy percent expected IT head count to stay the same or increase next year, and 64 percent said they had a less than 5 percent staff turnover, both significant improvements over last year's survey.

Budgets may be rising, but the report's author, Jerry Luftman of the Stevens Institute of Technology, said he didn't see any budget planning for Windows Vista upgrades next year. Software as a percentage of IT budgets remained flat, while budgets for hardware and networking were rising for 2007, Luftman said.

The Global State of Information Security study, conducted in partnership with CIO magazine, CSO magazine and PricewaterhouseCoopers, finds that while companies are increasing their security budgets, a lack of resources is still a big factor impeding effective security. According to more than 8,200 IT security professionals from 62 countries, companies experienced an average of 824 security incidents or events over the past 12 months with the majority of these events being the result of malicious code or unauthorized entry to information assets.

The number of companies now employing a Chief Security Officer or Chief Information Security Officer increased from last year and a higher percent of senior security executives are now reporting to the CEO or board. Over the past year, companies developed their information security strategies and are now focusing on the processes and technologies to support the overall strategy, including user and asset monitoring and security audits.

Organizations are making headway towards creating a security intelligence function by centralizing security information management and investing in tools and processes to analyze security data. Going forward, security executives must successfully articulate the need for security investment as a strategic business initiative rather than a tactical reaction to security crises.

Conducted by credit information services company DP Information Group between May and July this year, the survey targeted some 10,000 SMB’s across various industries in the island-state.

According to Chan Yew Nah, managing director of DP Information Group, 85 percent of very small businesses--particularly those with fewer than 25 employees--feel that they have not benefited from the use of technology.

Some 53 percent of respondents that indicated they have profited from the use of technology cited improvements in productivity as a benefit. This group of respondents also noted an increase in cost efficiency and their company's ability to meet customer expectations, as two other main benefits of IT.

Another significant finding, noted Chan, is that six in 10 of SMBs surveyed said they were unsure of how to strengthen their technological capabilities. When asked to name critical factors in strengthening their IT capabilities, 62 percent said they did not know.

According to Chan, the statistic showed that while the younger workforce may be IT-savvy, some SMBs may "need more help" to understand how IT can play a bigger role in their business. One way to resolve this could be to set up IT academies to showcase IT successes of SMBs, so others can learn from their peers and be encouraged to adopt technology, he suggested.

Like many earlier initiatives that helped to spearhead the growth of the Indian IT Services and ITES-BPO industries, NASSCOM, the premier association of Indian IT Services and ITES-BPO companies approached IDC India with a fresh brief. The challenge was to design and conduct a study to gauge the current size and future potential and direction of the domestic IT Services and ITES-BPO markets.

 The findings of the study more than justified the excitement of the IDC India research team, when viewed in the context of a whole new growth opportunity emerging in the domestic space for the Indian IT Services and ITES-BPO players. 

The key learning from this study has undoubtedly been unearthing the current scale and the future scope of the domestic IT Services and the domestic ITES-BPO sectors, slated to touch INR 15,604 crores and INR 6,608 crores, respectively by end of 2006.

However, the Indian domestic IT Services market or the share of spending which goes to make up the revenues of India's domestic IT service providers, is estimated to be only 45% of the total IT Services spending of Indian businesses. The total spending on IT Services by businesses consists of payouts to a service provider plus salary and training costs of inhouse IT staff and the associated overheads.

 For IT service providers this represents a great challenge and as well as an opportunity to develop and showcase their skills to domestic customers, and remove the commonly held perception that IT Services vendors have a lack of focus on domestic markets or that there is little return from outsourcing IT operations.

By eradicating the gap between real versus perceived value of IT outsourcing, vendors can play a critical role in helping the CIO showcase IT investments as a tool enabling strategic business advantage. The IT Services market in the country can thus gradually evolve from low-value, long-term service engagements through high-value, one-time service engagements on to high-value, long-term service engagements.

Another revelation from the current study was about the ITES-BPO space, which has been historically associated with exports. There is huge opportunity waiting to be tapped, as globalisation demands higher efficiencies and competitiveness from Indian businesses. Unlike the IT Services exports market where price arbitrage plays an important role, the domestic market will be driven more by access to specialist skills and helping businesses free up their scarce resources for focusing on core business activities.

 IT Services and ITES-BPO players urgently need to work together with customers, government and other stakeholders to remove some of the perceived inhibitors and help develop a conducive environment for healthy, long-term growth of the domestic industry.