Here's an interesting interview of Harvard professor Niall Ferguson by Cynthia Churchwell. With our reliance on Offshore Outsourcing revnues going up day by day, and our economy rapidly integrating into the World Economy, a reversal of globalisation could mean bad news for India and its citizens.
Cynthia Churchwell: What drew you to seek historical parallels with our current state of globalization?
Niall Ferguson: I am an historian who has long been preoccupied by the similarities between our own time and the pre-1914 period. That the years 1880–1914 were the "first age of globalization" is now quite a widely accepted idea among economic historians. The data on trade, capital flows, and migration certainly bear that out.
Q: When was the first age of globalization? Do you see the sinking of the Lusitania in 1915 as a benchmark for the beginning of the end of this first age of globalization?
A: To be absolutely precise about dating, I'd say it was from the moment the transatlantic cable was laid, which was in 1866, until the cutting of the cables to Germany, after war broke out in 1914. The Lusitania (which was sunk on May 7, 1915) is simply a good symbol for the end of this first age because so much had previously depended on safe navigation between New York and Europe.
Q: You suggest that "The possibility is as real today as it was in 1915 that globalization, like the Lusitania, could be sunk." What do you mean by "sinking globalization"?
A: I mean that we could just as easily find ourselves swept into economic "de-globalization" by an international political crisis as our great-grandfathers were in 1914. Like the Lusitania, globalization could be sunk by great-power conflict.
Q: What are the five major points you identify as contributing to the impending decline in the globalization of our present-day economy?
A: I don't say it's impending. I just say it's possible. Like the outbreak of the First World War, a crisis of globalization today is a low-probability worst-case scenario. The key causes of the 1914 crisis were:
The overstretch of the hegemonic empire (Britain).
The escalation of rivalry between great powers (Britain and Germany in particular, but also Germany and Russia).
The destabilization of the alliance system (unreliability of Austria in German eyes, of Britain in French eyes).
The existence of a rogue regime sponsoring terror (Serbia).
The rise of a revolutionary organization hostile to global capitalism (Bolshevism).
To see my point, just change the words in parenthesis to:
(the United States)
(the United States and China)
(unreliability of the Europeans in American eyes, unreliability of the Americans in Japanese, South Korean, and Taiwanese eyes)
(Syria, Iran, etc.)
(Al Qaeda)
Q: Are there any actions or events that could accelerate or forestall another decline of globalization? Which ones do you believe to be the most significant?
We could find ourselves swept into economic "de-globalization" by an international political crisis as our great-grandfathers were in 1914.
A: It would be a very good idea if the United States were to act now to avert the danger of a clash with China over the future of Taiwan. There is a real danger that Taiwan could be what Belgium was in 1914: the small state over which two great powers went to war without either quite meaning to.
Q: Do you think globalization will continue to come and go in waves?
A: I am not sure waves are the right natural-world image here. I would prefer to think of events such as forest fires or earthquakes—sudden crises arising from the advent of what scientists call "criticality."
Q: What other business-related research currently interests you?
A: I am writing a book about the banker Siegmund Warburg, who was a key proponent of globalization after 1945 and deserves much of the credit for the emergence of the Eurobond market, among other things. More generally, I am continuing to do research on the international bond market before and after the First World War.
Friday, May 27, 2005
Thursday, May 26, 2005
Women outnumber men in Recruitment Firms
Running my own Recruitment Frim and being the founder member and Treasurer of NAESCON (National Assciation of Executive Search Consultants) I wholeheartedly agree with the insights brought out by Barkha Shah in this news item, however, I would like to differ somewhat when it comes to the gender equation vis-a- vis the leadership of the Recruiter Firms. We seem to have more 'men' owners than 'women' owners.
Barkha says that this is one industry where women beat men hands down. Not only in terms of sheer numbers, but also in terms of quality of work that they provide. The recruitment firms hiring talent for companies across various sectors is another area where women better men.
The "boom" in the job scenario across verticals like information technology, retailing, banking, insurance and financial sectors has led to a spurt in the number of recruitment firms being set up in the country.
If estimates are to be believed, there are more than 10,000 such firms today. While some have a nation wide presence, others are basically run as a one-man or, shall we say, a one-woman show.
However, the one similarity among all such companies is that men are a minority in this industry. So much so, that Bangalore-based TeamLease Services Private Limited, is into recruiting, training and "temping" across industry verticals, is now planning to recruit more men than women to bridge the "gender-gap".
Says Nirupama V G, associate director, TeamLease, "Within the next six months, we will be setting up centres in another four cities and will, therefore, be recruiting internally in good numbers." TeamLease hires 400-odd people across its 14 centres, which includes a centre at Hyderabad too.
"Earlier, around 90 per cent of our total employee numbers comprised females. Now, it is around 70 per cent and we are trying to reduce this gap in the male-female ratio further," Nirupama adds. At present, TeamLease hires 100 people internally, every quarter. So what makes this sector a women's domain? According to Shyam Suryanarayanan, director, S2 Management Consulting, a manpower consultant, women are more people-oriented and have better soft skills than men. "Besides, women have patience, which is an essential requirement in this job," adds Praveen Singh, also a director with S2. The Bangalore-based firm has around 25 employees working for it with 19 out of them being women.
Sushmita, a recruiter with Hyderabad-based Goose Technologies, that has clients like Microsoft, Virtusa and Oracle among others, feels that men are basically restless and that's why are generally not preferred for such jobs.
"This job requires concentration and women fare better in this regard," she adds. Stability is another reason why women are being banked upon in this industry. "Women tend to stick around with an organisation for a longer period. Some men use this kind of a job as a stepping stone to get into the corporate world," Shyam says.
Incidentally, this job promises good "moolah" as it offers target-based incentives. While the basic salary for an executive is Rs 10,000-Rs 12,000, according to Nirupama, there have been executives in her company who have earned even Rs 100,000 as incentives in a quarter.
"Besides, we also offer overseas trips and star performer awards as other add-ons," she says.
So what does a recruitment firm look for while hiring internally? For some companies, although an MBA is a requirement, there are some who do not mind taking in raw graduates as well."We just look for firebrands with people-skills," says Shyam. "It is communication skills that is the real deciding factor," adds Sushmita
Barkha says that this is one industry where women beat men hands down. Not only in terms of sheer numbers, but also in terms of quality of work that they provide. The recruitment firms hiring talent for companies across various sectors is another area where women better men.
The "boom" in the job scenario across verticals like information technology, retailing, banking, insurance and financial sectors has led to a spurt in the number of recruitment firms being set up in the country.
If estimates are to be believed, there are more than 10,000 such firms today. While some have a nation wide presence, others are basically run as a one-man or, shall we say, a one-woman show.
However, the one similarity among all such companies is that men are a minority in this industry. So much so, that Bangalore-based TeamLease Services Private Limited, is into recruiting, training and "temping" across industry verticals, is now planning to recruit more men than women to bridge the "gender-gap".
Says Nirupama V G, associate director, TeamLease, "Within the next six months, we will be setting up centres in another four cities and will, therefore, be recruiting internally in good numbers." TeamLease hires 400-odd people across its 14 centres, which includes a centre at Hyderabad too.
"Earlier, around 90 per cent of our total employee numbers comprised females. Now, it is around 70 per cent and we are trying to reduce this gap in the male-female ratio further," Nirupama adds. At present, TeamLease hires 100 people internally, every quarter. So what makes this sector a women's domain? According to Shyam Suryanarayanan, director, S2 Management Consulting, a manpower consultant, women are more people-oriented and have better soft skills than men. "Besides, women have patience, which is an essential requirement in this job," adds Praveen Singh, also a director with S2. The Bangalore-based firm has around 25 employees working for it with 19 out of them being women.
Sushmita, a recruiter with Hyderabad-based Goose Technologies, that has clients like Microsoft, Virtusa and Oracle among others, feels that men are basically restless and that's why are generally not preferred for such jobs.
"This job requires concentration and women fare better in this regard," she adds. Stability is another reason why women are being banked upon in this industry. "Women tend to stick around with an organisation for a longer period. Some men use this kind of a job as a stepping stone to get into the corporate world," Shyam says.
Incidentally, this job promises good "moolah" as it offers target-based incentives. While the basic salary for an executive is Rs 10,000-Rs 12,000, according to Nirupama, there have been executives in her company who have earned even Rs 100,000 as incentives in a quarter.
"Besides, we also offer overseas trips and star performer awards as other add-ons," she says.
So what does a recruitment firm look for while hiring internally? For some companies, although an MBA is a requirement, there are some who do not mind taking in raw graduates as well."We just look for firebrands with people-skills," says Shyam. "It is communication skills that is the real deciding factor," adds Sushmita
Wednesday, May 25, 2005
'Phone calls will be free by 2015'
Voice over IP will force traditional telephone companies to stop charging for voice calls and ensure emergency services update their use of technology, according to Skype CEO Niklas Zennström.
Speaking at the VON Europe 2005 conference today in Stockholm, Zennström said the fact telephony has morphed from a network to a software application "is a game changer".
One rule of the game it changes is economics. Given that VoIP applications such as Skype have no customer acquisition costs and no real cost for calls, "we cannot charge for phone calls in the future," Zennström said.
This means phone companies will have to change their business models, Zennström said: "If you fast forward 10 years, all [telcos'] revenue will come from internet access and none from voice minutes or line rental." Telcos will need to change their phone lines to broadband lines but they will not go out of business, according to the Skype boss. "They will always be competitive because they are the ones that have the cables," he said.
Zennström cited BT and TeliaSonera as two European phone companies which are already looking to move to all-IP networks.
James Enck, European telecom analyst at Daiwa Securities, agreed the telcos are finally facing the IP telephony threat. "The period of incumbent complacency is over," he said. While two years ago telcos did not appear concerned about VoIP, "there is now a sense of urgency and openness and a sense of crisis that wasn't there before", Enck said.
Zennström also turned the tables on both US and European regulators who aim to require IP telephony providers to give customers access to emergency services and to provide the emergency services suppliers with a location for the caller - something that's essentially impossible on IP networks.
He proposed that along with ensuring VoIP companies offer access to 999, regulators should make sure emergency services can receive communications not only from the phone but also via text messages and email. "Let's make sure we're enabling emergency services on all devices," he said.
Skype is working with emergency services organisations to come up with such a solution, Zennström explained, and emphasised the need to develop a way to map geographical locations over IP networks. "It's important as an industry we take initiative on this so politicians don't force legacy rules onto us," he said.
While Skype now has 150,000 new users a day and 1.4 million paying customers for its SkypeOut service - and hopes to increase those numbers further through its new affiliate programme - many believe it's still a company in search of a realistic business model.
Zennström stressed he's happy with the model they have, though. "We don't need to charge a lot," he said, because they have such low costs. When looking at Skype's average revenue per user, the company doesn't compare itself to Vodafone or BT but to Google and Yahoo!. "We're in the nickel and dime business. A few nickels, a few dimes but a lot of users."
Zennström also confirmed the company is developing Skype for mobile operating systems such as embedded Linux, Symbian and Windows Mobile but said no release dates are available at this time.
Speaking at the VON Europe 2005 conference today in Stockholm, Zennström said the fact telephony has morphed from a network to a software application "is a game changer".
One rule of the game it changes is economics. Given that VoIP applications such as Skype have no customer acquisition costs and no real cost for calls, "we cannot charge for phone calls in the future," Zennström said.
This means phone companies will have to change their business models, Zennström said: "If you fast forward 10 years, all [telcos'] revenue will come from internet access and none from voice minutes or line rental." Telcos will need to change their phone lines to broadband lines but they will not go out of business, according to the Skype boss. "They will always be competitive because they are the ones that have the cables," he said.
Zennström cited BT and TeliaSonera as two European phone companies which are already looking to move to all-IP networks.
James Enck, European telecom analyst at Daiwa Securities, agreed the telcos are finally facing the IP telephony threat. "The period of incumbent complacency is over," he said. While two years ago telcos did not appear concerned about VoIP, "there is now a sense of urgency and openness and a sense of crisis that wasn't there before", Enck said.
Zennström also turned the tables on both US and European regulators who aim to require IP telephony providers to give customers access to emergency services and to provide the emergency services suppliers with a location for the caller - something that's essentially impossible on IP networks.
He proposed that along with ensuring VoIP companies offer access to 999, regulators should make sure emergency services can receive communications not only from the phone but also via text messages and email. "Let's make sure we're enabling emergency services on all devices," he said.
Skype is working with emergency services organisations to come up with such a solution, Zennström explained, and emphasised the need to develop a way to map geographical locations over IP networks. "It's important as an industry we take initiative on this so politicians don't force legacy rules onto us," he said.
While Skype now has 150,000 new users a day and 1.4 million paying customers for its SkypeOut service - and hopes to increase those numbers further through its new affiliate programme - many believe it's still a company in search of a realistic business model.
Zennström stressed he's happy with the model they have, though. "We don't need to charge a lot," he said, because they have such low costs. When looking at Skype's average revenue per user, the company doesn't compare itself to Vodafone or BT but to Google and Yahoo!. "We're in the nickel and dime business. A few nickels, a few dimes but a lot of users."
Zennström also confirmed the company is developing Skype for mobile operating systems such as embedded Linux, Symbian and Windows Mobile but said no release dates are available at this time.
Monday, May 23, 2005
Legal outsourcing makes its case
With KPO catching up the Legal profession has also got into the act. Legal Outsourcing is expected to be a US $163 billion pie and India is aptly positioned to take a sizeable share.
It didn't take much for University of Pennsylvania law school friends David Perla and Sanjay Kamlani to become entrepreneurs. After working as corporate counsels for years in the US, they wanted to make an impact on the legal market.
Last May, they set up legal services firm -- Pangea 3 -- with five US lawyers and two clients. Today, they have a dozen clients, and 15 professionals. And in the next three years, they hope to have about 200 lawyers and 100 clients.
Their clients -- US law firms and legal departments of corporates -- may be American and British, but they are serviced from Mumbai, thousands of miles away.
With offices in New York and India, the duo, both 35, are part of the fast growing legal process outsourcing (LPO) tableau which has hit India in the past one year.
So what's new? Not to be left behind, traditional business process outsourcing (BPO) units are frenetically hiring lawyers to take on this business. And practically every homegrown Indian law firm is building up its case.
Last year, Mumbai-based ALMT Legal, which has been providing LPO services since 2003, spun of this business. The LPO arm -- ALMT Synergies -- is now headed by Mathew Banks, who left behind a lucrative law practice back home in Britain.
“Our work encapsulates a whole range of tasks. It is like a low hanging fruit ready to be eaten,” says Banks.
So today, on offer is online research, reviewing and reporting documents, drafting, litigation support, corporate due diligence support, mortgage processing and intellectual property researching, drafting and applications of patents.
A far cry from the the traditional BPO activity of a voice-based, transaction-oriented model, law firm Nishith Desai & Associates set up its patents practice in 1999. Last year, Desai tied up with old friend, technocrat Sam Pitroda, and transferred his patents business to the newly set up IP-PRO.
Industry sources claim that more than a dozen dedicated patents lawyers are assigned to the business.
Then there is AZB & Partners, the erstwhile Zia Mody's Chambers. A flourishing corporate law firm, Mody claims she is seriously thinking about courting this business.
“It is an interesting proposition and can provide an alternate revenue stream for us,” she says.
Typically, those into it claims they are providing high-end legal work. But clients say that it is mostly back-end, low-profile, labour-intensive para-legal work which is being outsourced.
This is something that the law firms are not worried about. “The work may not be too high-end but we can make up with sheer volume,” adds Mody.
Almost all the big players from Office Tiger to Evalueserve to Integreon, which began as traditional BPOs, are focusing on LPO. And most of their business is coming from two constituencies -- law firms and corporate legal departments.
Says Jason Brennan, director of legal services at Office Tiger, “As the global marketplace becomes increasingly competitive, corporations are being forced to streamline operations and cut costs in order to maintain profitability. Law firms are subject to increasing pressure from their clients to reduce costs and maintain profits per partner. These factors have given them an incentive to look at alternative sourcing methods.”
Or take Evalueserve, the BPO which has hired three lawyers and plans to hire seven more immediately. “Fortunately, the area is still nascent,” says Alok Agarwal, chairman, Evalueserve.
In fact, American conglomerate General Electric was one of the first to set up its captive BPO Gecis in India, which included LPO. Other technology companies, too, farmed out work to their Indian captive units.
That's because like other BPO activities, Indian lawyers come cheap. An associate lawyer in the US comes with a $225 per hour tag in the first year.
By the eighth year, it goes up to $450 an hour. In India, the rates are barely 10 per cent to 15 per cent of that. It isn't cost alone. With the time lag between India and the US and the UK, the turnaround time is 24 hours.
And now, with Indian law firms, too, donning their robes, it is a different case altogether. As Mody says, “We can bring more credibility to the business.”
It didn't take much for University of Pennsylvania law school friends David Perla and Sanjay Kamlani to become entrepreneurs. After working as corporate counsels for years in the US, they wanted to make an impact on the legal market.
Last May, they set up legal services firm -- Pangea 3 -- with five US lawyers and two clients. Today, they have a dozen clients, and 15 professionals. And in the next three years, they hope to have about 200 lawyers and 100 clients.
Their clients -- US law firms and legal departments of corporates -- may be American and British, but they are serviced from Mumbai, thousands of miles away.
With offices in New York and India, the duo, both 35, are part of the fast growing legal process outsourcing (LPO) tableau which has hit India in the past one year.
So what's new? Not to be left behind, traditional business process outsourcing (BPO) units are frenetically hiring lawyers to take on this business. And practically every homegrown Indian law firm is building up its case.
Last year, Mumbai-based ALMT Legal, which has been providing LPO services since 2003, spun of this business. The LPO arm -- ALMT Synergies -- is now headed by Mathew Banks, who left behind a lucrative law practice back home in Britain.
“Our work encapsulates a whole range of tasks. It is like a low hanging fruit ready to be eaten,” says Banks.
So today, on offer is online research, reviewing and reporting documents, drafting, litigation support, corporate due diligence support, mortgage processing and intellectual property researching, drafting and applications of patents.
A far cry from the the traditional BPO activity of a voice-based, transaction-oriented model, law firm Nishith Desai & Associates set up its patents practice in 1999. Last year, Desai tied up with old friend, technocrat Sam Pitroda, and transferred his patents business to the newly set up IP-PRO.
Industry sources claim that more than a dozen dedicated patents lawyers are assigned to the business.
Then there is AZB & Partners, the erstwhile Zia Mody's Chambers. A flourishing corporate law firm, Mody claims she is seriously thinking about courting this business.
“It is an interesting proposition and can provide an alternate revenue stream for us,” she says.
Typically, those into it claims they are providing high-end legal work. But clients say that it is mostly back-end, low-profile, labour-intensive para-legal work which is being outsourced.
This is something that the law firms are not worried about. “The work may not be too high-end but we can make up with sheer volume,” adds Mody.
Almost all the big players from Office Tiger to Evalueserve to Integreon, which began as traditional BPOs, are focusing on LPO. And most of their business is coming from two constituencies -- law firms and corporate legal departments.
Says Jason Brennan, director of legal services at Office Tiger, “As the global marketplace becomes increasingly competitive, corporations are being forced to streamline operations and cut costs in order to maintain profitability. Law firms are subject to increasing pressure from their clients to reduce costs and maintain profits per partner. These factors have given them an incentive to look at alternative sourcing methods.”
Or take Evalueserve, the BPO which has hired three lawyers and plans to hire seven more immediately. “Fortunately, the area is still nascent,” says Alok Agarwal, chairman, Evalueserve.
In fact, American conglomerate General Electric was one of the first to set up its captive BPO Gecis in India, which included LPO. Other technology companies, too, farmed out work to their Indian captive units.
That's because like other BPO activities, Indian lawyers come cheap. An associate lawyer in the US comes with a $225 per hour tag in the first year.
By the eighth year, it goes up to $450 an hour. In India, the rates are barely 10 per cent to 15 per cent of that. It isn't cost alone. With the time lag between India and the US and the UK, the turnaround time is 24 hours.
And now, with Indian law firms, too, donning their robes, it is a different case altogether. As Mody says, “We can bring more credibility to the business.”
Six on 10, surely you`re joking?
I have been discussing this with my colleagues for the past number of days and I was glad to see this article by Sunil Jain in the Business Standard -
Set your sights low enough, and any progress made looks meaningful. And so it is with the score of six out of 10 that Prime Minister Manmohan Singh has given the UPA government on its completion of a year in office. Use any other criterion, certainly by the standards set by Singh himself, and the performance is well below even a passing grade.
At this point, apologists and the spin-masters hired by the UPA will come out and tout the major achievements in the aviation sector and the opening up of banking, but it would be foolish to get caught up in the detail, especially since the NDA can rightfully claim that it had set the ball rolling on each of these initiatives........
Clearly a 60 per cent score today doesn’t mean what it used to in the old days.
Set your sights low enough, and any progress made looks meaningful. And so it is with the score of six out of 10 that Prime Minister Manmohan Singh has given the UPA government on its completion of a year in office. Use any other criterion, certainly by the standards set by Singh himself, and the performance is well below even a passing grade.
At this point, apologists and the spin-masters hired by the UPA will come out and tout the major achievements in the aviation sector and the opening up of banking, but it would be foolish to get caught up in the detail, especially since the NDA can rightfully claim that it had set the ball rolling on each of these initiatives........
Clearly a 60 per cent score today doesn’t mean what it used to in the old days.
Sunday, May 22, 2005
Alliances: The Right Choice
'Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before defeat' —Sun Tzu
Having interacted with a number of call centres in India and abroad, it has become clear to me that a strategic alliance is the most likely route to success for the third-party outsourcing call centers in India.
Most of the third-party call centers set up over the past few years were established by entrepreneurs who had been sold the dream by equipment/solution vendors—whose primary aim was to essentially sell their solution/equipment—that one had to just set up the call center and inbound business would come pouring in. There could be nothing farther from truth.
Why?
One, more than 90 percent of the business being done by third-party call centers is ‘outbound’ or ‘telemarketing’ and not ‘inbound’. Many of the call center entrepreneurs were not even aware that they would essentially become telemarketers, or else they would not have taken the plunge. Two, most of the entrants to this field were not from the services industry and opted for the route more as a diversification from their existing manufacturing activity where they were seeing a stagnation. By not being from a similar industry they did not appreciate the need to develop a customer acquisition strategy. So they faltered, soon after commencing their services. Their ‘delivery capability’ fell woefully short, mainly because they did not focus on this aspect of the business and took it for granted.
Dreams are now turning sour very fast and are seeing a major consolidation happening. The smaller players, who did not conceptualize the project well and did not take care of the working capital needs at the start, assuming that the business and cash inflows would start rolling from the first month, will either end up being taken over by larger players or just down their shutters. So what are the options?
At this juncture, it is important to understand that the adoption of a strategic perspective on outsourcing is today regarded as one of the most useful and important business methodologies, giving organizations world over the opportunity to liberate their full potential for profitability, efficiency and cost-effectiveness, and allowing them maximum flexibility in terms of retaining and broadening their customer base. Most of the organizations in the developed world have fully understood and adopted this approach towards business, resulting in a phenomenal growth in outsourcing (it’s a $600-billion segment), which is now increasingly leading to ‘offshore outsourcing’ primarily because of its enticing ‘value’ proposition (price/performance)—India’s delivery capabilities have now been validated over the years. To be cont .........
Having interacted with a number of call centres in India and abroad, it has become clear to me that a strategic alliance is the most likely route to success for the third-party outsourcing call centers in India.
Most of the third-party call centers set up over the past few years were established by entrepreneurs who had been sold the dream by equipment/solution vendors—whose primary aim was to essentially sell their solution/equipment—that one had to just set up the call center and inbound business would come pouring in. There could be nothing farther from truth.
Why?
One, more than 90 percent of the business being done by third-party call centers is ‘outbound’ or ‘telemarketing’ and not ‘inbound’. Many of the call center entrepreneurs were not even aware that they would essentially become telemarketers, or else they would not have taken the plunge. Two, most of the entrants to this field were not from the services industry and opted for the route more as a diversification from their existing manufacturing activity where they were seeing a stagnation. By not being from a similar industry they did not appreciate the need to develop a customer acquisition strategy. So they faltered, soon after commencing their services. Their ‘delivery capability’ fell woefully short, mainly because they did not focus on this aspect of the business and took it for granted.
Dreams are now turning sour very fast and are seeing a major consolidation happening. The smaller players, who did not conceptualize the project well and did not take care of the working capital needs at the start, assuming that the business and cash inflows would start rolling from the first month, will either end up being taken over by larger players or just down their shutters. So what are the options?
At this juncture, it is important to understand that the adoption of a strategic perspective on outsourcing is today regarded as one of the most useful and important business methodologies, giving organizations world over the opportunity to liberate their full potential for profitability, efficiency and cost-effectiveness, and allowing them maximum flexibility in terms of retaining and broadening their customer base. Most of the organizations in the developed world have fully understood and adopted this approach towards business, resulting in a phenomenal growth in outsourcing (it’s a $600-billion segment), which is now increasingly leading to ‘offshore outsourcing’ primarily because of its enticing ‘value’ proposition (price/performance)—India’s delivery capabilities have now been validated over the years. To be cont .........
Thursday, May 19, 2005
State of Indian Politics
For once, in my opinion, Vinod Mehta of Outlook has had a change of heart and decided to call a spade a spade when it comes to the Congress and its strongest ally Sarvshri Lalu Prasad Yadav. It was nice of him to acknowledge that he has been a great supporter of LPY when he says this about Lalu
“When he made his simple-minded wife the chief minister, we said, "Poor man, who else can he trust?" Meanwhile, Bihar fell off the map of India and its galloping anarchy did not merit discussion because, in a sense, Bihar was not part of India. Bihar was Bihar. I don't absolve myself or Outlook from spreading the aforementioned logic. In the last 15 years, consequently, we have allowed Laloo a very easy ride.”
Now that Lalu is a Central Minister and responsible for the budget of a mammoth organization such as the Railways who is going to ensure that the kind of incidents that took place during his regime in Bihar are not replicated in the Centre - specially the Railways ? In case our leaders keep on citing “compulsions of coalition politics” and continue in the same vain – GOD Bless Us !
Wednesday, May 18, 2005
MSN Desktop Search Launched
Microsoft has launched its Desktop Search Tool to take on Google, Yahoo, Copernic, x1 etc under the name MSN Search Toolbar with Windows Desktop Search. There are mixed reviews of the same, however, it is much better than the Beta Version. Like all Microsoft products, it is bound to improve over time, as such I plan to run it in parallel for sometime.
Till now, however, I have found the same to be delivering the desired results. One drawback is that in the Preview pane it does not show the results duly ‘highlighted’ in some colour such as yellow or green for one to be able to zero onto the same quickly. Either I am missing something or this needs to be taken care of.
Comments and views from others who are using such tools are most welcome as they would be a great help.
Till now, however, I have found the same to be delivering the desired results. One drawback is that in the Preview pane it does not show the results duly ‘highlighted’ in some colour such as yellow or green for one to be able to zero onto the same quickly. Either I am missing something or this needs to be taken care of.
Comments and views from others who are using such tools are most welcome as they would be a great help.
Friday, May 13, 2005
Fringe Benefits Tax – FAQs
What is the meaning of Fringe Benefit Tax ?
A new Chapter XII-H is being introduced in the Income Tax Act, 1961 containing sections 115W to 115WL and Fringe Benefit Tax is the tax chargeable u/s 115WA of the Act. It has been introduced by the FM as he was of the opinion that there are benefits being provided, or are deemed to be provided to employees, by the employers that are escaping taxation. However, the way the provisions are currently structured it is obvious that it is not just the Fringe Benefit which is being brought under the tax net but genuine business expenditure is also being taxed under the garb of FBT.
Which entities are liable to pay FBT ?
Thank god for small mercies, as the FM has deleted i) Individuals, ii) HUFs and iii) registered funds or trusts from the ambit of FBT during the discussion in Parliament. The Central and State Govts were in any case out of the ambit of FBT from the beginning.
Thus all companies, partnership firms, AOPs, local authority and every judicial person not falling under any of the above sub clauses is covered under FBT.
What are Fringe Benefits ?
As per Sec 115WB (1) of the Act, “Fringe Benefits” means any consideration for employment provided by way of
a) any privilege, service, facility or amenity, directly or indirectly, provided by an employer whether by way of reimbursement or otherwise to his employees (including former employee or employees) or
b) any free or concessional ticket provided by the employer for private journeys of the employees and their family members; and
c) any contribution by the employer to an approved superannuation fund for employees.
What are Deemed Fringe Benefits ?
As per Sec 115WB (1) of the Act, fringe benefits shall be deemed to have been provided by the employer to the employees if the employer has, in the course of his business or profession (including any activity whether or not such activity is carried on with the object of deriving income, profits or gains), incurred any expense on or made any payment for, the following purposes, namely:—
(A) entertainment;
Wednesday, May 11, 2005
Service Tax implications for Recruiters - Budget 2005
Service Tax implications for Recruiters - Budget 2005
Well it’s a mixed bag for the Recruitment Industry. Lets take up the relevant points one by one:
Service Tax Notification No. 6/2005 exempts taxable services of aggregate value not exceeding four lakh rupees in any financial year from the whole of the service tax leviable thereon under section 66 of the said Finance Act:
Provided that nothing contained in this notification shall apply to,-
(i) taxable services provided by a person under a brand name or trade name, whether registered or not, of another person; or
(ii) such value of taxable services in respect of which service tax shall be paid by such person and in such manner as specified under sub-section (2) of section 68 of the said Finance Act read with Service Tax Rules,1994.
The exemption contained in the said notification shall apply subject to certain conditions laid out therein, one of which is noteworthy i:e
(viii) the aggregate value of taxable services rendered by a provider of taxable service from one or more premises, does not exceed rupees four lakhs in the preceding financial year.
Further an Explanation to the said notification clarifies as under:
Explanation.- For the purposes of this notification,-
(A) “brand name” or “trade name” means a brand name or a trade name, whether registered or not, that is to say, a name or a mark, such as symbol, monogram, logo, label, signature, or invented word or writing which is used in relation to such specified services for the purpose of indicating, or so as to indicate a connection in the course of trade between such specified services and some person using such name or mark with or without any indication of the identity of that person;
(B) “aggregate value not exceeding four lakh rupees” means the sum total of first consecutive payments received during a financial year towards the gross amount, as prescribed under section 67 of the said Finance Act, charged by the service provider towards taxable services till the aggregate amount of such payments is equal to four lakh rupees but does not include payments received towards such gross amount which are exempt from whole of service tax leviable thereon under section 66 of the said Finance Act under any other notification.
This notification shall come into force on the 1st day of April, 2005.
Service Tax Notification No. 7/2005 has made some amendments to the Service Tax Rules, 1994, whereby all invoices are to be issued not later than fourteen days from the date of completion of such taxable service or receipt of any payment towards the value of such taxable service, whichever is earlier.
This is fine so far as raising invoices for services rendered is concerned, however, this could create an issue where the payment is received as an ‘advance’ against the services to be rendered. An Invoice would still have to be issued within 14 days of the receipt of the advance and Service Tax paid thereon. In case later, for some reason, the service is not rendered it would create an anomaly where the Tax would have been paid but no service rendered.
· Further, the same Notification provides that where an assessee is providing a taxable service from more than one premises or offices and has centralized billing systems or centralized accounting systems in respect of such service, and such centralized billing or centralized accounting systems are located in one or more offices or premises, he may, at his option, register such premises or offices from where such centralized billing or centralized accounting systems are located. This is definitely going to ease the process and paperwork at the Service Provider’s end.
· The Rules for payment of Service Tax have been amended so as to give the following effect, namely:-
The service tax shall be paid to the credit of the Central Government by the 5th of the month immediately following the calendar month in which the payments are received, towards the value of taxable services:
Provided that where the assessee is an individual or proprietary firm or partnership firm, the service tax shall be paid to the credit of the Central Government by the 5th of the month immediately following the quarter in which the payments are received, towards the value of taxable services:
Provided also that the service tax on the value of taxable services received during the month of March, or the quarter ending in March, as the case may be, shall be paid to
the credit of the Central Government by the 31st day of March of the calendar year.”.
The scope of certain services has been extended and one them is wrt manpower recruitment services which would now include the supply of manpower, temporary or otherwise.
Well it’s a mixed bag for the Recruitment Industry. Lets take up the relevant points one by one:
Service Tax Notification No. 6/2005 exempts taxable services of aggregate value not exceeding four lakh rupees in any financial year from the whole of the service tax leviable thereon under section 66 of the said Finance Act:
Provided that nothing contained in this notification shall apply to,-
(i) taxable services provided by a person under a brand name or trade name, whether registered or not, of another person; or
(ii) such value of taxable services in respect of which service tax shall be paid by such person and in such manner as specified under sub-section (2) of section 68 of the said Finance Act read with Service Tax Rules,1994.
The exemption contained in the said notification shall apply subject to certain conditions laid out therein, one of which is noteworthy i:e
(viii) the aggregate value of taxable services rendered by a provider of taxable service from one or more premises, does not exceed rupees four lakhs in the preceding financial year.
Further an Explanation to the said notification clarifies as under:
Explanation.- For the purposes of this notification,-
(A) “brand name” or “trade name” means a brand name or a trade name, whether registered or not, that is to say, a name or a mark, such as symbol, monogram, logo, label, signature, or invented word or writing which is used in relation to such specified services for the purpose of indicating, or so as to indicate a connection in the course of trade between such specified services and some person using such name or mark with or without any indication of the identity of that person;
(B) “aggregate value not exceeding four lakh rupees” means the sum total of first consecutive payments received during a financial year towards the gross amount, as prescribed under section 67 of the said Finance Act, charged by the service provider towards taxable services till the aggregate amount of such payments is equal to four lakh rupees but does not include payments received towards such gross amount which are exempt from whole of service tax leviable thereon under section 66 of the said Finance Act under any other notification.
This notification shall come into force on the 1st day of April, 2005.
Service Tax Notification No. 7/2005 has made some amendments to the Service Tax Rules, 1994, whereby all invoices are to be issued not later than fourteen days from the date of completion of such taxable service or receipt of any payment towards the value of such taxable service, whichever is earlier.
This is fine so far as raising invoices for services rendered is concerned, however, this could create an issue where the payment is received as an ‘advance’ against the services to be rendered. An Invoice would still have to be issued within 14 days of the receipt of the advance and Service Tax paid thereon. In case later, for some reason, the service is not rendered it would create an anomaly where the Tax would have been paid but no service rendered.
· Further, the same Notification provides that where an assessee is providing a taxable service from more than one premises or offices and has centralized billing systems or centralized accounting systems in respect of such service, and such centralized billing or centralized accounting systems are located in one or more offices or premises, he may, at his option, register such premises or offices from where such centralized billing or centralized accounting systems are located. This is definitely going to ease the process and paperwork at the Service Provider’s end.
· The Rules for payment of Service Tax have been amended so as to give the following effect, namely:-
The service tax shall be paid to the credit of the Central Government by the 5th of the month immediately following the calendar month in which the payments are received, towards the value of taxable services:
Provided that where the assessee is an individual or proprietary firm or partnership firm, the service tax shall be paid to the credit of the Central Government by the 5th of the month immediately following the quarter in which the payments are received, towards the value of taxable services:
Provided also that the service tax on the value of taxable services received during the month of March, or the quarter ending in March, as the case may be, shall be paid to
the credit of the Central Government by the 31st day of March of the calendar year.”.
The scope of certain services has been extended and one them is wrt manpower recruitment services which would now include the supply of manpower, temporary or otherwise.
Services Export Promotion Council (SEPC) gets off the ground
Last year, in August, the government unveiled a five-year Foreign Trade Policy aimed at doubling India’s share of global merchandise trade by 2009 with the thrust on employment generation in semi-urban and rural areas through enhanced export-oriented activities.
The Foreign Trade Policy (2004-09), unveiled by the Commerce and Industry Minister, contained a host of new packages and schemes pertaining to agriculture, services and bio-technology export besides some rationalisation measures to reduce transaction costs. Amongst these was an exclusive Services Export Promotion Council (SEPC) that would be set up in order to map opportunities in key services in major markets and develop strategic market access programmes, including brand building in coordination with players in specific sectors and recognised nodal bodies of the services industry.
Mr Kamal Nath had said that the government would promote the establishment of common facility centres for use by home-based service providers, particularly in areas such as engineering and architectural design, multi-media operations and software developers in state and district-level towns.
In pursuance of the same the Commerce Ministry has now taken the first step towards operationalising the Services Export Promotion Council (SEPC) by appointing Mr L.B. Singhal as its Executive Director. Mr Singhal is currently the Director-General of the Export Promotion Council for EoUs and SEZs and will hold the additional responsibility of ED at SEPC.
When contacted, Mr Singhal told Business Line that the SEPC would be registered as a society under the Societies Registration Act. The council would formulate policies and work out strategies to enhance exports of all major services. "The SEPC would cover all major services including entertainment, health, tourism, education, hospital, consultancy, legal and accountancy services," he said. The council would cover all the 160-odd services notified by the World Trade Organisation except that of computer software services and hotels, which have separate export promotion councils.
Since services account for about 50 per cent of the country's gross domestic product, an export promotion council for this sector was first proposed in the five-year Foreign Trade Policy 2004-09, announced in August last year.
The Commerce Minister had set up an inter-ministerial taskforce headed by the Director-General of Foreign Trade, Mr K.T. Chacko, to work out the modalities for setting up the SEPC including its scope of work and composition. The taskforce has submitted its report.
Meanwhile, a Parliamentary Standing Committee on Commerce has recommended that the Directorate-General of Commercial Intelligence and Statistics (DGCI&S) should strive to compile data on export of services also.
In its report tabled in Parliament recently, the Committee highlighted that compilation of data on export of services would enable grant of help under the Assistance to States for Infrastructure Development for Exports (ASIDE) scheme on the basis of their performance in the export of services. Currently, the data compiled by the DGCI&S do not capture services exports and only reports on foreign trade in goods. The allocation of assistance under the ASIDE scheme was based on export of goods alone and export of services was not taken into account.
Note: With inputs from The Hindu Business Line
The Foreign Trade Policy (2004-09), unveiled by the Commerce and Industry Minister, contained a host of new packages and schemes pertaining to agriculture, services and bio-technology export besides some rationalisation measures to reduce transaction costs. Amongst these was an exclusive Services Export Promotion Council (SEPC) that would be set up in order to map opportunities in key services in major markets and develop strategic market access programmes, including brand building in coordination with players in specific sectors and recognised nodal bodies of the services industry.
Mr Kamal Nath had said that the government would promote the establishment of common facility centres for use by home-based service providers, particularly in areas such as engineering and architectural design, multi-media operations and software developers in state and district-level towns.
In pursuance of the same the Commerce Ministry has now taken the first step towards operationalising the Services Export Promotion Council (SEPC) by appointing Mr L.B. Singhal as its Executive Director. Mr Singhal is currently the Director-General of the Export Promotion Council for EoUs and SEZs and will hold the additional responsibility of ED at SEPC.
When contacted, Mr Singhal told Business Line that the SEPC would be registered as a society under the Societies Registration Act. The council would formulate policies and work out strategies to enhance exports of all major services. "The SEPC would cover all major services including entertainment, health, tourism, education, hospital, consultancy, legal and accountancy services," he said. The council would cover all the 160-odd services notified by the World Trade Organisation except that of computer software services and hotels, which have separate export promotion councils.
Since services account for about 50 per cent of the country's gross domestic product, an export promotion council for this sector was first proposed in the five-year Foreign Trade Policy 2004-09, announced in August last year.
The Commerce Minister had set up an inter-ministerial taskforce headed by the Director-General of Foreign Trade, Mr K.T. Chacko, to work out the modalities for setting up the SEPC including its scope of work and composition. The taskforce has submitted its report.
Meanwhile, a Parliamentary Standing Committee on Commerce has recommended that the Directorate-General of Commercial Intelligence and Statistics (DGCI&S) should strive to compile data on export of services also.
In its report tabled in Parliament recently, the Committee highlighted that compilation of data on export of services would enable grant of help under the Assistance to States for Infrastructure Development for Exports (ASIDE) scheme on the basis of their performance in the export of services. Currently, the data compiled by the DGCI&S do not capture services exports and only reports on foreign trade in goods. The allocation of assistance under the ASIDE scheme was based on export of goods alone and export of services was not taken into account.
Note: With inputs from The Hindu Business Line
Tuesday, May 10, 2005
“Networking & Capacity Building”
Vinay Talwar’s Beat
A couple of days ago I attended a Seminar organised by the Institute Of Chartered Accountants of India on “Networking & Capacity Building”. I had more gone there for the heck of it and to also see what the CA community is doing wrt ‘Networking’.
I must say that I was pleasantly surprised to find around 400 attendees for a topic that I thought was alien to this staid profession. One of the speakers turned out to be an old friend of mine, Vinod Jain, who has been very active in the affairs of the Institute and has played an active role in the Regional Council as well as the Central Council. Vinod made a very powerful presentation on the various aspects of Networking & Capacity Building and most of all on the “need” for the same. I feel the most important take away for me, and for most of the participants that I spoke to, was for us to get out of the thought process of the past ( ekla chalo re ) and the urgency to adopt this collaborative approach for ‘survival’ let alone growth. Vinod’s story telling style, he gave an excellent example from Mahabharat, aptly got the message home to the participants.
Amal Ganguly, who retired as the head of PwC in 2003 was the Guest of Honour and he did a good job of answering the doubts and queries of the participating CAs. His clear message wrt partnerships and their longterm survival was – forget this ‘goodwill’ business and the only claim that an exiting partner should have should be to his/ her share of ‘Capital’ and nothing else, only then will partnerships thrive and survive !
Roy, Dy Secretary of the Institute, took the participants through the various provisions of the Guidelines framed by the Institute wrt Networking as well Mergers & Demergers between its members.
Having been in business for most of my active working life, for once, I came away with the impression that the Institute of Chartered Accountants is taking a proactive interest in furthering the cause of their members by helping them keep pace with the times. With the GATS discussions rapidly moving forward this topic has assumed much greater importance. I am sure there are a number of issues that still need to be thrashed out, both legal and cultural, but as it is said – a job well begun is half done.
A couple of days ago I attended a Seminar organised by the Institute Of Chartered Accountants of India on “Networking & Capacity Building”. I had more gone there for the heck of it and to also see what the CA community is doing wrt ‘Networking’.
I must say that I was pleasantly surprised to find around 400 attendees for a topic that I thought was alien to this staid profession. One of the speakers turned out to be an old friend of mine, Vinod Jain, who has been very active in the affairs of the Institute and has played an active role in the Regional Council as well as the Central Council. Vinod made a very powerful presentation on the various aspects of Networking & Capacity Building and most of all on the “need” for the same. I feel the most important take away for me, and for most of the participants that I spoke to, was for us to get out of the thought process of the past ( ekla chalo re ) and the urgency to adopt this collaborative approach for ‘survival’ let alone growth. Vinod’s story telling style, he gave an excellent example from Mahabharat, aptly got the message home to the participants.
Amal Ganguly, who retired as the head of PwC in 2003 was the Guest of Honour and he did a good job of answering the doubts and queries of the participating CAs. His clear message wrt partnerships and their longterm survival was – forget this ‘goodwill’ business and the only claim that an exiting partner should have should be to his/ her share of ‘Capital’ and nothing else, only then will partnerships thrive and survive !
Roy, Dy Secretary of the Institute, took the participants through the various provisions of the Guidelines framed by the Institute wrt Networking as well Mergers & Demergers between its members.
Having been in business for most of my active working life, for once, I came away with the impression that the Institute of Chartered Accountants is taking a proactive interest in furthering the cause of their members by helping them keep pace with the times. With the GATS discussions rapidly moving forward this topic has assumed much greater importance. I am sure there are a number of issues that still need to be thrashed out, both legal and cultural, but as it is said – a job well begun is half done.
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