Vinay Talwar’s Beat

Big believer in Growth

2009-08-15T17:54:00.000+05:30

I'm a big believer in growth. Life is not about achievement, it's about learning and growth, and developing qualities like compassion, patience, perseverance, love, and joy, and so forth. And so if that is the case, then I think our goals should include something which stretches us.

As you begin to take action toward the fulfillment of your goals and dreams, you must realize that not every action will be perfect. Not every action will produce the desired result. Not every action will work. Making mistakes, getting it almost right, and experimenting to see what happens are all part of the process of eventually getting it right.

Jack Canfield

Budgeting and the arrogance of bureaucracy after 2,063 years?

2008-12-20T17:20:00.001+05:30

“The budget should be balanced, the Treasury should be refilled, public debt should be reduced, the arrogance of officialdom should be tempered and controlled, and the assistance to foreign lands should be curtailed lest Rome become bankrupt. People must again learn to work, instead of living on public assistance.”

— Cicero, 55 BC

Bernard Madoff, former Nasdaq Chairman...Ponzi King!

2008-12-16T23:22:00.001+05:30

Wow, this takes the cake. The man even went on to become the Chairman of Nasdaq under the very nose of the great SEC. We have still to get over the shock of the sub-prime crisis, the downfall of numerous organisations that had overleveraged themselves and now we have another situation resulting from the lack of oversight on behalf of the regulator. I am not sure who out of the Big Four is the Auditor of the US $ 50 billion empire of Mr Madoff but I am sure the Auditor too will have a lot to explain. Not to mention the rating agencies that must have been part of the big scheme spun by the spin doctors at his companies. What to say of the due diligence process carried out by the great investment bankers using their best practices for recommending investment in these schemes!

A number of red flags were raised, and some newspapers even carried stories on the credibility of growth story spun by Mr Madoff, however, nothing came of it and now we are faced with another big scandal.

Helpless India looks on…… and waits for the Home minister’s usual spiel!

2008-11-27T08:54:00.002+05:30

Its more of anger and frustration that pushes me to write this post. I am sure that a major part of the country is today looking on with helplessness as we see the terrorist attacks in Mumbai unfold and the death toll goes to 87 with another 185 plus injured.

We will again have our Home Minister come out and give us his usual spiel on how he will let us know as soon as he finds out more about the attacks (as he was sleeping throughout the night and could not be briefed on the same). We will also have the usual noises from the rest of the polity. However, as this time the attacks are on the elite hotels and foreigners staying therein, maybe, there will be greater pressure on the government to come out of its slumber and act!

Tourism advisories are sure to come out from most countries abroad which will effect the tourism industry. In any case what locus standi does India have to call off the cricket tour to Pakistan when its own Financial Capital is under attack!

Slowdown....lets jump the competition!

2008-11-16T09:05:00.001+05:30

What I have said many a time, and strongly believe in, tough times are the best times to jump the competition and rapidly expand your marketshare. This the time when your marketing dollar (or rupee) gets you a getter bang for the buck as everybosy else goes into a huddle. Some interesting surveys have been done and reported here in this article.

Crisis, a word when written in the chinese alphabet, represents both Danger and Opportunity.

Darrell Rigby, head of Bain's global retail practice and Steve Ellis, Bain's worldwide managing director, said: "The tumultuous events of the past few weeks have battered financial markets and created uncertainty that companies will be reckoning with for months. But in the turbulence lies opportunity.

"Like dangerous curves on a racetrack, economic downturns create more opportunities for companies to move from the middle of the pack into leadership positions than any other time in business.

"Unlike straightaways, where leaders can thrive on raw power alone, steep curves require strategic finesse. That often results in dramatic differences in performance as leaders steer out of the curve."

Another characteristic of companies that do well from a downturn, say the two Bain executives, is: "They make bargain acquisitions to build up their core, even when it means taking calculated financial risks. As markets improve, they are well-positioned to accelerate." The latest example: Bank of America's planned acquisition of Merrill Lynch, which may turn out to be "the strategic opportunity of a lifetime," says Ken Lewis, Bank of America's CEO.

So are we all ready to take the plunge!

Work/life balance....control and impact

2008-11-16T08:47:00.001+05:30

“What we’ve learned over the years is work/life balance has to be defined at the individual level. It means different things to different people at different times in their lives. What is universally true is the importance of two key factors—control and impact. If our teams are working in an environment where they have an appropriate level of control over their schedule and their work is clearly having measurable impact, they can achieve their definition of work/life balance.” Steve Ellis, Managing Director, Bain & Company

Coming from a leader whose company has been consistently ranked in the top 10 of the best “places to work” in (Consulting Magazine), it is indeed very relevant and insightful. After having put in more than 27 years, post qualification, and seen different businesses from different angles and perspectives over the years I truly relate to his thought of work/ life balance meaning different things to different people at different times in their lives.

Without taking away anything from the concept of ‘control’ – all of us like to have some control over what we do, how we do it and when we do it, however, I also believe that a person will be ready to cede control to some extent in case he/ she is able to get the satisfaction of seeing the positive impact of the work being done by him/ her, whether at work or in personal life, and be appreciated for it.

India’s Corporate lawyers court riches

2008-11-11T23:31:00.001+05:30

Well, I guess my last post on the topic of CAs and lawyers having a good time despite a slowdown in the economy and some job losses across the board today got support from an article in the FT which goes on to say -

While the world economy sags, India’s lawyers are enjoying a boom. Lead partners at the country’s commercial law firms are now earning over $1m a year.

“Corporate [lawyer] salaries have ex ploded. They are going up by 20 to 40 per cent,” says Anand Prasad, a partner at Trilegal, a law firm with offices in Delhi, Mumbai and Bangalore.

With rates for domestic corporate lawyers averaging $400 an hour, even junior corporate partners at top firms earn surprising sums – sometimes up to $250,000 before bonus es. Desai & Diwanji, for example, a firm with offices in Mumbai and Delhi, increased its staff remuneration this year by 200 per cent.

While liberalisation of the Indian economy began only in 1991 – making the modern practice of corporate law in India just 15 years old – the profession is already reaping huge benefits from a period of economic growth that will be slowed, but is unlikely to be halted, by the global downturn.

The shift has some painful ramifications, both for foreign law firms prevented from sharing in the bonanza locally by protectionist regulation and large corporations that are unable to use a single international law firm for all their work.

Global law firms such as Clifford Chance see India as ripe with possibility and the “missing link” in their worldwide coverage. There are clear advantages for the UK’s leading firms: India’s legal code has roots in British law, its language of business is English and its economy has been growing by 8 per cent for the past three years.

Yet for now they are shut out. Strict Bar rules prevent large international law firms opening offices or practising Indian or foreign law in the country.

As well as raising the costs of Indian legal services for incoming multinationals, this creates other problems. Lesley Jackson, chief financial officer at United Breweries in Bangalore, says she must work with foreign law firms out of hotel rooms, shuttling back and forth to sign documents in Singapore, and having two law firms (one Indian and one foreign) on every deal. “It makes it difficult not to be able to instruct legal one-stop shops, especially on global deals where it is important to have a brand name,” she says.

Indian corporate lawyers with the right skills to serve such clients are also thin on the ground. Bharat Vasani, general counsel at Tata Group, says: “Outsiders can be deceived by the overall size of Indian law firms. There are actually very few partners capable of doing top level corporate work.”

The profession faces a struggle to service India’s growing corporate sector and foreign investors. According to India Today magazine, the country requires 3,000 new corporate lawyers a year to keep pace with demand. Multinationals such as IBM and Hewlett- Packard and Indian corporations such as Infosys and Reliance have responded by expanding their in-house legal departments. Promod Rao, general counsel of ICICI Bank, says: “Our referrals to domestic firms are few. We even parachute our own guys in to do due diligence work.”

For foreign law firms that need to serve their global clients in India, the Indian Bar restrictions create tortuous logistical challenges. Ashurst, a UK law firm, has a liaison office in Delhi but the firm’s visiting partners say they are careful not to meet clients or give legal advice at these premises, which are more akin to a personal apartment than a law firm office.

Sandeep Katwala, Linklaters’ India head, spends a lot of time working out of his “house hotel”, the Oberoi in Mumbai. Various other hotel suites double up as offices, not only for lawyers but for other professional firms such as Morgan Stanley and Nomura.

Linklaters is one of the most active law firms in India and has advised underwriters on some of India’s largest public listings, such as Cairn India’s IPO and that of DLF, India’s largest real estate company. Last year it formed a referral relationship with a recently established Mumbai law firm, Talwar Thakore & Associates.

Although independent, the firms refer work to each other, share training and run secondments. Kunal Thakore, whose father Shobhan is one of TTA’s named partners, is a partner in Linklaters’ Hong Kong office. Mr Katwala says: “We probably still work as much with other Indian law firms [as with TTA]. But on the Vodafone-Essar transaction, for example, working with TTA allowed us to offer the client an integrated team approach.”

To ensure they gain access to leading domestic lawyers, multinationals and foreign law firms have similar relationships with Indian law firms, such as Amarchand & Mangaldas and AZB & Partners. However, nearly everyone wants to instruct the top partners at these firms, so availability of talent is a problem. For example, during the demerger in 2005 of Reliance Industries, one of the country’s biggest conglomerates, Amarchand & Mangaldas acted for each of the Ambani brothers and their mother.

This type of arrangement would unsettle most western lawyers. “Conflicts in India are scary,” says Mukesh Bhavani, general counsel at Essar Group, the Indian conglomerate. He feels that although the Indian legal market is maturing, it still has some way to go before lawyers can claim to have put proper Chinese walls in place.

Foreign firms, meanwhile, are beating legal restrictions by developing India practices outside the country – and picking off the brightest graduates to staff them. Rajesh Begur, managing partner at ARA Law, a Mumbai-based firm, says he is already feeling the pinch of foreign competition in graduate recruitment. “I went to Jodphur just after [UK law firm] Herbert Smith had been there and I could not recruit one law student.”

The inroads made by foreign firms, however, can spark passionate opposition. Lalit Bhasin, head of the Society for Indian Lawyers, says: “UK Magic Circle firms want to emasculate the Indian legal profession in what amounts to a hostile takeover.”

Such sentiments contributed to the Indian Bar Council’s rejection of liberalisation proposals in November 2007. Firms believe it will be anything from three to five years before India opens up its legal market. For now, international law firms must look on with envy as the country’s local lawyers enjoy the rewards of exclusivity.

4 Secrets of the Successfully Self-Employed

2008-11-04T18:37:00.002+05:30

Sometimes one comes across an article which immediately strikes a cord as it is on a topic which is being discussed somewhere in your life at that very moment – at work or at home with the family.

One such short note is by Marc and Angel and, I think, it is most relevant for all the young professionals who are now setting up practices in their professionals fields. Once this concept of Time and Money is clear to them then at least they will be in a position to set goals which would help them plan their life. Enjoy.

#1 – We Only Have 2 Products: Time and Knowledge

No matter how you make a living or who you think you work for, you only work for one person, yourself. Likewise, you only have 2 products to sell, your time and your knowledge. Here are a few example scenarios:

Migrant Farmer – Sells hours of his/her life to pick fruit or vegetables for a farmer in exchange for money. A perfect example of trading hours for dollars.
Doctor – Sells hours of his/her life to perform medical treatments based on the knowledge stored in his/her brain. A perfect example of trading hours and knowledge for dollars.
Best-Selling Author – Spends time crafting a book based on his/her knowledge or intellectual capacity and then sells the book (knowledge) many times over. A perfect example of trading knowledge for dollars. The key benefit here is residual, passive income.

In almost all cases of the self-employed, the small business owner is taking information out of his or her brain and spending the necessary time to convert it into a product of value. This concept confuses some people, and to others it seems obvious. The bottom line is that customers pay you for your time and knowledge. Success is achieved by properly crafting the two into one convenient bundle that can be sold many times over (think of products vs. services).

What knowledge do you have in your brain that provides value to others? How can you extract this information and sell it?

#2 – The Implementation of Knowledge is Power

Knowledge alone is not power! The implementation of knowledge is power. Knowledge is simply a commodity; it’s a product like any other that has the potential to be sold. How knowledge is organized, packaged, presented, shared, and received by others is what makes knowledge so powerful.

Knowledge is useless unless it’s effectively shared with others. Your ability to educate others in a way that allows them to effectively apply the instruction is what makes knowledge an asset… something worth buying.

#3 – Time is More Valuable than Money

One of the most important points to understand is the fact that there are two basic forms of currency, money and time. Of the two, time is the most valuable, for it cannot be replenished. A surplus of time, and the unfettered liberty to do with it as you choose, is the true measure of success.

Your time must be extracted from the formula of making money. No matter how skilled you are at transferring your knowledge to others, if you are paid on an hours for dollars basis, your ability to expand your business will eventually plateau. You will run out of time.

The successfully self-employed have made this realization and concentrate the majority of their time and effort on the single greatest secret of self-employment: generating passive income. Passive income is achieved by applying what you know into a package that can be designed and built once, and then repeatedly sold over and over again. Finding a unique way to promote and sell this knowlege is the key.

Passive Income Examples: Useful books and guides, time saving computer applications, etc.

#4 – Success is About Knowing What You Want

Self-employed success is not the byproduct of working your way up from the ground up. It’s based on knowing what you want, understanding your abilities and implementing them diligently to achieve your goals. There are plenty of people who get laid-off from their 9 to 5 day job and end up making millions in a few short years of self-employment.

Take a look at some of the success stories around you that emerged from nowhere. These success stories were not initiated by people paying their dues to someone else’s initiatives. These success stories revolve strictly around perception and choice. The people in these stories know their capabilities, what they’re doing, and what they want. Once people make this realization, and the conscious choice to act on it, the possibilities for success are limitless.
Photo by: TeeJe

Job loss? Not for Chartered Accountants and Lawyers

2008-10-29T19:12:00.002+05:30

With the economy slowing down there is a definite fear amongst professionals of various categories of either loosing their jobs or facing a cut in their salaries. However, there is one category of professionals who continue to be in high demand and that is my tribe of warriors, namely Chartered Accountants. Despite the slowdown the world still has to compile its accounts (which are on increasingly complex IT systems) and get them audited and that is where the CA scores over a number of other professions in a slowdown.

Further, with the regulatory environment becoming stricter and more complex by the day there is a distinct need for more professionals with hands on experience of ERP systems, taxation, auditing and now with IFRS implementation looming on the horizon – persons with knowledge of IFRS.

Similarly, lawyers too are in a good position as with increased regulatory control and, businesses increasingly facing problems due to the tight money market conditions, legal issues are cropping up everyday which are generating more work for the profession. Increased amount of legal work being generated in the developed economies, due to the mortgage crisis, is also a good sign for the LPO (legal process outsourcing) Industry.

SEBI Takeover Code - creeping acquisition norms eased for persons holding 55% and above but below 75%

2008-10-29T08:02:00.003+05:30

In a bid to help the market sentiment SEBI has eased the creeping acquisition norms so as to allow promoters to increase their holding beyond 55%, upto 75%, through creeping acquisition of upto 5% per annum. The earlier limit of 5% per annum still remains and only promoters who are currently holding more than 50% would benefit in the near term as they are the ones who will be able to increase their holding beyond 55% immediately, the others who are currently holding say, 40% or so will take at least 3 years to go beyond the 55% mark and as such their share prices, at this juncture, do not get any support because of this move.

It may be noted that Sebi has mandated that such acquisitions could be done only though open market operations and not via bulk, block deal, or through preferential offer.

Further, till now, for any increase in the holding of promoters pursuant to buy back, exemption under the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations was required to be sought. SEBI has now decided to automatically exempt increase/consolidation up to 5 per cent per annum as a result of buy back by a company.

I am not sure how much of an effect this is going to have in the current tight liquidity scenario as, although the promoters have a great opportunity to increase their shareholding beyond 55%, but do they have the hard cash to do so, is the moot question.

Nomura offers up to 130% retention bonus to Lehman employees in India

2008-10-28T08:08:00.002+05:30

Despite tough market conditions retaining talent is still a challenge, especially if you are one of the failed Investment Banks.

Ensuring business continuity is the biggest challenge in a situation as the one faced by Nomura after its takeover of Lehman assets. However, with Investment Banking itself going through a tough phase it does take a lot of conviction and foresight to be able to take the calls as the ones taken by Nomura. Hats off to them as despite all the gloom and doom the world is actually not going to come to an end and these assets would pay off big time over the next few years.

Bar Council now amenable to Opening up of the Legal sector

2008-10-24T08:24:00.002+05:30

The Economic Times today quotes BCI member Jagdev:

“We have told the law ministry that we would consider applications of UK-based law firms only if they allow our lawyers to practice in their country. A stricter set of reciprocity rules would be laid out before we actually set out to start operations,”

The commerce Minister, Mr Kamal Nath, had spoken of this sometime back during his parlays at the WTO, however, there was no movement forward as the Bar Council was dead against it.

A number of UK based firms have already got a tie-up with Indian firms in the form of client referral arrangements such as Allen & Overy and Linklaters which have client referral arrangements with Trilegal and Talwar, Thakore & Associates, respectively. Others like Clifford Chance have liaison offices in India.

However, for the above to actually happen on the ground, it would need a legislative change, but now, it seems, it is only a matter of time.

India is the highest recipient of remittances from abroad

2008-10-23T22:43:00.002+05:30

The Minister of Overseas Indian Affairs, Shri Vayalar Ravi told the Rajya Sabha today that India is the highest recipient of remittances from abroad. About 40% of this is the estimated remittances received from overseas Indian workers including from semi-skilled and unskilled workers in the gulf.

The remittances from Overseas Indians for the year 2007 were estimated at US $27 billion. These are in the nature of private funds transferred by individuals for various purposes including to meet consumption expenditure of their families back home. The data in this respect is maintained by the Reserve Bank of India.
With the Foreign Exchange reserves rapidly dwindling due to the rapid increase in demand for dollars (owing to the FIIs selling and taking their money out of the country as well as the high cost of fuel), this could be a blessing in disguise and a route that should be encouraged by the government so as to balance the outflow of foreign exchange.

Finally, some movement on the Limited Liability Partnership Bill

2008-10-23T12:50:00.002+05:30

As reported across several papers, Shri Prem Chand Gupta, Minister of Corporate Affairs, in the government on Tuesday introduced the revised Limited Liability Partnership Bill, 2008 in the Rajya Sabha. The Bill provides for the formation and regulation of limited liability partnerships and for matters connected therewith or incidental thereto.

With the imminent opening up of the accounting and legal and other professional services sectors this Bill will play an important role in creating a level playing field for the professionals of India. The Institute of Chartered Accountants of India, has already made the necessary amendments allowing its members to partner with members of other professions. The other professional bodies are also making similar amendments to facilitate the process. This will help in creating larger multi-disciplinary firms which can service clients across domains.

Limited Liability Partnership (LLP) as proposed in the Bill, 2008 is a new corporate form that enables professional expertise and entrepreneurial initiative to combine, organize and operate in an innovative and efficient manner. In India, this need has long been recognised for businesses which may require a framework that provides flexibility suited to requirements of service, knowledge and technology based enterprises.

Services sector is playing a major role in the national economy and there is a growing diversity in the range of services being offered. The services sector would also find this form very useful. The advantage of the LLP form would be that it will not impose detailed legal and procedural requirements intended for large widely held companies on such enterprises. In this way it will also be useful for small enterprises.

The need for LLP legislation has been recognized for a very long time. Various committees and Expert Groups have, from time to time, recommended introduction of LLP legislation in India. In the last decade itself, Abid Hussain Committee (1997) had recommended this legislation in the context of SSIs. The Naresh Chandra Committee on Regulation of Private Companies and Partnerships (2003) and Dr. Irani Committee on New Company Law (2005) had also made recommendations for a separate LLP Legislation.

However, it is the recent initiative of the Ministry of Corporate Affairs that has enabled this legislation to be finalized and tabled in the Parliament.

Government had earlier introduced the Limited Liability Partnership Bill, 2006 in the Rajya Sabha on 15^th December, 2006. It was later referred to the Department Related Parliamentary Standing Committee on Finance for examination and report. The Committee submitted its recommendations in its report to both Houses of Parliament on 27^th November, 2007. The present Bill, 2008 has taken in view the recommendations made by the Standing Committee and other relevant inputs.

The salient features of the LLP Bill, 2008 are as follows:

(i) The LLP will be an alternative corporate business vehicle that would give the benefits of limited liability but would allow its members the flexibility of organizing their internal structure as a partnership based on an agreement.

(ii) The Bill does not restrict the benefit of LLP structure to certain classes of professionals only and would be available for use by any enterprise which fulfills the requirements of the Act.

(iii) While the LLP will be a separate legal entity, liable to the full extent of its assets, the liability of the partners would be limited to their agreed contribution in the LLP. Further, no partner would be liable on account of the independent or un-authorized actions of other partners, thus allowing individual partners to be shielded from joint liability created by another partner’s wrongful business decisions or misconduct.

(iv) LLP shall be a body corporate and a legal entity separate from its partners. It will have perpetual succession. Indian Partnership Act, 1932 shall not be applicable to LLPs. Since LLP shall be in the form of a body corporate, it is also proposed that the relevant provisions of the Companies Act, 1956 may be made applicable to LLPs at any time in the future by Notification by Central Government, with such changes or modifications as appropriate.

(v) An LLP shall be under obligation to maintain annual accounts reflecting true and fair view of its state of affairs. Since tax matters of all entities in India are addressed in the Income Tax Act, 1961, the taxation of LLPs shall be addressed in that Act.

(vi) Provisions have been made in the Bill for corporate actions like mergers, amalgamations etc.

(vii) While enabling provisions in respect of winding up and dissolutions of LLPs have been made in the Bill, detailed provisions in this regard would be provided by way of rules under the Act.

Prior to introducing the LLP Bill, 2008, Shri Prem Chand Gupta withdrew the earlier Limited Liability Partnership Bill, 2006.

Crystal ball gazing, where are we headed from here?

2008-10-22T22:25:00.002+05:30

"Your next-door neighbour can likely predict what is going to happen as accurately as we can." - Steve Jobs

This accurately sums up the debate today. In India everybody has an opinion about everything but the fact is that nobody knows where we are headed and what’s in store over the next couple of years. Today, on TV, there is a story of a couple killing themselves due to a set back suffered in the market. One day the market jumps 600 points and promptly the next day there is selling pressure bringing it back to the same or lower levels. The pundits who, at the beginning of the year, were talking of the sensex hitting 25,000 (some had even started talking of 50,000) are now asking ordinary investors to ‘have faith’ and keep invested for the ‘long run’. Try explaining this to a guy who had put in his life’s savings in the stock market and his corpus is now down 70%. What a mess, and we still have no clue as to where the bottom is, as we really don’t know how many more skeletons are yet to pop up across the world. Who all are guilty for this is another story, but as Jack and Suzy Welch said, quoting Agatha Christie, in Murder on the Orient Express, I guess, everybody is guilty in one way or another.

The only saving grace of being in India is that we are nowhere near a ‘recession’ and should grow between 6-7% even this year despite the global crisis. All of us who are getting regular calls from NRIs in the west should brace up for handling a greater influx of returning Indians this year, the only catch being – are these returning Indians capable of delivering under the Indian conditions? If not, just like a number of others, they will soon be going back to the west as soon as things improve a bit.

PS. Wipro has just announced its numbers and has cautioned about the future but TCS is still gung ho!

Section 79 of the Income Tax Act definitely needs to be amended!

2008-10-21T06:32:00.002+05:30

Was again faced with a situation where another client incurred the wrath of Section 79 and is loosing the right to carry forward substantial genuine business losses just on account of taking on a new (majority) shareholder.

Till 1989, before clause (b) was deleted from Section 79, there was the possibility for a genuine loss making company to take on a majority partner/ shareholder and still claim set off of losses in subsequent years so as to mitigate some of the hardship suffered earlier. The object of clause (b) was to ensure that the assessee was not deprived of the benefit of carry forward of losses unless the change in shareholding had been made with a view to avoid or reduce the tax liability. However, as the section stands to day, there is no discretionary power in the hands of the assessing officer to do anything in the matter and in all cases where there is a 51% or greater transfer of beneficial shareholding the right to carry forward and set-off previous years’ genuine losses is lost. This is downright unfair, and hard, on genuine entrepreneurs who have, firstly, lost a lot of their money in the venture and have to now doubly suffer on account of this stricture of law.

It just goes to show the lack of trust that the government has in its own administrative machinery and instead of trying to plug the loopholes for the misuse of Section 79, it has simply taken the easy way out and done away with the discretionary powers given to its officers, in the process putting all genuine business owners at loss. Looking at it in the context of the overall direct tax collection of the government, I don’t think this kind of set off would have had any material impact on the same, however, from the company’s point of view the impact is huge on each such company that is put to a genuine hardship (loss) on this account.

Circumventing the Takeover Code

2008-10-20T21:41:00.002+05:30

Kudos to the CNBC reporter, Sajeet Manghat, who has correctly analysed the scheme adopted by RIL to effectively circumvent the SEBI Takeover Code. The transcript, from the CNBC website, is as under:

“Delivery-based selling in RIL has gone up to 57.4% from 22.3% on Wednesday and there is also an increase in delivery volumes. The main reason why the stock is under pressure is because RIL has reclassified promoter shareholding ahead of warrant conversion. RIL has nearly 14% of its equity under treasury stock and classified under promoter and PAC. The treasury stock is held under petroleum trust and eight corporate bodies. RIL has converted eight corporate bodies into its subsidiaries. Subsidiaries lose promoter status and voting rights under regulations. RIL promoters converts warrants at Rs 1402 per share and infuses Rs 15141 crore. Promoter stake has fallen to 44.8% from over 51%. Post warrant conversion, RIL promoter stake has gone up to 49%. RIL promoter voting right also goes up to 52%. Warrant conversion has infused over Rs 15,100 crore into RIL funds”.

As per Section 42 of the Companies Act a subsidiary cannot hold shares in a holding company, however, a company which is not a subsidiary at the time it purchases the shares of the holding company and becomes a subsidiary later, due to the acquisition of its shares by the holding company, is exempt form the provisions of Section 42 (sub section 3). However, such a subsidiary then looses its voting rights (which in any case is irrelevant for a promoter who is already holding a high stake). Further, the subsidiary also looses its promoter tag under the Takeover Code and thus creates space for the promoter to acquire additional shares.

Would definitely like to someday connect with Sajeet and get more of these inside stories!

Shortage of labourers plagues India's construction industry

2008-05-05T15:02:00.002+05:30

The Wall Street Journal carried a timely story on the current shortage being faced by the India Construction and Infrasructure Industries. Till now it was the middle and senior level managerial personnel who were being wooed back and in what was labled as a 'reverse brain drain' but now we can see it happening at the bottom of the pyramid where some skills are in such short supply that the salaries have more than doubled!

What's the Secret of your Success?

2006-09-20T10:54:00.001+05:30

An excellant summation by Micheal Hyatt. We all have heard of (and experienced) what a positive attitude can help achieve, however, in today's times I would add another trait - curiosity, as I believe that in a Knowledge economy unless you have an inquisitive nature and are constantly seeking answers or trying to look into the future you would lag behind. This is what Mr Hyatt has to say on what he considers is the single most important trait -responsiveness.

As a CEO, I get asked this a lot. And, I'm always a little embarrassed by it. For the most part, I get the question from people who are in their twenties. They want to know “the secret path to the top.”

This past weekend, I received an email from one of my readers. He started, “I have an MBA, but I must have missed the course on Fast-Tracking My Career. If you had to boil it down to one thing, Mr. Hyatt, what would you recommend to a young, aspiring person such as myself?”

I'm not sure I could boil it down to one thing. Life isn’t usually that simple. But if I really, really had to boil it down to one thing, I would say this: responsiveness.

So many people I meet are unresponsive. They don’t return their phone calls promptly. They don’t answer their emails quickly. They don’t complete their assignments on time. They promise to do something and never follow through. They have to be reminded, prodded, and nagged. This behavior creates work for everyone else and eats into their own productivity. Sadly, they seem oblivious to it.

When I was a kid, we used to play “Tag.” The objective was simple: keep from becoming “It.” If someone tagged you (touched you), you became “it” until you tagged someone else. Whoever was “it” when the game ended, lost.

Business is very similar. People “tag” us in countless ways every day. They place calls. They send emails. They mention something to us in a meeting. Suddenly, we are “it.” And, just like the game, if you stay “it” too long, you lose. The only winning strategy is to respond quickly and make someone else “it.”

Reality is that we live in an “instant world.” People want instant results. They don’t want to wait. And if they have to wait on you, their frustration and resentment grows. They begin to see you as an obstacle to getting their work done. If that happens, it will begin to impact your reputation. Pretty soon people start saying, “I can never get a timely response from him,” or “When I send her an email, I feel like it goes into a black hole,” or worse, your colleagues just roll their eyes and sigh at the mention of your name.

Yet, these are the very people who will push you up or pull you down. You cannot succeed without the support of your peers and subordinates. (Go back and re-read that sentence again.)

As I was making my way to the top, my former boss, Sam Moore, used to ask everyone I worked with, “What’s it like to work with Mike?” “How’s he really doing?” “Do you think he could take on more responsibility?” In responding to him, all they had was their experience with me. If I hadn’t been responsive to them, how do you think they would have responded to his questions? “More responsibility? Are you kidding me? He can’t handle what he has now!” It wouldn’t take too many candid responses like that to tank my career.

And yet this happens to people all the time. I can’t tell you how many meetings I have sat in where people are complaining about someone else’s work habits. “He always waits until the last minute.” “She never plans ahead.” “I can never get him to respond to my emails.” You may think that the people who are making these comments are too far down the food chain to matter. I can assure you they aren’t. They have a way of bubbling to the top where the decisions about your career are made.

The truth is, you are building your reputation—your brand—one response at a time. People are shaping their view of you by how you respond to them. If you are slow, they assume you are incompetent and over your head. If you respond quickly, they assume you are competent and on top of your work. Their perception, whether you realize it or not, will determine how fast your career advances and how high you go. You can’t afford to be unresponsive. It is a career-killer.

My basic rule is this: respond immediately unless there is a good reason to wait. Obviously, this isn’t always possible, especially since I spend so much time in meetings. Nevertheless, I rarely let messages sit longer than a day. Twenty-four hours is the outside edge. If you can’t respond now, then at least acknowledge that you have received the message: “I received your message. I don’t have time to give it the attention it deserves right now, but you can expect to hear from me before the end of the day tomorrow.”

The great thing about being responsive is that it will quickly differentiate you from your peers. People love doing business with responsive people. Nothing will advance your career faster than this.

Warren Buffet on Value

2006-09-18T16:04:00.001+05:30

Price is what you Pay, Value is what you Get

Warren Buffet

Service Tax on providing Recruitment Services to Overseas Companies

2006-09-18T15:51:00.001+05:30

I have been asked by some TPR associates as to what is the
correct position wrt Service Tax on Provision of Recruitment Services to companies abroad.

In this connection I would like to, firstly, point out that Service Tax is a destination based consumption tax and it would, logically, be leviable only on services provided within the country and not be applicable on export of services.

However, as I had mentioned in one of my earlier posts, wef March 15, 2005 the Govt has introduced the Export of Services Rules, 2005 which have, subsequently, been amended from time to time. Hence, currently, the above query needs to be answered in the context of the said Rules and the amendments notified thereto.

As per Rule 3 all the taxable services have been divided into 3 parts, each part being represented by a sub-rule. Each part has a different set of criteria so as to treat the service provided therein as an “Export of Service” and hence become eligible for being treated as Exempt.

Suffice is to say that sub-rules (1) & (2) are not relevant to our query as they apply to

(1) Property based services i:e services which are related to immovable property and cover service providers such as Architects, Interior Designers, Real Estate Agents, Construction Services, Site Preparation Services, etc

(2) Performance based Services, i:e services which are performed by service providers either fully or partly outside India, the service is used in a business or for any other purpose outside India and payments are received by the service provider in convertible foreign exchange. Service providers covered under the said sub-rule are Stock Brokers, Practicing CA/CS/CWA, Security Agencies, Tour Operators, Event Managers, Travel Agents etc.

Manpower Recruitment or Supply Agency Services, along with many other services, are covered under the residual services category of sub-rule (3) of Rule 3 which is primarily for recipient based services and these services will be treated as Export of Services, if such services are used in or in relation to commerce or industry and the recipient is located outside India.

However, in case the recipient has any commercial or industrial establishment or office relating thereto in India, such services shall be treated as Export of Services only if the order for such service is made from outside India, the services are delivered outside India and used in the business of the recipient outside India as well as the payments are received, by the service provider, in convertible foreign exchange.

In case, the service provided is not used in or in relation to commerce and industry, the service provided will be treated as Export of Service only when the recipient of such service is located outside India at the time when such service is received. This would generally not be applicable to recruiters as their service would mostly be used in the business of the recipient outside India.

From the above the following situations emerge:

a) Where the Recruiter, in India, provides services to a Recipient (client) located outside India which does not have any commercial or industrial establishment or office relating thereto in India and such services are used in or in relation to commerce or industry by the recipient – then the said service is exempt and can be provided without payment of Service Tax.

b) Where the Recruiter, in India, provides services to a Recipient (client) located outside India which has an office or establishment in India but the order for commissioning such service is from outside India and such services are delivered outside India and also used in or in relation to commerce or industry by the recipient as well as the payments are received, by the service provider, in convertible foreign exchange – then the said service is exempt and can be provided without payment of Service Tax.

c) Where the Recruiter, in India, provides services to a Recipient (client) located outside India but such services are not used in or in relation to commerce or industry by the recipient – then the said service is exempt and can be provided without payment of Service Tax only in cases where the recipient is located outside India at the time when the service is received by it as well as the payments are received, by the service provider, in convertible foreign exchange.

In my opinion what is of great significance is that in the requirement of para (a) above there is no mention of monies being received in convertible foreign exchange and in para (b) there is an additional requirement of having to prove that the service was ‘delivered’ outside India.

As far as the para (a) requirement is concerned I am of the opinion that all Recruiters should play it safe and only treat those invoices as exempt from Service Tax where, even though they meet all the other conditions, the monies are actually going to be received in convertible foreign exchange.

As regards the requirement of proving ‘delivered’ under para (b) above, I guess, in case all the other requirements are met, then the Department needs to take a practical view in the matter and treat all such cases as exempt from Service Tax.

I look forward to all comments, queries and inputs.

Are global layoffs likely to benefit techies in India

2006-09-12T13:02:00.001+05:30

As I have pointed out in my earlier post, Offshoring is good for America, and even Jack Welch has stated that Outsourcing Is Forever - Jack & Suzy Welch, thus this story, in the Econimic Times, which has a slightly different take, is worth a look. In the end, I Think, it will come down to how effectively the Indian side handles the PR wrt this issue.

Global pink slips in the tech industry may end up benefiting India. As big-wigs like Intel, Sony, CA, IBM and Sun Microsystems announce the return of retrenchment, Indian HR honchos foresee a spurt in demand for low-cost, high-skilled destinations like India in the near future.
The chip-maker-in-distress, Intel, on Wednesday announced that it will reduce its global work-force by 10,500 by mid-07. But this is unlikely to have a huge impact on its India operations, which incidentally, is its largest development centre outside the US. The company refused to put any India numbers on the table, but indications are that investment commitments of over a billion dollars will stay, so the local layoffs may not be high. However, indications are that there could be a cap on hiring.

Indeed, with cost-cutting a major priority, Intel may outsource more to India, say market sources. “India could stand to gain from these global layoffs. Due to talent availability at cheaper costs in the Asia Pacific, Central America and East European regions, business processes are being restructured and shifted to these locations," says Pradeep Udhas, KPMG executive director and CEO, KPMG Resource Centre.

For instance, IBM, which announced axing of 13,000 jobs in Europe and the US, followed it up with plans to treble its investments in India over the next three years by pumping in $6bn towards its operations here.

Rakesh Malik, practice leader-global sourcing (India), Hewitt Associates, said: “With global competition fuelling restructuring efforts to attain greater efficiencies at low costs, firms are exploring different geographies outside the US.” A talent crunch in some markets further triggers the search for newer alternatives, he added.

Terming layoffs announced by Intel as a ‘correction’, Nasscom president Kiran Karnik said: “The industry goes through a business cycle. It is a temporary phase where the company is attempting to strike a balance between manpower and demand. As the business moves towards an upcycle, I am sure they will add people.”

Experts, however, point out that India Inc, through industry associations like Nasscom, needs to intensify efforts to manage its PR globally in order to deal effectively with the sensitive issue of job losses in countries such as the US.

AESC Member Search Firms Form Alliance

2006-09-12T11:38:00.000+05:30

One has been talking (and writing) about the evolution of new
business models for the past year or so primarily because of my
exposure to similar trends in the CA profession, where due to the
exponential growth seen by clients it is increasingly becoming
untenable for smaller boutique firms to effectively service their
client's needs (sometimes on account of their lack of geographical
reach/size and at times due to paucity of management/domain
bandwidth). In view of the same, the said professional service firms are adopting new and innovative strategies to overcome their size/expertise limitation and one of the models being increasingly adopted is the formation of an "Alliance of Firms" which operates under one brand globally but firm retains its independent identity too.

I had shared my experience in this regard with some TPRs and some of them had shown preliminary interest in the said model. In the meantime I have come across this "press release" and I would solicit the views and interest of all the members on whether they too feel there is potential in creating such an alliance and what could be the key stumbling blocks/ road blocks in actually creating an alliance of this nature. I am sure others would have had some experiences (or would have heard some war stories) in this regard and it would benefit everybody in case they shared these with the other readers.

As Peter F Drucker pointed out:

"Business once grew by one of two ways: grass roots up, or by
acquisition. Today businesses grow through alliances - all kinds of
dangerous alliance, joint ventures, and customer partnering, which by the way, very few people understand."

Although Mr Drucker is no longer with us in this world, his words of wisdom continue to provide deep insight into this continuously
evolving business paradigm.

Looking forward to all inputs.

NASSCOM creating a list of NO SHOW candidates

2006-08-24T12:38:00.000+05:30

We in our association have been implementing this for sometime now, however, I guess NASSCOM too has now woken up to this menace and is planning to create a list of such candidates who do not show up after accepting an offer. This list can be accessed by all major companies to check for any such behaviour by candidates in the past. Such candidates may also be blacklisted, making it difficult for them to work for reputed companies in the future.

While a candidate is perfectly within his/her rights to accept the offer which he feels is the best suited to his career path, however, it is very important that once they have made up their minds they show some basic courtesy by immediately informing all the companies from whom they have collected an offer letter about their decision. This would help these companies in working out alternatives in time and their work schedule and commitments to customers would not go haywire.

Why people leave an organisation

2006-08-23T22:51:00.000+05:30

Here is a message sent to me by someone which I would like to share. How true!

Every company faces the problem of people leaving the company for better pay or profile.

Early this year, Arun, a senior software designer, got an offer from a prestigious international firm to work in its India operations developing specialized software. He was thrilled by the offer.
He had heard a lot about the CEO. The salary was great. The company had all the right systems in place employee-friendly human resources (HR) policies, a spanking new office, and the very best technology, even a canteen that served superb food.
Twice Arun was sent abroad for training. "My learning curve is the
sharpest it's ever been," he said soon after he joined.

Last week, less than eight months after he joined, Arun walked out of the job. Why did this talented employee leave ?
Arun quit for the same reason that drives many good people away.

The answer lies in one of the largest studies undertaken by the Gallup Organization. The study surveyed over a million employees and 80,000 managers and was published in a book called "First Break All The Rules".

It came up with this surprising finding:
If you're losing good people, look to their immediate boss. Immediate boss is the reason people stay and thrive in an organization. And he's the reason why people leave. When people leave they take knowledge, experience and contacts with them, straight to the competition.

"People leave managers not companies," write the authors Marcus Buckingham and Curt Coffman.

Mostly manager drives people away?

HR experts say that of all the abuses, employees find humiliation the most intolerable. The first time, an employee may not leave, but a thought has been planted. The second time, that thought gets strengthened. The third time, he looks for another job.
When people cannot retort openly in anger, they do so by passive
aggression. By digging their heels in and slowing down. By doing only what they are told to do and no more. By omitting to give the boss crucial information. Dev says: "If you work for a jerk, you basically want to get him into trouble. You don't have your heart and soul in the job."

Different managers can stress out employees in different ways - by being too controlling, too suspicious, too pushy, too critical, but they forget that workers are not fixed assets, they are free agents. When this goes on too long, an employee will quit - often over a trivial issue.

Jack Welch of GE once said.

A company's value lies "between the ears of its employees".

Dangerous Alliances - Peter F Drucker

2006-08-23T11:15:00.001+05:30

"Business once grew by one of two ways: grass roots up, or by acquisition. Today businesses grow through alliances - all kinds of dangerous alliance, joint ventures, and customer partnering, which by the way, very few people understand."

Although Mr Drucker is no longer with us in this world, his words of wisdom continue to provide deep insight into this continuously evolving business paradigm.

Windows Live Writer

2006-08-18T23:06:00.000+05:30

Today, for once, after years, I used a MS product within days of its launch and I must admit I am pleasantly stumped! Although I have not used it extensively but the simple uploads that I did today worked like a charm. Uploading the same post onto different blog hosts was a cinch. Great stuff - till now.

Economy's racing but talent is still hard to come by

2006-08-18T17:26:00.000+05:30

It’s been 10 weeks now and Marut Sikka is still on the lookout. The Delhi-based food expert is looking for a chef for his client since June. “They are just not available,” he says. With the changing lifestyle and rising disposable income, the food and restaurant business in India is growing rapidly. The organised restaurant business, pegged at Rs 21,000 crore has been growing at 25-30%in the recent past. Big restaurants in Delhi alone, Mr Sikka estimates, would need up to 35,000 chefs.
But where will they come from? India does not have a single training institute for chefs. Most chefs who are good were trained on the job, and most have been picked up by international outlets. “Indian food and chefs are in demand,” he says. It’s the most serious issue for the industry, adds Mr Sikka.
This isn’t just about chefs. Add masseurs, hair stylists, event managers, interior decorators, florists and many more services professionals to the list. Garment exporters are looking for merchandisers. The auto industry is looking for design engineers. Infrastructure companies are looking for urban and town planners. A rapidly growing economy is creating plenty of jobs — but mostly in the services sector. But there aren’t enough trained professionals to take those jobs. “Employment and educational infrastructure — both haven’t kept pace with the economy,” says B Santhanam, CEO of Saint Gobain and chairman of CII HR committee. The scramble for talent is making headlines when 45m Indians are unemployed and many more underemployed as agricultural labour.
Clearly, an agrarian economy has leapfrogged to turn into a services-led economic engine — today, services sector provides over 60% to India’s GDP while agriculture and industry provides around 19 and 10% respectively. But the employment patterns are just the reverse. Over 56%of India’s workforce today is employed — often underemployed — by the agricultural sector. “It’s no rocket science — going forward industry and services will create jobs in future. To make that work, agrarian workers will have to migrate,” he says. Through training and skill development China has successfully managed to migrate 9m workers from agriculture to industry.
If India does not wake up its a time bomb ticking. The Teamlease Labour report estimates that if things continue the way they are, India will have anywhere between 8.4 crore and 21 crore (see table) unemployed workers in the country, depending on the rate of employment growth. Of course, literacy levels will matter. Given the trend growth in the 1990s, India’s working age population will have 233m uneducated and 157m primary school pass people. Hopefully the Left-backed government will go on a literacy overdrive to tackle that. But this isn’t just about literacy levels.

India's educational infrastructure has to be completely hauled up. Today professional orientation is very low — Of the total college enrolments, 84% in ‘04-05 is in arts and commerce or sciences. Only 16%of students were enrolled in professionals courses. Even in the small base of 16%, there is an issue of employability — barely 20% can be directly hired by the industry. “Training infrastructure set up by corporates will play a critical role,” says Vineet Kaul, director, HR Philips Electronics. Capacity building at colleges will be important. But they will also need to impart softer skills, introduce new courses and attune syllabus closer to the industry needs.
Not just at the high end, India Inc will need many more at the low-end in jobs like plumbing, brick laying, electrician, tailoring. "ITIs today offers training in only 40-45 trades, overlooking many other skills that the industry may need today," says Shailendra Sharma, former advisor, employment and training, Planning Commission. ITIs will have to evolve — already in five-six states, private sector is chipping in streamlining operations and training programs.
But migrating over 200m agrarian workers to other sectors of the economy will hold the key. “Private sector is willing to partner training in most areas but here the government's role will be critical,” says Mr Santhanam. CII is already piloting a project for the Tamil Nadu government where Rs 550 crore is being invested in grassroot training. At a national level, it expects Rs 5,000 crore annually will suffice to train 50 lakh agrarian workers. “It may sound big — but this investment will have a multiplier effect for the nation and the economy,” he said.

Source: The Economic Times

Pitfalls ahead for the booming KPO sector

2006-08-18T17:11:00.000+05:30

Supply side issues may yet trip up the growth story at the high end of the offshoring business.

The conventional wisdom so far has been that knowledge process outsourcing (KPO) is going to be India’s (and indeed, the globe’s) fastest growing sector over the next decade, growing at more than 40 per cent a year.

Upbeat estimates envision the global KPO business soaring from the current $2 billion to $16-17 billion by 2010, with India’s share of this newest, hottest sunrise sector at more than two-thirds, or $12 billion, and employing 250,000 people.

However, while a new White Paper by employment services firm Kelly Services is gung-ho on KPO, a study by RocSearch, a UK-based research services firm, warns that the size of the Indian KPO market in 2010 will be just a little more than $5 billion, and that it will provide employment to only 100,000 people.

Yet another employment services firm— Manpower Services— however offers a way out of current and potential problems through private-public partnerships.

The White Paper by Kelly Services, titled Knowledge Process Outsourcing (KPO)— An Emerging Opportunity, cites the usual reasons why India is considered “by far the most attractive KPO destination”: its competitive salaries (less than 40% of US salaries); proficiency in English (with more than 70 million people speaking it); and its large and competent pool of professionals (nearly 3 million new graduates every year).

A large number of Indian and foreign players have made a successful entry into the KPO domain in India. They include Evalue Serve, Genpact, JP Morgan, Morgan Stanley, SmartAnalayst, McKinsey, Value Notes, Netscribes, Smart Cube, WNS Global, Quest, HSBC, Office Tiger, Citigroup, Reuters, Fidelity, Tech Books, ITC Client Logic and Copal Partners.

“It is estimated that most of them will grow the India KPO business manifold in the coming years, while simultaneously a host of new players will enter the KPO segment in India,” says the Kelly study.

However, RocSearch warns that a severe talent crunch may limit India’s achievements in the KPO domain, forcing a scaling down of market-size expectations from $12 billion to $5 billion, and employment in the sector from 250,000 to 100,000. It adds that analysts may have overestimated the supply of skilled workers in the country.

There is currently an annual addition of more than three million graduates and professional degree and diploma holders to the existing of 100 million. India has the world’s second largest reservoir of engineers and scientists, and the second largest pool of IT manpower. More than six times as many Indians as Chinese go to universities. However, there is the issue of poor employability and competing demands from other sections of domestic industry.

RocSearch observes that, partly as a result of outdated curricula at many professional colleges, only a fraction of the qualified labour force can be considered suitable for employment in reputed companies. Of the three million educated workers added to the labour pool in 2005, it points out, only 500,000 “could be considered employable in a world-class company.”

RocSearch says this would bring down the number of India’s KPO employees in 2010 from the currently projected 250,000 to 100,000. At an average revenue per person of $55,000 in 2010, it projects that the sector will be worth a little over $5 billion by then.

Manpower Services points to the way forward in a White Paper of its own, titled Confronting the Coming Talent Crunch: What’s Next? The paper observes that as the talent crunch intensifies across countries, governments that are finding it difficult to recruit the right talent have started looking to employment services providers for ways to recruit and train individuals for positions that are hard to fill.

Indeed, Manpower has worked with government agencies in Australia, the Netherlands, China, the UK, the US and Canada to address supply-side issues on the labour front.

On the BPO front, private-public partnerships featuring NASSCOM, Dell, Microsoft, the Indian Institutes of Information Technology, and the governments of Andhra Pradesh and Chandigarh, have already taken off.

The NASSCOM initiative is called IT Workforce Development, in which some 20 companies are involved. This covers faculty development, mentoring and internship programmes, with professors work closely with companies.

Source: Business Standard

Court passes restraining order on Poaching

2006-08-18T16:50:00.000+05:30

The High Court of Delhi has passed a restraining order restraining Wipro Biomed's longtime partner Beckman Coulter from luring away its employees. Beckman Coulter is said to be preparing the ground for an independent foray into the Indian market.

With an acute shortage of talent being faced in sectors like Life Sciences, Aviation, IT and BPO this would establish some kind of a benchmark in the Indian scenario where where there is still no clarity on the validity of non- compete agreements.

In industries like Aviation considerable investments are made in training the Pilots and in case such a non-compete clause is missing then as per Capt Gopinath, Air Deccan Managing Director, "one fine day you see key people not having reported for work, and there you have a grounded aircraft. We spend considerable amount of money on training our crew."

Source: Times of India

Global Outsourcing Guide 2006 CIO/ A T Kearney

2006-08-01T13:49:00.000+05:30

The CIO's global outsourcing guide, prepared by A T Kearney, brings out how the offshoring world has changed.

The Executive Summary

India remains the leading offshore destination by a wide margin, particularly for U.S. and U.K. companies. "Every year, the risks of moving work to India get lower," says Dean Davison, VP of strategic outsourcing for Nautilus Advisors. "India is increasingly more adept at IP protection, providing resilient infrastructure and managing global relationships effectively." Although Gartner estimates that India currently holds 80 percent to 90 percent of the offshoring market, wage inflation and the increasing maturity of other low-cost areas threaten its future dominance. And as India's star has risen, so have its turnover rates—a growing concern for CIOs. Consequently, Davison expects India's market share to shrink 20 percent by 2010.

Today, less than 10 percent of American companies outsource to more than one country but "most are evaluating multiple locations," says Davison. China, for example. Experts say it could be a powerful rival to India in the next three to five years, even though it currently can't match India's large English-speaking workforce, its level of compliance with international law or its number of IT grads.

Labor and operational costs in Central European countries such as Poland, Hungary and the Czech Republic—attractive outsourcing options for Western European businesses—continue to rise, approaching the level of their customers. So penny-pinching European CIOs are looking deeper into the former Soviet bloc, to countries like Romania, Bulgaria and the Ukraine. Latin American destinations such as Costa Rica, Mexico and Brazil are beginning to attract U.S. back-office and call center work as the need to service Spanish-speaking markets grows. And A.T. Kearney suggests that the Middle East and Africa may be the next frontier for offshore operations—if the politics of the area stabilize.

Although labor costs will continue to be the driving factor behind offshoring, CIOs must internalize the "cost-versus-risk equation," says Ian Marriott, research vice president at Gartner. When going offshore, common risks (infrastructure stability, process maturity, security) become more conspicuous, and uncommon risks (human resource predictability, political stability, rule of law or lack thereof) emerge. Increased competition for the offshore outsourcing dollar promises to raise standards around the globe, but more opportunity equals more risk, and choosing a location is an increasingly complex decision—one we're hoping the "2006 Global Outsourcing Guide" will help you make.

Outsourcing Is Forever - Jack & Suzy Welch

2006-08-01T13:40:00.000+05:30

The issue for the U.S. economy isn't outsourcing -- it's bringing in more talent from overseas.

BusinessWeek columnists Jack & Suzy Welch say that the debate over outsourcing should be over by now. It was pretty much all about politics to begin with. The question now is not how do we stop outsourcing, but how do we use outsourcing to enhance competitiveness in what is, and forever will be, a global marketplace?

Well, I guess, this is another nail in the coffin of naysayers.

Resolved: Offshoring is good for America

2006-06-30T13:26:00.000+05:30

A great debate featured on Fastcompany. As Ashok Soota points out the issue has to be seen at a micro level and a macro level.

At a micro level, one must empathize with anyone who loses a job whether due to offshoring or obsolescence. Assistance in reskilling such persons must be available at a social and structural level.
At a macro level, jobs lost in one part of the economy are replaced by gains elsewhere. A well-known McKinsey study shows that the U.S. economy gains $1.14 in return for every dollar of offshoring spend in India.

These numbers don't take into account the additional gains from Capital investment. For example, the majority of the funding for MindTree and many other companies is from U.S. sources (institutional and individual) who will benefit when we go public.
The U.S., as the world's largest exporter of services, is the largest beneficiary of open markets. Also, countries with more open approach to offshoring like the U.S. and UK have lower levels of unemployment than relatively conservative economies like Germany and France. All of the above reconfirm that offshoring is good for America.

To say that "if the current trends continue, the US will soon be running a trade deficit in its service category" is not based on facts. The US is the world's No. 1 exporter of services (per WTO/Dept of Commerce report 2005) at $318 billion with 15% share of the world services market. The next largest is UK with 8% share. Indian share of the overall service market (of which programming is a part) is a paltry 1.9%. That HUGE gap is not going to go away soon as feared by you.

On the re-skill issue, I must share with you what happened to computer manufacturing in India when the market was opened up to global competition. Most manufacturers had to shut shop and were replaced by IBM, Dell, Compaq and HP. What happened to the people in India who used to manufacture computers? Some re-skilled themselves, some changed professions and some I am sure, were left behind. The onus to learn and add new value is a global imperative.

Retention becoming a major issue

2005-12-08T06:44:00.000+05:30

As the Indian IT Industry gains further momentum and comes closer to achieving its goal of US $50 billion the stakes are becoming high for the small and medium sized companies who are now finding it increasingly difficult to retain trained staff. As is evident from the statistics revealed by Nasscom, the IT industry body in India, the top 10 software companies are growing much faster than the rest and the number of professionals being added to their teams, every quarter, is phenomenal. Where are these people coming from? Whereas some are off course from the IITs, RECs and other training institutes, however, a significant portion are being poached from the smaller companies by promising better projects and a higher salary.

Just the other day I was in a meeting with the promoter of one such company, having around 200 employees across the world, who related an experience which corroborates this viewpoint. He had appointed a software engineer who was earlier drawing Rs 4 lacs per annum at a salary of Rs 6lacs. Within 15 days the employee was back saying that he had got an offer from one of the top 10 companies for Rs 8.5 lac per annum and he would be taking up the offer immediately. The Brand as well as the Salary offered by the Top 10 company won the day. How is the smaller company, as well as all the other such companies in the industry, supposed to tackle such situations?

Are we headed for a situation where most of the offshore work will consolidate behind the top companies and the smaller ones will either be bought out or close? OR is the Supply side going to change significantly in the near future to take care of this problem ?

Selling your Business

2005-09-29T11:29:00.000+05:30

I guess all entrepreneurs have an emotional attachment to their business which prevents them from even contemplating selling the same until circumstances force them to. This is typically true of Indian Entrepreneurs.

Just yesterday I was in meeting where it was established that even though one of the business units of the family was making continuous losses, and there seems to be no way out, still the promoter who had started the same and nurtured it over the years was continuing to cross subsidise the same instead of looking to exit. There are many such similar situations where the promoter’s emotions have prevented the right solution being adopted.

This led me to try and pen down what are the top 5 errors that most entrepreneurs make while trying to divest their existing business.

1. In todays world the only thing constant is change. As such it is most important to decide right at the beginning of a venture as to when you would like to make an exit. It is like the stock market, you invest in a share with a certain return in mind and then stick to the plan or you might end up loosing your shirt. In any case, even in case one has not decided this in advance, one should try and give it enough lead time or else one will not do justice to the exit strategy and end up loosing in the final deal. Further, in most cases the Buyer would want the existing management to continue for a specified period so as to achieve a smooth transition and that time should be also be factored in by the Seller.

2. Selling a business is not like selling Real Estate, although, today, even selling real estate has become complex. Businesses are of various types and shapes and consist of elements which can have a different meaning for different people. As such it is advisable to take the assistance of someone who has handled such transactions and not try to do it yourself. In most cases you will come out ahead by getting a better price. I remember in one of the transactions that I was involved in from the buyers side, one was able to bring down the valuation by more than 50%. The impact ran into millions of dollars.

3. Competition drives up the price. As such it is of utmost importance to try and have more than one buyer or else you end up loosing by not getting the right price. This is true of every transaction in any sphere of life. This too can be achieved by taking the assistance of Investment Bankers/ Management Consultants who specialise in such deal making. It will be well worth the effort.

4. Identifying the right buyer is another important aspect which needs considerable attention. Typically a Strategic Buyer would see a strategic fit with their current line of business and be agreeable to pay a greater price as compared to a Financial Buyer who is primarily looking at it as a specific period investment and would like to see returns by way of Dividends and Appreciation in value over a defined period before exiting. they would not normally interfere with the management of the company except to ensure proper financial discipline and control. A Strategic Buyer would see longterm value as the acquisition would strengthen and add synergies to its main business.

5. Although I have touched upon this in an earlier point, however, I have found that most SME sector entrepreneurs do not know how to project their key strengths / assets that could influence value substantially. You need to identify all your value drivers, both tangible and intangible, more so in case you are in the Services Industry. These could be the credentials of the management, the brand recognition, unique process or process maturity, intellectual property etc.

In the end it is best to remember the Biblical saying “Where there is no vision, the people perish”

Blog Search Gets Easier and Better– with Google

2005-09-21T18:05:00.000+05:30

The big daddy of search has recently launched its blog search and it works great ! I definitely like the clean interface and the way the results are shown.

Joel Cheeseman has an interesting take on the effect this could have on the online recruitment marketplace. We in the recruitment industry definitely need to give it a serious thought and, maybe, come up with ideas on how to leverage it.

What I will comment on is the crystal ball this offering seems to be for providing vertical search for other content. Say, oh, jobs for example.

Do a search and you'll see how the results are served. You'll notice results take you to actual blog entries and not homepages of blogs - just like they might take you directly to job listings. You'll notice results are incredibly timely.

You'll notice that results are ranked by relevancy. This is a big difference from most of the other blog search engines like Technorati, which default to a date-based sort.

This kind of ranking should be the secret weapon to Google’s blog search success. From limited testing, it appears to be a combination of timing, links, and keyword frequency.

And if you think of this in terms of job postings, the relevancy issue becomes very important. Here's an example: Do a search for online recruiting.

You'll notice that this very blog (Joel Cheesemans) owns a lot of real estate on page one. Am I the only one blogging about online recruitment? Of course not. But you may not know that looking at the results.

Could an employer leverage the same optimization tactics in a vertical search for jobs and push their competition down the ladder of results? You bet they can. And I think savvy employers will do just that.

You'll also notice the ability to get results via your favorite RSS feeder. Say goodbye to e-mail alerts.

For Monster, CareerBuilder, SimplyHired, Indeed, your local newspaper, etc., Google's move shouldn't be a surprise, but it should certainly be a wake-up call to what their futures may hold. In India Naukri, Timesjobs, Jobsahead, Newspapers would be equally affected as broadband becomes cheaper and easily available at low cost across the country. The 800-pound gorilla may soon be coming to their neighborhood too.

Manufacturing Sector – A loosing Battle ?

2005-08-26T10:25:00.000+05:30

In the past few months I have had the occasion to work on a couple of assignments looking for HR cum IR professionals for top manufacturing companies in India. I must confess the whole exercise has clearly made me realise the truth in the GDP numbers – that the Service Sector now truly constitutes 51% of the Indian Economy and Manufacturing only 26%. The workforce has also consequently re-aligned and their preference has shifted to the Service Sector (which also paying more !). It has become increasingly difficult to find professionals for leading institutes who are still in the manufacturing sector. XLRI, whose name includes “labour”, seems to turn out graduates who are forsaking the manufacturing sector for the Service Sector. Very few are wanting to get down to the shop floor and ‘dirty’ their hands. At the end of the day, I think, it is a matter of disparity in compensation packages which is resulting in this mismatch.

I guess this is a challenge the Business Heads (alongwith their Strategic HR Heads) need to urgently tackle or else it is going to be a downhill battle.

Employee Recruiting and Retention Ranks as Top Priority - Accenture Study

2005-08-08T12:07:00.000+05:30

Here's an interesting study by Accenture which finds that the Topmost priority of the Top Management today is “Attracting and retaining skilled staff”. People issues have dominated the Top 10 concerns of management. This is good news for Recruiters as with “Talent Acquisition” being centre stage their services would be in greater demand for locating high performing candidates through headhunting and their networks. The other Top 10 priorities too are an interesting read.

The study, which Accenture conducts annually, comprised interviews with 425 senior executives at leading organizations in North America, Europe and Asia to identify and prioritize the issues of greatest concern to senior management, understand how their priorities shift over time and identify key forces behind the issues.

Workforce improvement-issues dominated the top priorities, comprising 4 of the 10 most-selected concerns, including the top 2. For instance, the greatest number of respondents, 35 percent, selected "attracting and retaining skilled staff," followed by 33 percent who selected "changing organizational cultural and employee attitudes." Other workforce issues in the top 10 are "improving workforce performance" (selected by 28 percent to rank 7th) and "developing employees into capable leaders" (selected by 26 percent to rank 10th).

"The most powerful theme emerging this year is a strong and consistent focus on people," said Peter Cheese, global managing partner of Accenture's Human Performance practice. "Even though the business conversations have centered on global competition and the need for execution, business leaders are increasingly aware that nothing happens unless people-talent is engaged in the right way."

Customer-retention issues also occupy top spots on executive agendas. Both "acquiring new customers" (32 percent) and "increasing customer loyalty and retention" (29 percent) were popular responses across all countries surveyed.

Innovation also rose on the executive agenda, ranking relatively higher and making it back into the list of top 10 issues on executives' list. "Developing new processes and products to stay ahead of the competition" is the fourth-highest-ranked executive concern, selected by 29 percent of respondents. Another top 10 issue is "being flexible and adaptable to rapidly changing market conditions," selected by 26 percent.

"Innovation, like expansion, seems to be an issue that rises in importance when the economy improves. That may be natural, but it is also short-sighted," said Cheese. "Innovation should never be out of mind - possibly even more so in tough times."

The only IT issue in the top 10 is "using IT to reduce costs and create value," selected by 27 percent of respondents to rank 8th, a sharp decline from its number 2 ranking in each of the past two years. "Although ranked relatively lower, the use of IT continues to be a major focus, as businesses are becoming more demanding in driving value from IT in the form of improving employees' productivity, engagement and capabilities," said Cheese.

Top 10 current business issues for senior executives

1.Attracting and retaining skilled staff 35%
2.Changing organizational culture and employee attitudes 33%
3.Acquiring new customers 32%
4.Developing new processes and products to stay ahead of the competition 29%
5.Increasing customer loyalty and retention 29%
6.Managing risk 29%
7.Improving workforce performance 28%
8.Increasing shareholder value 27%
8.Using IT to reduce costs and create value 27%
10.Being flexible and adaptable to rapidly changing market
conditions 26%
10.Developing employees into capable leaders 26%

About the study
As part of an annual study to identify senior executives' top concerns, Accenture conducted a survey of 425 senior executives at many of the world's largest organizations across all major industries and the public sector in the United States, United Kingdom, Germany, France, Italy, Spain, Japan and Canada. Respondents included executives at the highest levels of senior management ("C-suite" executives) as well as heads of key functional areas, such as human resources. Fieldwork was conducted from October 2004 through January 2005.

The Hunters and the Hunted

2005-07-29T13:41:00.000+05:30

Today’s Corporate Dossier in the Economic Times carries a story on the Recruitment Industry and how the war for talent is helping hunters make a killing. It does, however, lament the lack of talent availability resulting in the Hunters becoming the Hunted. I have been mooting the idea of an organized training program being conducted by our profession for quite sometime now and we have discussed the same in the association (NAESCON) too over the past few months, however, things are moving a bit slowly. I think this article reinforces the crying need for such a structured programme in India and I feel that all members of the fraternity who can contribute to help bring this idea to fruition should come forward and lets create a steady stream of fresh talent for the industry. This is starting to happen in the BPO Industry, so why not in this niche area ? Poaching from each other is definitely not the solution

Now even the WTO supports Offshore Outsourcing.

2005-07-14T11:28:00.000+05:30

Till now it was NASSCOM and its head, Kiran Karnik, who was fighting the battle on behalf of India against “Offshoring” or “Offshore Outsourcing”. However, we now have a WTO Report that has downplayed the impact of Offshoring on production, employment and trade patterns. It has supported its analysis with statistics – the offshoring of IT Services constitutes on 10% (approx) of the total world export of business services. If we look at it in context, IT jobs in the US constitute only 2.3% of the job market of the US.

So what are we really talking about ?

Great Customer Service - through Ownership

2005-07-03T19:25:00.000+05:30

WOW ! This experience, related by Jeff Blackman, really makes me envious and has got me thinking as to how one can implement a program to inculcate this ‘ownership’ feeling and consequently such excellent customer service qualities in ones organization. It should definitely be easier to implement in a smaller business organization.

The Ritz Rules!

Who consistently delivers great service?

That's an easy one. The Ritz Carlton. I've never had a bad experience at a Ritz. And if something unexpectedly goes awry, they fix it. Fast!

Three months ago, I stayed at The Ritz in Orlando. The Ritz does little things right. Like at check-in, they offer you a glass of fresh lemonade. (I've noticed that other hotels are implementing a similar service strategy, by offering at check-in, glasses of i.e., champagne, juice or bottled water.)

And when I asked where the elevator was, Dena at the front desk didn't merely point toward the elevator, she personally escorted me there.

Later, at 6:00 p.m., I called room service. The phone was cheerfully answered by Gloria. She took my order and then said, "Mr. Blackman, please let me recap, to make sure I've got it right." (Confirmation now, often eliminates problems later.) I then asked, "Gloria, would it be possible to have dinner arrive at 7:00 p.m., since I'm leaving now to run in the fitness center?" She replied, "Absolutely! We'll see you at 7. Enjoy your run!"

At exactly 7:00 p.m. I returned. I was there, but dinner wasn't. At 7:11 I called Gloria and said, "I'm lonely!" She immediately apologized and said a rush would be placed on my order. At 7:22 there was a knock at the door. It was Rupert from room service. He said, "Mr. Blackman, Gloria and I once again apologize that your dinner has arrived late. Tonight, your meal is compliments of the Ritz."

Whoa! Cool! (Especially since the bill would have been over $350! Chicken nuggets ain't a bargain at the Ritz! Just kidding!)

I thanked Rupert for his gracious hospitality with a generous tip. I also gave him a tip for Gloria. He was surprised, but grateful.

Then, I called Gloria to express my thanks. I said, "Gloria, that was very thoughtful of you to comp my dinner." To which she said something remarkable. It was only a one-word response, but it was unforgettable. She replied,
"Ownership." (Meaning, even if it wasn't her fault, she still owned the problem. And, the solution. She didn't assign blame. She delivered satisfaction.)

I asked, "Gloria, is that your word or are you trained to say that?" Her response, "Mr. Blackman, it's simply part of our Ritz ethics and commitment to our customers." Yikes! I wanted to know where I could buy her books!

Lessons to learn and things to consider:
• What little things are you doing that'll yield BIG results?
• How can you improve your customer's experience?
• How many moments of magic or touch-points do you have with a customer?
What subtleties will elevate their value?
• How do you get others to talk about you and your business with phrases
that begin with:
o You're not gonna believe...
o Wait till you hear what happened to me...
o Have I told you about the time...

Oil Price and Shortage of Jobs

2005-07-01T11:55:00.000+05:30

Just the other day Business Today carried a story on Skyrocketing Salaries and things could not have been looking better. However, experts tell us that everytime there has been an oil price surge in the past it has been followed by a recession leading to a shortage of jobs. Should the Recruiting Industry be concerned - as the oil price has crossed US$ 60 and as per the Goldman Sachs warning, issued earlier this year, it could cross US $105. Experts have said that a small blip in the production could have a dramatic impact on oil prices as a small demand supply imbalance could heighten the actual effect.

Being an optimist and a believer in the fact that there are still some good and intelligent men and women at the helm of affairs of this world, I hope the situation will not go out of hand and we Recruiters will not be left chasing clients and consequently jobs, as well as the skyrocketing salaries, would not just vanish.

How are the others reading the future ?

Something’s phishy – Wakeup Call for Recruiters !

2005-06-29T11:56:00.000+05:30

One of the leading lawyers of India, Diljeet Titus, has analysed, in the Economic Times, the landmark judgment in the case of National Association of Software and Service Companies vs Ajay Sood & Others, delivered in March, ‘05, wherein the Delhi High Court declared `phishing’ on the internet to be an illegal act, entailing an injunction and recovery of damages. The case involved a placement agency involved in head-hunting and recruitment.

Without reproducing the whole article, the operative part that is most relevant to our profession is given hereunder. Sourcing being and integral part of our profession, I would request comments from all as to what they are doing to adhere to such norms and what we could do, as a profession, to incorporate certain self-regulatory norms so that we do not end up like the telemarketing companies – who are now being regulated excessively the worldover.

The Delhi HC stated that even though there is no specific legislation in India to penalise phishing, it held phishing to be an illegal act by defining it under Indian law as “a misrepresentation made in the course of trade leading to confusion as to the source and origin of the e-mail causing immense harm not only to the consumer but even the person whose name, identity or password is misused.” The court held the act of phishing as passing off and tarnishing the plaintiff’s image. The plaintiff in this case was the National Association of Software and Service Companies (Nasscom), India’s premier software association.

The defendants were operating a placement agency involved in head-hunting and recruitment. In order to obtain personal data, which they could use for purposes of head-hunting, the defendants composed and sent e-mails to third parties in the name of Nasscom.

The high court recognised the trademark rights of the plaintiff and passed an ex-parte ad interim injunction restraining the defendants from using the trade name or any other name deceptively similar to Nasscom. The court further restrained the defendants from holding themselves out as being associates or a part of Nasscom According to the terms of compromise, the defendants agreed to pay a sum of Rs1.6 million to the plaintiff as damages for violation of the plaintiff’s trademark rights. The court also ordered the hard disks seized from the defendants’ premises to be handed over to the plaintiff who would be the owner of the hard disks.

This case achieves clear milestones: It brings the act of “phishing” into the ambit of Indian laws even in the absence of specific legislation; It clears the misconception that there is no “damages culture” in India for violation of IP rights; This case reaffirms IP owners’ faith in the Indian judicial system’s ability and willingness to protect intangible property rights and send a strong message to IP owners where they can do business in India without sacrificing their IP rights

Skyrocketing Salaries – Good times ahead !

2005-06-27T13:26:00.000+05:30

Yesterday I was speaking to someone and found that he had missed this issue of Business Today which I feel all of us definitely need to go through as it has a number of great nuggets wrt our profession as well as the Industry at large. One thing is for sure, we cannot complain of inflation as it gets adequately taken care of when we get paid our fee on a percentage basis (specially on enhanced remuneration numbers !)

Other than talking in detail about some of the High Growth Sectors such as Aviation, Financial Services, Engineering/Manufacturing, IT-Enabled Services, IT Services, Pharmaceuticals, Real Estate, Retail, Telecom it also goes on to list the skill sets which are in demand and says that the professionals, with those skill sets, are commanding a premium as there are not enough of them there to meet the demand.

Indeed, execs at headhunting companies (some insist they be called HR consultants focussed on recruitment; others are happy with the more prosaic search firms) rattle off a list of executives who have recently moved jobs and the impressive salaries at which they have moved. R.S. Prasad moved from Dr Reddy's to head Chennai-based Orchid Chemicals and Pharmaceutical's formulations business at a salary of Rs 1.5 crore a year; Lloyd Mathias left Pepsi where (page 53) he was Executive Vice President (Marketing), to head the marketing function at Motorola India at a salary significantly higher than the Rs 50-60 lakh-a-year he was earning at the beverages major; Sanjay Viswanathan moved from igate (he was head of Europe) to GECIS as Managing Director, Europe, at a salary of $300,000 (Rs 1.32 crore); and Padma Ravichander signed on as head of Perot Systems India (from Oracle) at a salary of $325,000 (Rs 1.43 crore). "Indian salaries, especially for senior managers, is fast racing towards the $250,000 (Rs 1.1 crore) mark," says Venkatesh Shastry, Associate Director, Stanton Chase, a headhunting firm. "This is comparable to the compensation in the us for middle-to-senior-level positions." The Indian salaryman has arrived.

It's celebration time for salaried professionals with salaries nudging the magical Rs 1-crore-a-year mark. The good news - things can only get better.

Where is Online Recruitment headed ?

2005-06-16T16:32:00.000+05:30

eBay Google Look to Lists

Here is an interesting article from Red Herring. Although it talks about eBay too, however, the moot question is - Where is the Online Recruitment business headed ? It would be interesting to see what would be the impact on online Portals such as monster, dice, hotjobs, naukri etc.

As revenue growth slows in other areas, big Internet companies take a lesson in success from sites like Craigslist. Internet companies have woken up to the fact that listings may be theroute to a larger audience and fatter profits.

While eBay has alreadywet its feet, Red Herring has learned from sources close to Google that the search giant plans to get into listings as early as next month.

Online and print classifieds make up a $100-billion global industry,according to estimates from Classifieds Intelligence, an interactiveadvertising consulting and research firm. It's a market thelarger search and e-commerce giants could easily tap.

"All these companies are trying to create new communities ofpeople who didn't advertise before," said Jim Townsend,editorial director at Classifieds Intelligence."You can argue `these are free,' butmost of them have schemes for up-selling to advertisers."

For Google, listings would be a natural progression, as it has single-handedly transformed online advertising into an integral part ofmarketing campaigns for small- and medium-sized businesses.Regardless of what kinds of listings it gets into, it would beanother stream of revenue. Google declined to comment on its plans.

Many newspapers have begun to offer certain categories of onlineadvertisements for free, in an attempt to draw the audience thatfound newspaper classifieds too expensive in the past (see TechSpin:Papers Fight Google).

Many Internet companies, hampered by a deceleration in revenuegrowth, are betting on listings, too. eBay, for one, has zeroed in onlistings as a new source of revenue to combat its slowing growth overthe past year.

eBay made its most aggressive foray last week when it boughtShopping.com for $620 million. But it had stepped into the field in2004 when it dished out $415 million for Rent.com and also took a 25percent stake in locally focused listings site Craiglist.org.

eBay also bought Dutch classifieds web site Marketplaats.nl for $290million and German vehicles listings site Mobile.de for $149 million.

In March, eBay launched Kijiji.com, a group of web sites carryingclassified listings across more than 90 cities outside the UnitedStates. It's a concept similar to Craigslist, but implementedabroad. Kijiji expanded last month, too, through its purchases ofclassifiedweb sites Gumtree.com and Loquo.com.When it announced its acquisition of Shopping.com, the online auctionhouse said it wanted to reach a wider audience. Shopping.com had 22.6million unique visitors in April, according to comScore Media Metrix.That might be a small number when compared to eBay's 63.8 millionin the same time frame, but it's a number that reflects anincrease of 15 percent over the past year, compared with eBay's6 percent.

When it announced its acquisition of Shopping.com, the online auctionhouse said it wanted to reach a wider audience. Shopping.com had 22.6million unique visitors in April, according to comScore Media Metrix.That might be a small number when compared to eBay's 63.8 millionin the same time frame, but it's a number that reflects anincrease of 15 percent over the past year, compared with eBay's6 percent.

Jobless Growth in todays Globalised World

2005-06-13T15:54:00.000+05:30

Commenting on “Jobless Growth” The Finance Minister, Mr P Chidambaram, had this to say in his Budget Speech this year.

“In the last Budget, I had rejected the idea of jobless growth. As I unfold the vision of the UPA Government, Hon’ble Members will note that the central theme that runs through the various schemes and programmes is creation of jobs. Assured irrigation facilities to an additional 1 crore hectares of land over a period of five years will generate employment for an additional 1 crore people at the rate 1 person per hectare. The food processing industry is growing at a rate which generates 2.5 lakh jobs every year. The textile sector alone has the potential to create 1.2 crore jobs over the next 5 years. The information technology (IT) industry is expected to offer an additional 70 lakh jobs by 2009. Construction industry is also expected to throw up lakhs of jobs. Sectors with potential for generating employment will receive the highest attention of the Government.” This is what is called “reform with a human face”.

It is all very well to reject the idea of jobless growth, however, the ground realities need to be factored in. As per news reports, Mr Juan Somavia, director-general, International Labour Organisation (ILO), has said that the growing gap between wealth generation and job creation is becoming a serious threat to international security, development and democracy and needs to be addressed urgently. Further, the ILO chief said at the ILO’s 93rd International Labour Conference “This global jobs crisis is the most pressing political issue of our time,”. Illustrating the contrast between a healthy global growth rate of 5 pct and a disappointing expansion in employment of only 1.7 pct in 2004, Mr Somavia said, “World output increased by nearly $4 trillion, yet global unemployment was reduced by only 500,000.” The imbalance between globalisation and growth and job creation was illustrated by the fact that about 1.4 billion people are unemployed or considered working poor, with almost half the world’s labour force living on less than $2 per day.

In todays increasingly globalised world job growth is very much dependent upon external factors within each sector and cannot just be controlled by launching schemes within the national borders.

In the face of such challenges can India’s political and bureaucratic establishment rise up to the occasion and come up with innovative policies for the upliftment of the working class. We have to wait and see.

Strategic Alliances Part II

2005-06-13T11:06:00.000+05:30

Strategies for the Small...

Having said this, the salvation of those third-party call centers that do not have sufficient working capital, lies in:

Getting over the mindset of waiting for inbound support work and immediately taking on outbound telemarketing work for which there is no shortage. Essentially, they need to ensure that they keep the right kind of sales staff with good communications skills so as to achieve a reasonable sales per hour (SPH). This will make the center viable, or
Entering into a build, operate, transfer (BOT) contract with a foreign customer so that they can transfer the whole unit to the outsourcing party after the completion of a pre-defined period, say in two to three years. Thereafter, the learnings from the BOT can be used to set up another venture.

... And for the Big

In case the call center firm has deep pockets, it can:

Set up a marketing office in the US and start working on customer acquisition—this can be a long and strenuous process and cost a tidy sum
Make a strategic investment in a call center outsourcing or service bureau in the US/UK so as to acquire the latter’s customers and migrate the processes offshore. This too can take time and considerable amount of financial resources
Embark upon a plan to enter into a strategic alliance, maybe even a joint venture, with some outsourcing provider or end-user client in the US or Europe which helps them gain the customer relationships of the foreign partner as well as its knowledge of successful management and delivery of processes.

On a consulting assignment in the US and Europe, and met a number of companies there in the SME sector. There is tremendous immediate interest in the US in offshore outsourcing, and although Europe is a bit slow on offtake, there too is an active interest in exploring the possibility of going offshore with support services. In sum and substance, due to the enticing value proposition, the business opportunity is very much there and it’s just a matter of adopting the right strategy to tap it.

All in the Alliance

Before we go any further it is important to understand what a ‘strategic alliance’ is.

Strategic is something that ties up with the strategic plan/vision, and is relatively long-term—focusing on long-term goals and justifying a commitment of resources. Strategic also means that it’s not tactical in intent.

Alliance constitutes an interdependent activity with an emphasis on cooperation and collaboration that requires resource commitments from more than one company and often requires continuing parent/owner support.

A strategic alliance can take various shapes—it may or may not entail equity investments, and may or may not maintain independence, multi-product/service, or a full life cycle.

An increasing number of global organizations are finding that a strategic alliance is a fast and flexible way of accessing complementary resources and skills that reside in other companies and an organization’s ability to enter into and effectively manage strategic alliances can provide a sustainable competitive advantage to it.

For a successful alliance it is very important to ensure that the top management acts as the champion and has full commitment to the alliance. But before that, it should be committed to the process and allocate the time required to enter into a successful relationship. It should show the ability to internally communicate the mission/rationale for the alliance, have the ability to obtain, and later ensure, the continued maintenance of the internal team’s commitment, and last but not the least, stay closely involved with the post-closing implementation stages.

Although a detailed roadmap for structuring an alliance is beyond the scope of this article, it is important that a well laid-out process is followed. It all starts with, first, getting internal approval from the owners/top management/stakeholders and conducting a due diligence for the possible conflicts and overlaps. After identifying the probable alliance partner, it is important to check upon its track record, the tenure of its existence, and its financial health over the period of existence so as to be assured of its stability. Initially, it is also better to establish the partner’s exact fit and determine whether it would complement the activities of the call center and help gain a foothold in both onsite and offshore spaces. One also needs to identify areas of conflict and competition as these could even lead to a collapse of the alliance later. Finally, it is very important to ensure that the alliance is equally important and strategic for the alliance partner as well, or else all the efforts will go waste.

For a successful negotiation it is critical that extensive meetings are held internally to identify major issues in advance, establish achievable targets, prepare business openings and even identify the deal breakers.

Once an alliance is in place, it is important to manage the same and ensure that all tasks have owners and deadlines, that the team takes out the time and allocates enough time to focus on overseeing the alliance. Even though alliances cannot be said to be risk-free, if managed well, they offer a very good option to other expensive, time consuming and less efficient options. Today, ‘alliance management’ is increasingly being considered as a ‘competency’ and can deliver rich rewards for an organization that effectively leverages the same.

Recruitment Firms - limited only by their Vision and Resources

2005-06-01T12:00:00.000+05:30

Looking at today's robust economic environment and the fact that the real action, on the economic front, over the next few decades is going to be in the Asia Pacific region, I believe that the Recruitment Outsourcing business is headed for good growth and the winners will be the ones who have the vision and the resources to implement the same.

Janaki Krishnan writes in the Business Standard that even as India emerges as a hub for critical talent, not only in software but also other sectors, recruitment and placement agencies are gearing up to meet this challenge. In the recruitment space, managed services is seen as the next big wave.

Managed services essentially refer to recruitment process outsourcing, where companies will be outsourcing their entire process recruitment which will essentially be a mix of on-site recruitment, temp staffing and managed services.

Tarun Bali, managing director of ABC Consultants, among the largest placement agencies in the country, is extremely bullish about the recruitment scene in India.

“With the economic environment so robust, the recruitment industry will grow even faster.” He however cautioned that the only impediments to growth would be in the quality and volume of recruiters.

Job seekers can take heart from the fact that compensation levels will approach client standards.

Clients themselves will go back to working with a few partners which means that recruitment and placement firms will have to increase their delivery capability. “Only these kinds of firms will grow,” Bali said.

At present, delivery is a big issue with clients. Working with multiple partners - as many as 30 in some cases - client organisations are forced into this situation owing to lack of concern for quality, time lines and weak candidate management by recruitment partners.

There is shortage of quality recruiters which is still not considered an attractive industry to work in.

Industry watchers said that another turned which would emerge is that recruitment firms will have to tap into emerging employment sectors such as retail, Information Technology and IT enables services.

Bali estimates that retail is expecting 20 lakh new jobs in six years. While in the case of IT and related sectors there will be gaps in specific areas.

“Therefore recruiting partners need to work with the industry in identifying potential sources and partner with them in training and workforce management,” Bali said.

Multinational recruitment agencies are already in India and the result of this is that staffing will approach western standards in three years, while level of employees “deputed” to employers will move up, more and more senior executives will begin to work “flexi”.

“Recruiting firms in India will have greater opportunity of working with clients overseas in their quest for Indian talent, as India becomes hub for critical talent,” said Bali.

For niche segments such as biotech, animation, IT product development, research and development in auto sectors there is not enough talent available in India.

Here the recruiting challenge will be the ability to attract critical talent from overseas. Thus both client brand and recruitment firm brand will determine who will get the talent first. This will require firms to work on building their employer brand.

The challenge will be to tap talent in B and C class towns especially for sectors like retail, insurance, call centers and so on.

Bali pointed out that recruitment agencies will be limited only by their own vision and resources. “This is the time to think Big,” he said.

What Could Bring Globalization Down?

2005-05-27T09:40:00.000+05:30

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.

Women outnumber men in Recruitment Firms

2005-05-26T10:11:00.000+05:30

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

'Phone calls will be free by 2015'

2005-05-25T17:42:00.000+05:30

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.

Legal outsourcing makes its case

2005-05-23T12:58:00.000+05:30

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.”

Six on 10, surely you`re joking?

2005-05-23T12:39:00.000+05:30

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.

Alliances: The Right Choice

2005-05-22T17:44:00.000+05:30

'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 .........

State of Indian Politics

2005-05-19T11:16:00.000+05:30

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 !

MSN Desktop Search Launched

2005-05-18T10:23:00.000+05:30

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.

Fringe Benefits Tax – FAQs

2005-05-13T22:45:00.000+05:30

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;

Service Tax implications for Recruiters - Budget 2005

2005-05-11T13:35:00.000+05:30

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.

Services Export Promotion Council (SEPC) gets off the ground

2005-05-11T11:32:00.000+05:30

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

“Networking & Capacity Building”

2005-05-10T10:15:00.000+05:30

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.

Formation of an NGO

2005-01-09T22:42:00.000+05:30

An NGO can either be a registered or an unregistered
body and, in case it is to be a registered body, then it
can be formed in any of the following three ways:

1)As a Trust
2)As a Society
3)As a Company u/s 25 of the Companies Act, 1956

In case the NGO is looking for external funding then it
would be a good idea to register it as it would give some
comfort to the donors - be they National or International.
Even for Income Tax purposes it would be good idea to
create an instrument and register the same. Similarly
for FC (R) Act. It should be noted that all NGOs
with an Income in excess of Rs 50,000 are required to
get their accounts audited as per the conditions stipulated
by the Tax Department while granting exemption.

As regards collections, once one has an entity one
can open an Bank account and take donations by
cheque. In case one intends not to register then one can
be treated as an Association of Persons (AOP) by the
Bank and it can open a Bank account in the AOP’s
name.

The Recruitment Function

2005-01-09T22:35:00.000+05:30

‘HR needs to play a Strategic Role’ or ‘HR should be
a business Driver’ in any company has been a case
of more ‘talk the talk’ than ‘walk the talk’.

All these shortcomings of HR(perceived or otherwise)
need to be delinked from the Recruitment function and
this can be achieved by forming a separate department
for Recruitment which, I am sure, will find immediate
recognition and acceptance from the line managers –
as their own success depends upon finding the right
candidate for the job within their department..

As Human Capital actually becomes the core of every
organisation - and the main differentiator between
competitors which has the potential of creating and
sustaining competitive advantage- the importance of the
Recruitment Function rises manifold. Now the
Recruitment function needs to become part of the various
business processes that the company relies upon to
successfully and consistently deliver quality output,
competitively. Consequently, it has to start taking
responsibility, like any other line function, and stop
playing a supporting role.

Having said that, can we outsource such a Strategic
or ‘Core’ Function ? Outsourcing has increasingly become
Strategic and more and more companies are Outsourcing
different processes today than ever before, however, what
is being outsourced are non-core functions only and nothing
that forms the core activity of the Company.

The benefits of outsourcing I don’t think need to be
repeated here and it need only be said that some part
of the Recruitment process can definitely be outsourced
effectively and advantageously.

I believe that the way forward is in segregating the
sub-functions of ‘Search’ and ‘Selection’ within the Recruitment
process and further segmenting the hiring basket and adopting
a different approach, as well as hiring sources, for backend
or support staff and a different approach and sources for top/
critical/ strategic positions.

Who is liable to pay Service Tax ? and be Penalised for Default ?

2005-01-09T18:49:00.000+05:30

The occurrence of a “Taxable event” triggers the imposition of Tax.

It is the act of ‘import’ that triggers the levy of Customs Duty.
It is the act of ‘manufacture’ that triggers the levy of Excise Duty
It is the act of ‘Sale’ that triggers the levy of Sales Tax
It is the act of ‘providing service’ that triggers the levy of Service Tax.

The liability to pay Service Tax is upon the Service Provider, just
like the other Acts mentioned above. Against imports it is the Importer
who has to pay the Customs Duty, it is the Manufacturer who is
liable to pay the Excise Duty and similarly it is the Trader who has
to pay the Sales Tax to the government – whether they include the
said duties/ levies in their price charged to the customer or not.

Thus, in case the Service Provider does not stipulate that the Service
Tax would be charged separately, at the rate applicable, then the
Price charged for the ‘service provided’ will be deemed to be inclusive
of the Service Tax component and the Service provider would be liable
to pay the same proportionately. It has been clarified by the govt that
it is not necessary to show the Service Tax charged separately in the
Invoice. In case of default it would be liable to be penalized as per law.

With the services sector now constituting more than 50% of the GDP
it is but natural that the govt look towards it to raise taxes and not just
rely on the manufacturing, trading and agriculture sectors.