Outsource Bulgaria

Indian outsourcing company Satyam suffered a severe backlash when it was discovered billions were squandered by management.

Satyam Computer Services, the scandal-ridden solution provider based in India, this week unveiled a marketing overhaul intended to function as the rebirth of the company.

In April, Tech Mahindra agreed to purchase 31 percent of Satyam’s shares, resulting in an infusion of $351 million (U.S.) into the beleaguered Indian outsourcing firm. At the beginning of the year, the former chairman of Satyam confessed to $1 billion in fraud. B. Ramalinga Raju, his brother Rama Raju, Chief Financial Officer Srinivas Vadlamani, and two Price Waterhouse auditors have been charged with forgery and falsification of Satyam accounts and for causing disappearance of evidence.

This week, the firm unveiled its new brand identity, “Mahindra Satyam.” The logo takes a cue from Mahindra’s current design.

So you can see how a deep belief in reincarnation can actually help Indian outsourcing companies!

Computerworld has a new article on offshoring and recession. The results from the survey the author did were quite surprising – the offshore outsourcing held pretty well.

Global outsourcing companies experienced slight contraction of revenue but this was compensated by higher margins:

IBM’s strategic outsourcing business saw a 3% decline in revenue but an improvement in margins. On a like-to-like basis, HP’s services revenue declined 15%, but like IBM, it did see an increase in margins. HP saw a significant decline in its application services business as discretionary project work fell away. CSC also saw its outsourcing revenue decline by 13%, attributed to client delays and pullback of discretionary projects. Outsourcing bookings during the quarter were also down 50%, but like the others, CSC did improve its profitability.

What’s ahead for offshore outsourcing?

Special mention must be made of the increased use of offshoring by global and European outsourcers, and the emphasis on productivity and delivering value by select Indian players. We will see an increased use of offshoring, no doubt, but in a rational, rather than blind, way. It’s fair to say that the recession is wiping away the inefficiencies of the system. Those who recognize and adapt will be the real winners.

I was recently contacted by a Chinese company specializing in 3D art for games. The company boasts a portfolio including Microsoft’s Age of Empires and other A-games.

The rate is a very reasonable $10 per hour and most 3D models were taking between 10 and 16 hours. This makes game outsourcing to China an important competitive consideration, especially if you’re in a competitive field (and who isnt?).

My new project (RiftForge) doesn’t require 3D, so I had to pass. Fortunately, I found the best 2D talent to be in Indonesia. Stay tuned for an update.

AP reports on Dalian’s ambitions as a new outsourcing capital:

Along with SAP, Hewlett-Packard Co., IBM Corp., Britain’s BT Group PLC, Japan’s Yokogawa Electric Corp. and some 230 other foreign companies have flocked to Dalian in the last decade. Now, a critical mass of development is coming. Ground broke this year for both a $2.5 billion Intel Corp. factory and a $6.5 billion nuclear power plant for the city…

The revenue of $1.9 billion generated last year in Dalian by operations such as writing and testing software, operating computer systems and accounting and finance is still dwarfed by outsourcing in Bangalore. The Indian city, Asia’s leader in the industry, brought in $11.3 billion from such operations in 2006.

This just in from the Sofia Echo:

The website of Kendar Holdings, the investment company owned by solicitor Michael Lynn, has been suspended, the Irish Independent reported on October 22 2007.

Lynn, who has over 105 properties in Slovakia, Bulgaria, China, Spain, England, Dubai and Ireland, was alleged to have taken out multiple mortgages on several properties with major Irish banks, with alleged loan liabilities of more than 26 million euro…

The website was suspended on October 21 after a week in which several banks moved to protect their loans and recover some 26.3 million euro owed to them by Lynn.

The court case against Lynn would continue on October 22, the Independent reported.

This might explain why no one returned my emails when I was selling Kendar.com a few months ago!

VMware raised close to a billion USD in an IPO second only to Google in recent IT history. Here’s a bit more details on the stock offering and VMware’s solutions.

Analysts say VMware’s shares should soar to a significantly higher value than the opening price. “This could be in the $34-to-$35 range at the end of the trading day,” said Brian Babineau, a Silicon Valley-based analyst with Enterprise Strategy Group. “Their business model and their growth due to their technological competitiveness is extremely well received by customers and the marketplace as a whole.

“This has more of a Google feel than a traditional enterprise software company,” he said. “They’re one of the only tech companies that have shown upward of 80 percent annual growth consistently in the last few years.”

Matrix Partners venture capitalist David Skok said VMware is prospering from “a white-hot market” in the virtualization software that it helped pioneer. “This is the hottest thing going right now in the computing world,” said Skok, a director of VMware rival Virtual Iron.

Virtualization represents a software solution to a hardware problem, enhancing the computing power and flexibility of information-technology systems, while reducing energy costs.

This is a piece of news that’s not outsourcing-related. Since it made CNN’s frontpage, however, it’s impossible to ignore.

Five Bulgarian nurses and a Palestinian doctor were pardoned by President Georgi Parvanov upon their arrival in Sofia on Tuesday after spending eight-and-a-half years in prison in Libya.

The six medics, who were sentenced to life in prison for allegedly contaminating children with the AIDS virus, arrived on board a French presidential plane with French first lady Cecilia Sarkozy and the EU’s commissioner for foreign affairs, Benita Ferrero-Waldner.

The group was immediately greeted by a delegation of government officials and family members.

“I waited so long for this moment,” nurse Snezhana Dimitrova said before falling into the arms of her loved ones, The Associated Press reported.

“This is the result of very tough and long negotiations … between the European Union and Libyan authorities,” Bulgarian Foreign Minister Ivailo Kalfin said. “It has been a long discussion and debate with Libya until we reached this agreement.”

Bill Burnham has a post that discusses Indian outsourcers and their impact on the free software movement.

Let’s post the two examples he’s giving:

For example, one Open Source company mentioned to me that several Indian outsourcers were aggressively using their distributions as way to cheaply prototype solutions for clients without having to actually buy a license. If the clients bought the prototype, the outsourcer could deliver the solution with the “free” open source software embedded in it and stick the client with the maintenance. The pricing headroom created by the lack of up front license fees in the project allowed the outsourcer to lower prices and/or improve margins on their upfront work, while the Open Source software firms got the back-end revenue stream. A real win/win.

Now, the part where Indian outsourcers actually hurt open-source companies, who rely on their support fees to break even.

For his CRM system, his outsourcer recommended a well known Open Source CRM platform and even offered to customize it for his needs. This would seem to prove the above point in spades expect for the fact that in addition to the customization work the outsourcer offered to do all regular maintenance and support for $10/hour. This meant that my friend had no need to buy a support contract from the Open Source CRM company which means, being a cash poor entrepreneur, he didn’t.

If there’s one thing for certain, it’s that you can’t argue with $10/hour. Any organization faced with the option to choose between their “trusted” outsourcer at $10/hour, and for example, Red Hat’s $100+ support, will choose the cheaper option.

In a flat world (as Thomas Friedman would have it), considering that the quality of the support is the same, it’s not economically efficient to hire resources in the US and ask them to support a global clientele. Red Hat certainly has the option to go India or China and get the best support resources there.

US President Bush arrived in Sofia yesterday. The scoop from the International Herald Tribune (AP):

In Sofia, thousands of Bulgarians — many waving small American flags — lined the cobblestone main street through Nevsky Square as an honor guard played both countries’ national anthems. Bush greeted Bulgarian soldiers who have served in Iraq and Afghanistan, and then worked the crowd, reaching in to shake hands as the locals beamed and cheered.

A bit of recent history in the next paragraph:

Bulgaria shed communism in 1989, and it became a member of NATO in 2004 and the European Union in January. Its parliament recently extended the Iraq mission until March 2008, and last year, Bulgaria signed an agreement with Washington allowing U.S. troops to use Bulgarian military facilities.

In a purely outsourcing context, it makes me think about the price of stability but this begs a separate post.

Vietnam is holding general elections on Sunday.

The ruling Communist party (I mean Workers party!) is the undisputed leader. Less than 20% of the candidates are NOT members of the Communist Party, so the result cannot be that surprising.

In the mean time, courts have put on trial and jailed a number of political activists and journalists. Two of them were occused of attempts to sabotage the elections.

It’s not cleat what these elections will mean for the thousands of businesses who have invested in Vietnam on the promise of a liberlized market. Intel has already committed to build a billion-dollar chip factory.

One thing is certain – whatever the Communists decide to do, they better not scare these investors. China is a good example of a roaring economy with waving red flags.