Search Now


Saturday, August 25, 2007

Software testing is big revenue spinner for cos

Software testing arms of IT companies are growing, revenues indicate. Interestingly, these businesses are also helping companies enter new geographies.

Testing is an independent function that verifies software developed by third parties or clients. It indicates flaws and bugs in software that companies are suggested to correct through their software development vendors.

Mr Arun Ramu, Vice-President and Head, Independent Validation Services, Infosys Technologies, says Internet growth has resulted in in-house applications (usually not properly tested) becoming public to clients, partners and customers. Failure in such cases can impact businesses badly and hence testing has become vital today.

Infosys’ testing team has been doubling in size every year for the last three years, he said without sharing any numbers.
Doubling headcount

Over last year Cognizant Technology Solutions has doubled headcount in testing services to about 6,000 people. Ms Sumitra Gomatam, Vice-President, Cognizant, said these numbers were indicative of revenue growth, attributing it to demand from clients – new and existing.

“Clients realise their budgets on software maintenance are high and want to reduce this by finding and eliminating software defects at early stages through rigorous testing,” she said. Over 200 of Cognizant’s 430 clients use its testing services.

The company was able to enter Europe through its testing business and is now seeing clients there move software development projects to Cognizant’s Indian offices.

Wipro Technologies, currently with over 6,500 employees in testing, entered Japan, Australia, New Zealand, West Asia, Portugal and Romania via testing. “Ten out of the 40 clients we bagged in the first quarter of 2007-08 came as a result of our testing business,” Mr Sanjay Seth, General Manager, Marketing and Alliances, Wipro Technologies, told Business Line.
Training investment

Wipro is investing about $2,500 per employee in training them to undertake certificate courses in testing. “Clients show a preference for such employees and their billing rates are also higher,” he said. Having automated 40 per cent of its testing work, the company is focusing on high end testing for the future.

For Mr Dilip Dhanuka, Senior Vice-President and Head – Products and Technology Initiatives, Patni Computer Systems, testing is emerging as a mainstream activity, on par with product development.

“We see this industry growing at current rates for the next 2-3 years. In future, we want testing to support all the 50-60 activities Patni currently offers,” he said.

The global offshorable market for testing, growing at about 60 per cent, is estimated to be worth about $3.5 billion, of which India’s share could be $750 million - $1 billion, reports say.

JK Cement

JK Cements

A Left Prime Minister?

A Communist politician might become India’s Prime Minister sooner than later. But it won’t be Prakash Karat, who, at 58 in 2005, became one of the youngest General Secretaries of a Communist Party anywhere in the world in recent times (Mikhail Gorbachev was 54 when he was appointed to the post. PC Joshi became General Secretary of the CPI at 28. But that was in 1935).

However, two things will stop Karat from becoming the most important man in India: he puts ideology before practical politics; and he doesn’t understand economic issues too well, by his own admission. But Karat will be the man who will decide who India’s first Communist Prime Minister will be. If he sticks to his instinct and purity of conviction, that chance might be around the corner.

Sometimes, unabashed political speculation and scenario building cuts closer to the bone than you think. Look at the following scenario: Over the next few weeks or months, the Left parties withdraw support to the UPA government. After limping along as a minority government, the Congress calls for elections. It loses seats in Andhra Pradesh, Maharashtra, Tamil Nadu and Delhi. It gains from Chhattisgarh, Madhya Pradesh, Rajasthan and Kerala. It has 145 MPs today. Its numbers dip to touch 100 or 120.

Meanwhile the Left does its own planning. It is already in touch with the Samajwadi Party (SP) and the Telugu Desam Party (TDP). The Dravida Munnetra Kazhagam (DMK) is hoping it will never face a situation where it has to choose between the Congress and the Left [the 35-strong Congress is shoring up (95+18) members of the DMK-PMK coalition government in Tamil Nadu. In an assembly of 235 MLAs, the 15 MLAs of the Left parties support the DMK — which is why it can tell the PMK where to get off. If any one of the allies rocks the boat and the delicate balance is disturbed, the DMK government will have to decide which ally it wants to dump — losing the Congress support could mean losing the Tamil Nadu government; losing Left support means less leverage at the centre and some erosion of the Muslim vote].

Today the SP, TDP, DMK and the Left parties add up to 123 MPs in the Lok Sabha. As the TDP is only going to increase its tally, and the others are unlikely to lose too many seats, the chances are this number will change only marginally. The Congress, on the other hand, will drop seats. The short point of a long argument is that if elections are held in the next four months, it will be a close call whether the Congress or the Third Front stakes claim to form the government. And if the Third Front is indeed in a position to get the numbers and the Congress has no option but to support it, guess who will become Prime Minister?

A Communist, possibly, but not Prakash Karat. One reason is his relative reluctance to address economic issues. In the past, he has always delegated decision-making on this to other party colleagues, whether it is the pension or the EPF or FDI caps. Of course, his broad position is that PSUs should be supported and that social sector spending shouldn’t be curbed. But when it comes to the nitty-gritty of say, the patents issue, it is not economics that is Karat’s forte. It is politics.

How does Karat look at political power ? His view is that the BJP is the biggest Left enemy. But you can throw the BJP out after five years, while once the US sets root in India, it won’t be possible to turf it out for 50 years. In the last six months, Karat has been telling partymen that the US is gaining more and more control of India, whether it is in the garb of joint military exercises (the massive demonstration against joint air exercises at Kalaikunda in West Bengal was called off by the Buddhadeb Bhattacharjee government after the Prime Minister called him) or its economic stranglehold.

Of course, Karat’s political instinct has failed him and the party miserably in Kerala. He is on excellent terms with both V S Achuthanandan and Pinarayi Vijayan. The problem is they hate each other’s guts. There is now so much money floating around in Kerala politics that it is hard to differentiate between ideology and opportunism. And the party cannot do without either leader.

Karat is also — though it may not immediately be visible to the naked eye — staunchly anti-Congress. Unlike Jyoti Basu and Harkishan Singh Surjeet who, till ten years ago, were quite keen to experiment a stint in government even if it was supported by the Congress, Karat has always favoured a strong Third Front that the Left is able to control. But he will be the first to say that regrettably, this formation is not strong enough yet to form a government.

The operative word is ‘yet’. There is a clutch of ‘ifs’ before a Third Front government can stake claim to power. One, they need to have the numbers. Two, the Left has to be clear about what it wants to do with the numbers. Three, the Congress has to want to support them in realising their ambition.

Karat’s advantage is his clarity of thought. You always know where you stand with him. He has said that Nandigram shouldn’t have happened — that it was a blot on the CPI(M) image. He has been warning the government for months on the Indo-US civil nuclear agreement. His friends say someone should have listened to him. Maybe then things would have been different.

Weekly Technical Analysis, Strategist - Aug 25 2007

Weekly Technical Analysis, Strategist - Aug 25 2007

IPO myths

Lots of investors who may have subscribed to the initial public offers (IPO’s) are under the impression that they strike a goldmine when the IPO lists at a premium. But this may not be entirely correct.

Promoters’ wealth swells when the shares list at a premium as in most cases they have a majority holding. But whether the IPO listing has been profitable for retail investors can be understood from the following illustration. (In this study, only companies that have floated their IPOs with issue price above Rs 100 per share in calendar year 2007 and listed at a premium have been considered.)

Suppose a person invests Rs 1 lakh (the cap for small investors) in IPOs of two companies. Let us select from our sample a company whose shares ended with the highest premium on the day of listing, and a company whose shares closed with the least premium.

Everonn Systems’ shares settled with the highest premium on day 1, while DLF’s shares closed with the least premium.

By investing Rs 1 lakh in Everonn Systems’ IPO, the investor would have effectively applied for 714 shares. But because of the huge subscription of 123.80 times in the retail segment, he would have been allotted only six shares. The profit on day 1 would be Rs 338 per share (difference between close price and issue price). The investor would have made a total profit of Rs 2041 (Rs 338* 6 shares). The return on investment (ROI) in this case is just 2.03% (i.e., Rs 2041 earned on investment of Rs 1 lakh).

However, when the same investor puts in Rs 1 lakh in the DLF IPO, he would have applied for 190 shares and got full allotment of 190 shares as the retail portion was subscribed just 0.97 times. The profit on day 1 would be Rs 45 per share (difference between close price and issue price). The investor, thus, would have earned total profit of Rs 8550 (Rs 45* 190 shares). The ROI in this case is 8.55% (Rs 8550 earned on investment of Rs 1 lakh).

From this comparison it is seen that a retail investor with an investment of Rs 1 lakh earned 4.19 times more profit in a company which settled with the least premium on day 1 than the company which settled with the highest premium on day 1. Effectively, this means besides listing premium, oversubscription has an impact on investors’ return on investment. Higher the oversubscription lower is the return.

India Strategy - Aug 24 2007

India Strategy - Aug 24 2007

Dow gains 143pts, Tata Motors up 6%

US stocks gained on Friday as strong data on home sales and durable goods orders relieved anxiety about the economy and soothed confidence after weeks of market turbulence.

While the Dow zoomed 143 points to 13,379, the Nasdaq Composite moved up 35 points to 2,577.

All the major indices finished with weekly gains of over 2% after banks stepped up efforts to stave-off further woes due to the subprime crisis.

Indian ADRs, too, logged gains yesterday. Tata Motors gained nearly 6% at $16.45. HDFC Bank and ICICI Bank moved up over 4% each to $84.30 and $42.47, respectively. Infosys, Satyam, Wipro, Genpact and WNS advanced 1-3% each yesterday

Weekly Industry Trends Report

Weekly Industry Trends Report

Weekly Global Market Analysis

Weekly Global Market Analysis