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March 21, 2004

E-Loan puts positive spin to offshoring

"Opt for India to get your work done faster": E-Loan; "Yes, we'd like that": customers

At a time when other US companies are playing it safe and even asking their offshore outsourcing service providers not to talk about their contracts, Pleasanton, CA-based online lender E-loan Inc. is putting a positive spin to its offshore outsourcing operation.

E-Loan has an outsourcing deal with a BPO services firm (reportedly, Wipro), under which the latter's employees located in India process requests for home equity loans made by E-Loan's US-based customers. Since early February, E-Loan has been expressly asking customers whether they would like to have their loans processed in the US or India. The company also tells customers that going for the India option, would mean that their loans get processed 2 days faster. E-Loan's testing has shown that 86% of customers prefer to go for the faster processing (read India) option.

Click Here to read E-Loan's press release about its new program.

Click Here to read a news agency PTI report based on an article Wall Street Journal.

"Offshoring an 'brain drain' for the US"

In an article titled "An Unseen Peril of Outsourcing" in BusinessWeek Online, columnist David Gumpert warns US companies that in sending work offshore, they are exporting crucial knowledge and might be left with precious little when faced with a crunch situation. "As we send jobs to foreign businesses, we also send critical knowledge about processes, procedures, and development. When business conditions change, a company can't just go to the other side of the world and reclaim those things. The new owners aren't likely to give them up," Gumpert says.

The article describes the case of AM Communications (AM), a Quakertown, PA-based provider of software used by cable-TV operators to monitor their systems, which has an offshore outsourcing relationship with Trivandrum, India-based Network Systems & Technologies (NeST) Group. The two companies had been working together since 1998.

In August 2003, AM filed for Chapter 11 bankruptcy. According to the BW article, 2 competing bids were received for AM's assets: one from the company's Chairman, Javad "Jay" Hassan, an Indian-born American who had worked for IBM and other companies (and who had initiated the outsourcing relationship with NeST), and another from a group of former AM employees. However, the investor who had offered the former employees backed out because he "got spooked" since he realized that "not only were the manufacturing and development services based in India, but that the company's most important knowledge -- software and engineering savvy, not to mention its development expertise -- also had departed the US".

Click Here to read the full article.

March 19, 2004

Bioinformatics: the market that never was?

The bioinformatics market, once touted as the "the next big opportunity" for Indian IT services companies, never really took off. So much so that several companies, including Hyderabad-based incubation firm I-Labs, have start to abandon this space.

An article in Express Computers examines the reasons why bioinformatics failed to deliver on its promise and how companies like TCS and venture-backed Strand Genomics are coping.

Click Here to read the full article.

March 07, 2004

The Zenta Group story

The Philadelphia Inquirer has profiled US and India-based Business Process Outsourcing (BPO) firm Zenta Group. The article provides some hitherto unknown facts about Zenta as well as some good PR for the company's offshore operations.

Zenta was originally founded as a subsidiary of Mumbai-based real estate development firm The Hiranandani Group. Priya Hiranandani (Age: 27) serves as the company's CEO. Intrepid Capital Partners LLC, a venture capital firm founded by Warren "Pete" Musser (who earlier founded Safeguard Scientifics Inc.) and Non-Resident Indian Cyrus K. Vandrevala, acquired a 50% stake in Zenta in September 2002 for an undisclosed amount. Hiranandani and Vandrevala married in February 2003, according to the Philadelphia Inquirer article.

US-based debt collection firm NCO Group (formerly known as National Collection Office) is one of Zenta's largest customers. The company, which currently employs 1,900 (and recruits about 120 each week) expects to go public by year end.

Click Here to read the Philadelphia Inquirer article.

Click Here to visit the Zenta Group web site.

March 06, 2004

Hurdles facing the US biotech industry could benefit Indian cos.

"For all the enthusiasm that beats through the veins of the biotech industry, it remains a risky business, prone to delay, disappointment and outright failure," says a recent article in Mercury News. "In its quarter-century history, biotech has produced just 175 marketed biotech drugs. Only 70 of the 1,400 biotech companies have drugs on the market, despite spending $200 billion on research and development," it adds.

The Mercury News article profiles the travails of a Texas, USA-based biotech firm Tanox which has taken 16 years and spent (along with its partners Genentech and Novartis) hundreds of millions of dollars in developing an anti-asthma drug Xolair. And its success is still uncertain.

In order to cut costs, some US bio-tech firms are now looking to outsource their research and clinical trial processes to India. "I am here not to just talk about ideas, but also I am looking for outsourcing opportunities for my company," Vipin Garg, CEO of North Carolina, USA-based Tranzyme Pharma told Economic Times during a recent biotech conference held in Hyderabad.

Ace venture capitalist Vinod Khosla, during his latest trip to India, recommended that India can benefit significantly by having a liberal policy towards its bio-tech industry. He pointed out the area of stem cell research, which has been facing opposition from religious leaders in the US, as an especially ripe area for Indian bio-tech companies.

Where is Intel Capital headed

Though it has earned $3 billion on its investment portfolio over its 13-year history, Intel Capital lost $1.1 billion over the last three years. But no one at chip giant Intel Corp. is complaining about the hit caused to the company's earnings by its VC arm, says a BusinessWeek article. Why? "Intel Capital's real job is to help sell chips, not rack up investment returns. The idea is that if certain technologies take off because young companies invent cool new gear, a lot of that gear will need Intel semiconductors. Even if the gear doesn't, it'll boost demand for more powerful PCs and servers that run on Intel chips," the article adds.

The 200-person Intel Capital invested $700 million in 120 deals in 2003. Almost $575 million went into two companies--Micron Technology and Elpida Memory--developing next-generation memory chips. "Intel needs faster PC memory to clear a potential logjam in delivering movies and other digital content in PCs and home networks. If consumers like the idea, Intel will cash in as more homes add second PCs," the BW report adds.

Click Here to read the full article.