The Top 15 Global OutSourcing IT-BPO Service Providers Based on Revenues

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The global IT industry is a multi-billion industry with thousands of companies employing millions of workers . Within the industry one of the major subsectors that has experienced strong growth in the past few years has been the Business Process Outsourcing (BPO) sector. According to Wikipedia BPO “involves the contracting of the operations and responsibilities of specific business functions (or processes) to a third-party service provider”. For example, a BPO contract may involve Dell outsourcing all their call center operations for US customers to a BPO provider in India, Philippines or some other country thereby saving millions of dollar in labor costs.

The BPO industry continues to grow as large companies especially in the developed world try to maintain high profits by cutting costs. Among the emerging countries, India is the main destination for companies looking to outsource IT functions though other countries are trying to become competitive. The following chart shows the tremendous growth of the IT-BPO revenues in India:

Source: NASSCOM

Key highlights from a report on the NASSCOM site:

Milestone year for Indian IT-BPO industry-aggregate revenues cross the USD 100 billion mark, exports at USD 69 billion.

Within the global sourcing industry, India was able to increase its market share from 51 per cent in 2009, to 58 per cent in 2011, highlighting India’s continued competitiveness and the effectiveness of India-based providers delivering transformational benefits.

The industry continues to be a net employment generator – expected to add 230,000 jobs in FY2012, thus providing direct employment to about 2.8 million, and indirectly employing 8.9 million people.

As a proportion of national GDP, the sector revenues have grown from 1.2 per cent in FY1998 to an estimated 7.5 per cent in FY2012.

The industry’s share of total Indian exports (merchandise plus services) increased from less than 4 per cent in FY1998 to about 25 per cent in FY2012.

The Top 15 Global OutSourcing IT-BPO Service Providers Based on Revenues in 2009 are listed in the table below:

[TABLE=1060]

Source: World Investment Report 2011, UNCTAD

U.S. IT giant IBM (IBM) employs over 426,000 workers globally. Since the implosion of the dot com bubble IBM shifted most of the jobs from the U.S. to other countries especially to India. Today the company has more employees in India than in the U.S. IBM’s focus on the growth of BPO services and the shifting of jobs to overseas cheaper locations has helped its earnings which in turn has contributed to the strong performance of its stock over the past few years.

IBM’s competitor Hewlett-Packard Company (HPQ) has over 324,000 employees in over 50 countries. More than one-third of its employees in the HP Services unit are based in India. Indian outsources Tata Consulting Services and Wipro (WIT) employ thousands of workers both in India and overseas and are large enough to appear in the global ranking list. All the other firms listed above also have some form of presence in India.

Disclosure: No Positions

Chart: Performance of Foreign Bank Stocks YTD

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Equity markets worldwide started the year strong. However in the past few weeks they have been highly volatile with most of the markets declining considerably from the highs reached this year. The Year-To-Date (YTD) performance of some of the major indices are noted below:

S&P 500 Index: 3.0 %
CAC 40: -4.8%
DAX: 6.3%
FTSE 100: -5.5%
IBEX35: – 23.3%
Bombay Sensex: 4.5%
Shanghai: 6.6%
Bovespa: -3.9%

The FTSE Athex index of Greece reached a 22-year low this week. Spain’s IBEX35 index has reached levels reached during the peak of global financial crisis in 2009.

Financials have been hit especially hard this year as the crisis in Spain, Greece, Italy in Europe continues and many banks are still dealing with the impact of heavy losses from the credit crisis of 2008. The following chart shows the YTD performance of exchange-listed foreign bank stocks traded on the US markets:

Click to enlarge

Source: BNY Depository Receipts

The worst performers so far this year are Argentine, Spanish and Greek banks. Brazilian banks Banco Bradesco(BBD) and Itau Unibanco (ITUB) are also down by double digit percentages this year.

Disclosure: Long some of the banks shown in the chart

Labor’s Share of Income Plummets While Peronal Dividend Income Soars

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U.S. Corporations posted record profits in 2011 according to the latest Fortune 500 list published by Fortune magazine earlier this month. Despite the high unemployment rate in the country, the biggest 500 companies raked in a record-breaking $824.0 billion in combined profits last year. This amount is up 16% from 2010.

Exxon Mobil, the highest ranked firm in the list, alone made a profit of $41.1 billion, up 35% from previous year. The oil giant’s dramatic rise in profit is simply the result of sky-rocketing oil prices in 2011.

Meanwhile since the global financial crisis millions of workers have lost their jobs and many continue to remain unemployed. In April, the unemployment rate stood at 8.1% with some 12.5 million Americans unemployed according to official BLS data.

As U.S. companies’ profits soar many pay a higher amount of their earnings in dividends. Since most of the outstanding public stocks are held by the wealthy the majority of the dividend payments go to them. However for many years labor’s share of income has declined. In fact, according to a report by the Council on Foreign Relations labor’s share of income has plummeted since 2009 while personal dividend income as a percentage of disposable income has soared.

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Source: Where Have All the Profits Gone? Karl Marx Could Have Told You, CFR

The decline of labor’s share of income is not beneficial to the country in the long run.

Knowledge is Power: Gold, Greece, French Economy Edition

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How to cope with panicky markets

Is gold near a bottom?

Gold’s hasty demise from safe haven to risky asset

Defying the Odds – Why the French Economy Works Surprisingly Well

If Greece goes: An exit is likely to shatter faith in the eurozone’s integrity for ever

How Much Is Enough?

Eurozone crisis: what if … Greece leaves the single currency

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Winner in the “Best of Russia” photography contest, 2011

Courtesy: Photo Gallery: Moscow from on High, Der Spiegel

10 Foreign Dividend Paying Stocks To Consider

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The dividend yield on the S&P 500 is around a measly 2.0%. For investors looking to earn higher income from investing in equities,  foreign stocks provide an attractive investment opportunities. Generally foreign stocks have had higher dividend yields when compared to U.S. due to many reasons. The following chart shows that U.S. equities had a dividend yield of just 2% at the end of 2011 while global income stocks had yields of over 5%:

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Source: A global search for dividends, Fidelity Investments

From the Fidelity Viewpoints interview of Ramona Persaud, manager of the new Fidelity Global Equity Income Fund :

Q: Why have non-U.S. stocks historically tended to deliver higher dividend yields?

Persaud: There seem to be specific factors on a country-by-country basis that help explain the prevalence of higher yield outside the United States. For example, shareholders in parts of Asia where there is high family ownership often demand cash returns from their equity investments. In the U.K. and Chile, pension funds have had large ownership stakes and have advocated for high payout rates. In Brazil, there is a minimum 25% payout of earnings set by law. In Australia and New Zealand, dividends are often not subject to double taxation, as they are here in the U.S., so that incentivizes high payout ratios. Other examples are found in countries with a history of hyperinflation—such as Indonesia, Argentina, and Germany—where above-average dividend yields suggest that investors demanded high payouts to help offset inflation and earn real returns. So from a global perspective, there are great yield opportunities across the world, and this includes the United States, as I believe income is at a cyclical low here, with conditions ripe for a rebound.

Ten foreign stocks currently paying dividends of over 5% are listed below for further research:

1.Company:CorpBanca SA (BCA)
Sector: Banking
Current Dividend Yield:7.71%
Country: Chile

2.Company:National Grid PLC (NGG)
Sector: Electric Utilties
Current Dividend Yield: 5.61%
Country: UK

3.Company: Chunghwa Telecom Co Ltd(CHT)
Sector: Telecom
Current Dividend Yield: 6.16%
Country: Taiwan

4.Company:City Telecom (CTEL)
Sector: Telecom
Current Dividend Yield: 7.05%
Country: Hong Kong

5.Company:Philippine Long Distance Telephone Co (PHI)
Sector: Telecom
Current Dividend Yield: 5.85%
Country:Philippines

6.Company: Vodafone Group PLC (VOD)
Sector: Telecom
Current Dividend Yield: 5.35%
Country: UK

7.Company:Companhia Siderurgica Nacional (SID)
Sector:Basic Materials
Current Dividend Yield: 6.26%
Country: Brazil

8.Company:Administradora de Fondos de Pensiones Provida SA (PVD)
Sector:Investment Services
Current Dividend Yield: 8.38%
Country: Chile

9.Company:Alumina Ltd (AWC)
Sector:Metal Mining
Current Dividend Yield: 6.42%
Country: Australia

10.Company:Australia and New Zealand Banking Group Ltd (ANZBY)
Sector:Banking
Current Dividend Yield: 6.60%
Country: Australia

Note: Dividend yields noted are as of May 16, 2012

Disclosure: Long BCA