Sunday, March 31, 2013

Reuters: Small Business News: Small businesses spell big problems for Italy and Spain

Reuters: Small Business News
Reuters.com is your source for breaking news, business, financial and investing news, including personal finance and stocks. Reuters is the leading global provider of news, financial information and technology solutions to the world's media, financial institutions, businesses and individuals. // via fulltextrssfeed.com
Small businesses spell big problems for Italy and Spain
Apr 1st 2013, 04:04

A man walks past a closed down business in Madrid March 27, 2013. REUTERS/Susana Vera

A man walks past a closed down business in Madrid March 27, 2013.

Credit: Reuters/Susana Vera

By Silvia Aloisi and Sarah White

MILAN/MADRID | Mon Apr 1, 2013 12:04am EDT

MILAN/MADRID (Reuters) - Small companies struggling to repay loans in Italy and Spain signal bigger problems on the horizon for the euro zone after the dust has settled on Cyprus's last-ditch bailout this week.

Defaults by small and medium-sized enterprises (SMEs), easily the biggest employers in Spain and Italy, are rising at a worrying clip, spelling trouble for the banks and two countries at the heart of Europe's debt crisis.

"You can be sure that if these companies' bad debts rise, you're going to see more bad loans to families, and credit card bills that won't be paid," said Javier Santoma, finance professor at Spain's IESE business school.

The ability of Italy and Spain, which account for 28 percent of the euro zone economy compared with Cyprus's 0.2 percent, to pull themselves out of crisis and avoid full-blown bailouts depends on the health of their banks; weak banks conserve capital rather than lend to get the economy moving.

Profits at Spain's top three lenders Santander (SAN.MC), BBVA (BBVA.MC) and Caixabank (CABK.MC) fell an average 60 percent in 2012 due to steep government-enforced provisions for property losses. Writedowns of nearly 24 billion euros at state-owned Bankia (BKIA.MC) led to a record 19.2 billion euro loss.

In Italy, the two biggest banks, Intesa Sanpaolo (ISP.MI) and UniCredit (CRDI.MI), set aside a combined 14 billion euros in 2012 to cover bad loans. Smaller lenders also had to increase provisions after the central bank conducted simultaneous audits of around 20 institutions.

Banco Popolare (BAPO.MI), Italy's fourth biggest, issued a profit warning after the audit prompted 684 million euros of loan loss provisions in the fourth quarter, more than the total it set aside in the first nine months of the year.

PROVISIONS

The Italian banking association has said the pace of growth in bad loans, which has been climbing at an annual rate of 16-17 percent in recent months, should ease later in the year, based on economic recovery in the second half. That looks remote after the government this month said GDP would shrink 1.3 percent this year, adjusting a previous forecast for a 0.2 percent fall.

"Consumption levels, retail sales, industrial activity have gone back to pre-euro levels, and the banks still have not fully taken into account the fall in the property market. I doubt that if they foreclose today ... they would get much of their money back," said Ronny Rehn, analyst at Keefe, Bruyette & Woods.

"So I think we will see a lot more provisioning for many years. Also, there is a lot of non-competitive companies that will end up exiting the market and defaulting, entailing more losses for the banks."

Spanish banks are better protected against SME losses after Madrid used 41 billion euros of a total 100 billion euros of European aid to prop up its weakest lenders.

The government has ruled out another round of special provisions, and analysts said if more capital was required it would be covered by the remaining European aid.

"It could be that one bank here or there needs more capital, but it probably won't be a system-wide issue," said Erwin Van Lumich, a banking analyst at Fitch ratings agency.

"Bad debts could peak in the course of this year, or slightly into 2014, as there is always a delayed effect for these types of statistics."

Spanish banks face 25 billion euros of losses from 2012-2014 on non-property-related SME exposure of 237 billion euros on a base case scenario set by consultants Oliver Wyman last year.

On an adverse scenario, that hits 39 billion euros, compared with losses of 65 billion and 97 billion euros in base and adverse scenarios on real estate exposure of 227 billion.

NO SAFETY NET

Behind the figures are struggling people.

Raffaele Balzano faces eviction in days from his two-star hotel in Pistoia, Tuscany, which was forced to close last year. Power and water were cut off when he couldn't pay the bills.

"In 2011 it all came to a head. I had a debt of 26,000 euros with the bank, and they would not give me any new credit lines to try and stay afloat, plus I also owed some 50,000 euros to suppliers which I could not pay," Balzano told Reuters.

"No one has helped me, not the government, the banks or any trade unions. We, the small businessmen, have no safety net whatsoever. I've lost everything."

One in 10 Spanish loans was in arrears for three months or more in December, and research firm Axesor said February was the worst month since 2008, with more than 1,000 companies filing for creditor protection, up 82 percent on a year earlier, even though banks roll over debt for many struggling borrowers.

Around 1,000 companies a month went bust last year in Italy, and as of January, 7.4 percent of loans were non-performing, the highest in nearly 13 years and much worse than France's 4.1 percent and Germany's 3 percent. At the other end of the scale, the Greek bad loan ratio was 22.5 percent at end-September 2012.

With Italy and Spain expected to contract by 1.3 percent and 1.5 percent this year under the weight of government austerity programs, SME bad debts are set to climb, meaning defaults are more likely in consumer credit and mortgages.

Unemployment, already a record 26 percent in Spain and 11.7 percent in Italy, the worst since the current statistical series began in 1992, will also climb as small firms fire staff.

NO MARRIAGE, NO MORTGAGE

Fed up being ignored by banks and the Italian government, Giuseppina Virgili set up an association called the "Invisible Small Entrepreneurs" to advise businesses in trouble.

"The banks have turned off the credit tap for us small entrepreneurs. They don't give us money, they don't trust us. We are no longer welcome customers," Virgili told Reuters.

"They are scared that we can't pay them back, so they treat us as if we were the cause of the economic crisis, even when we should be part of the solution."

In Spain, a breakdown of the country's regional savings banks, which overextended themselves in the property boom, has left many of their small clients without financing.

"We want to lend, but those that really need the funding are the SMEs that used to borrow from the savings banks. We don't know their track record, and for now these companies are isolated, which has created a shock in terms of lending," a senior Spanish banker said, on condition of anonymity.

The government is trying to get various state-backed credit schemes going, including 45 billion euros in SME financing, plus tax breaks for these companies.

But bankers complain of a lack of "solvent demand".

"We have not seen a healthy demand for new credit," Victor Massiah, CEO of Ubi Banca (UBI.MI), said this month after Italy's fifth biggest bank by branch numbers reported a nearly 40 percent rise in loan writedowns for 2012.

"Unemployment is rising, young people are living with their parents, they are not getting married, and they are not buying a house - the demand for private mortgages has halved."

(Additional reporting by George Georgiopoulos in Athens, Christian Plumb in Paris and Alexander Huebner in Frankfurt. Writing by Carmel Crimmins; Editing by Will Waterman)

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Wednesday, March 27, 2013

Reuters: Small Business News: Belgian chocolate makers seek protection from copycats

Reuters: Small Business News
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Belgian chocolate makers seek protection from copycats
Mar 27th 2013, 14:49

Chocolate pralines are seen at Belgian chocolate maker Neuhaus in Vlezenbeek, near Brussels March 13, 2013. REUTERS/Yves Herman

1 of 4. Chocolate pralines are seen at Belgian chocolate maker Neuhaus in Vlezenbeek, near Brussels March 13, 2013.

Credit: Reuters/Yves Herman

By Philip Blenkinsop

BRUSSELS | Wed Mar 27, 2013 10:49am EDT

BRUSSELS (Reuters) - Belgian chocolate makers believe their renowned pralines should have similar protection to that enjoyed by French champagne or Italy's Parma ham.

They want the term "Belgian chocolate" to be their exclusive preserve and also want to crack down on foreign rivals dressing up their products as "Belgian style" or of a "Belgian recipe".

Copycats, they say, eat into sales and undermine a stamp of quality built up over the century since Jean Neuhaus invented the hard-shelled, cream-filled chocolate, the praline, in 1912.

The industry federation will meet regional governments from next month to decide how Belgium might apply to the European Union to protect Belgian chocolates or perhaps seek a trademark to safeguard their treats.

"What makes us sad is that very often the copies are not up to the standard of the originals," Jos Linkens, chief executive of Neuhaus, told Reuters in an interview.

"If top chocolatiers around the world copied us, perhaps we would be happy. We don't want the image of quality to suffer," said Linkens, who is also president of Belgian biscuit, chocolate and confectionery federation Choprabisco.

Belgium is proud of its mastery of chocolate. It boasts more than 200 chocolate firms, over 2,000 chocolate stores and museums, tours and workshops, such as the Brussels museum of cocoa and chocolate.

Belgians say their years of experience has created a pool of chocolate-making talent, and success is a result of the skill of master chefs devising new cream fillings, rather than machines.

At Neuhaus, workers fill buckets with pralines made imperfect by air bubbles or messy stripes while others make caramel tubes by hand or whip up chocolate for use in giant eggs and bunnies for Easter.

Despite their quality, like other luxury items, sales of Belgian chocolates have stagnated or slipped in mature Europe and North America, but compensate for that with roaring growth in emerging markets.

Overall exports of Belgian pralines rose just 1 percent between 2007 and 2011, but shot up 60 percent in Asia and 82 percent in Africa.

Sales to Asia in 2011 were three times their level a decade earlier. Individual chocolate makers talk of expansion in China and India last year of up to 50 percent.

And there is yet more scope for growth, with the average Chinese person eating less than 100 grams (3-1/2 ounces) of chocolate per year against between 6 and 10 kg (13-22 lb) for Europeans, Linkens said.

The surging demand in new markets has left foreign producers eager for a share of the market, tempting some to claim they too are making Belgian chocolates.

Guy Gallet, secretary general of Choprabisco, has a crate-load of "Belgian chocolate" boxes he and travelling Belgian executives have found on their travels. They include examples from Canada, China, Hungary, Ireland and Malaysia.

SWISS INDUSTRY

Switzerland, famous for its milk chocolate, has been more active in its protection of domestic brands.

They too have seen sharp growth in Asia, with sales rising by 49 percent in value terms last year to China and by 52 percent to India.

But the CHOCOSUISSE federation of chocolate makers, has trademarked the terms "Swiss" and "Switzerland" in the European Union, the United States and Canada. And it works to enforce those rights.

The federation has a staff member dedicated to the problem and can spend up to 80,000 Swiss francs ($85,100) a year on lawyers' fees.

"We check trademark applications all over the world and we regularly see cases in which Swiss, Switzerland or references to the country such as the flag are misused," said federation head Franz Schmid.

"The problem is more prevalent in Asia, South America and eastern European countries, including Turkey."

Steven Candries, export manager at Belgium's Guylian, known for its shell- and seahorse-shaped chocolates, becomes animated at the mention of copycats. The firm has been battling a Chinese maker of "Belgian chocolates" with a box design remarkably similar to that of Guylian.

"If everyone starts using the term, then what is the value? Nothing. We want Belgium to be thought of as the chocolate version of the champagne region among sparkling wines," he said.

He and others in Belgium, whose chocolate brings in almost 4 billion euros ($5.2 billion) each year, believe securing the EU's protected geographical status or a trademark, putting it on a par with champagne, Parma ham or Roquefort cheese, would curb impostors and set Belgian chocolate apart.

Choprabisco's Gallet says it was hard to imagine Belgian chocolate being accorded such status, until now.

Unlike earlier protected products, the chocolate itself does not come from Belgium, with the vast majority of cocoa beans originating in Ivory Coast and Ghana.

More recently, the European Union has included 'chocolate and derived products' as a specific category worthy of protection. This year, it modified its rules, to say that a geographical indication could apply to products from a specific country.

"Before it had said that it could be a specific country only in exceptional cases. You were thinking more of, say, Luxembourg. Belgium would be too big," Gallet said. "Now there is the theoretical possibility that didn't exist before."

Neuhaus's Linkens believes it will happen, although could take some time.

The World Trade Organisation's 159 members are supposed to uphold protection of geographical indications, such as Colombian coffee, but can choose how to do so.

In some cases, such as parma ham in Canada, a local company has continued to own the trademark to the name. Feta cheese is made in the United States despite being in theory only Greek.

The EU's recent bilateral trade deals, such as with Korea and Colombia, have proven a stronger way to ensure mutual respect of protected products.

WHAT IS BELGIAN?

However, quite what counts as "Belgian chocolate" is open to debate.

Gallet says a problem is that in some cases the chocolate itself is from a Belgian facility of one of the bulk producers, such as Swiss-based Barry Callebaut.

"That shouldn't count as Belgian chocolate. What you should be saying is: 'Made with Belgian chocolate'," he said.

Gallet mentions one EU producer that did agree to adjust its label to 'with Belgian chocolate', but the word 'with' was written in text so small that would only a discerning customer might spot it. Belgian chocolate makers were not amused.

Not all chocolates produced in Belgium are pralines. High-end chocolatier Pierre Marcolini, for example, makes some, but also has a wide range of other morsels, such as truffles and bite-sized pure chocolate tablets.

Since 2008, a number of Belgian producers have signed up to a non-binding chocolate code, specifying that to be labeled "Belgian chocolate" the products must be refined and molded in Belgium, but even that has its critics, such as Belgium-based Godiva.

Godiva has a very strong presence in North America, a market it supplies from a factory in Pennsylvania.

Guillaume de Foucault, Godiva's general manager for Europe, Middle East and Africa, says these Godiva chocolates are still essentially Belgian, in the same way that one might think of a BMW made in South Carolina as still essentially a German car.

"Godiva started in 1926 in Belgium, we have a Belgian chef and Belgian facilities," he said.

"It's important to include a lot of players. Some have difference areas of expertise. It would be very limiting if only chocolate produced in Belgium could be considered," he said.

Linkens, speaking for Neuhaus, has a different view.

"Why does camembert need to be made in Normandy, champagne in the region of Champagne? In all gastronomic products, the origin has some importance. It's about being honest and straightforward." ($1 = 0.7694 euros) ($1 = 0.9402 Swiss francs)

(Editing by Anna Willard)

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Tuesday, March 26, 2013

Reuters: Small Business News: Canadian startup muscles into gesture-control market

Reuters: Small Business News
Reuters.com is your source for breaking news, business, financial and investing news, including personal finance and stocks. Reuters is the leading global provider of news, financial information and technology solutions to the world's media, financial institutions, businesses and individuals. // via fulltextrssfeed.com
Canadian startup muscles into gesture-control market
Mar 26th 2013, 16:55

Thalmic Labs' gesture control armband dubbed as MYO is seen in this undated handout photo courtesy of Thalmic Labs. REUTERS/MYO/Thalmic Labs/Handout

Thalmic Labs' gesture control armband dubbed as MYO is seen in this undated handout photo courtesy of Thalmic Labs.

Credit: Reuters/MYO/Thalmic Labs/Handout

By Supantha Mukherjee and Krithika Krishnamurthy

Tue Mar 26, 2013 12:55pm EDT

(Reuters) - Ever wanted to unleash your inner Jedi?

If Thalmic Labs makes good on its promise, Star Wars fans will soon be able to play video games with the sweep of a hand.

The Canadian startup venture says it has 22,000 pre-orders for its MYO device, an armband that reads muscle signals before amplifying and relaying them to gadgets using Bluetooth wireless technology. It plans to begin deliveries in the fourth quarter.

"It's a functional device," Stephen Lake, co-founder and chief executive of Thalmic Labs, told Reuters in an interview. "We have prototypes currently. We'll be shipping commercial units by the end of this year."

Gesture-based devices, such as the Kinect device used by Microsoft Corp for its Xbox 360 gaming console, have grabbed the attention of technology companies on the back of the runaway success of touch-enabled smartphones and tablets.

Another device developed by Israel-based start-up Leap Motion reproduces finger movements on screen, effectively converting a monitor into a touchscreen display without the need for a mouse. (r.reuters.com/nap86t)

Priced at $149, the MYO is more expensive than Leap Motion's $80 sensor and Microsoft's $100 Kinect, both of which use external sensors, for example a camera, to detect hand movements and apply them to a specific device.

What sets the MYO apart is its use of muscle movement to control a wide range of devices. The device takes its name from the Greek word for muscle.

Its dependence on muscle signals also means the MYO, unlike other gesture-controlled devices, needs to be specially calibrated for each individual user, said Juan P. Wachs, an expert on interfaces between humans and machines.

"The problem with this kind of technology is that it requires lengthy calibration," said Wachs, assistant professor at the School of Industrial Engineering in Purdue University in West Lafayette, Indiana.

"It's not that, once you calibrate, someone else will use the band and it will work right away," said Wachs, who is familiar with Thalmic Labs' work.

Would he buy the device? "Definitely."

Lake said Thalmic Labs would provide access to its software interface for developers to make apps that are similar to mobile app ecosystems already used by Google Inc and Apple Inc.

"We provide the software interface," he said. "(Developers) are free to use the device for whatever they are interested in, and we've had all kinds of different ideas."

'VERY COOL'

Thalmic Labs was founded in May 2012 by three mechatronics engineering graduates from the University of Waterloo, Ontario. It has the backing of angel investors such as Y-Combinator.

It began taking pre-orders online from February 25 and has said it will ship the device anywhere in the world.

Lake said the company was working with "contract partners" to manufacture the devices and that its first shipment would be limited to 25,000 units.

"We're not going to stop taking orders after that, but we're not going to promise to deliver in the very first shipment," he said, adding that Thalmic Labs would charge customers only when the device is ready to ship.

A demonstration video shows MYO users, armband attached, moving their hands to play shooting games and control computer screens, presentation slides, flying objects and remote-control military vehicles. (r.reuters.com/dap86t)

The company's website carries the endorsement of Apple co-founder Steve Wozniak, who describes the MYO as "very cool and impressive".

Lake said he hoped the MYO would be available in the mainstream market from next year, through "the traditional retail channels".

Technology blog Singularity Hub wrote this month: "A few years from now, it isn't hard to imagine people wearing Google Glass or a related headset, using a MYO armband to control the headset and other computers in the area, and having a Leap Motion to use a computer at their workstations."

Google in February revealed some of the features of Google Glass, a pair of glasses that allows users to see information and record video.

Lake, meanwhile, said Thalmic Labs' efforts to deliver a futuristic device had piqued the attention of bigger companies.

"We certainly have ... interest from many companies," said Lake, who in 2007 was named as one of Canada's Top 20 Under 20, a youth awards program for leadership and initiative.

But selling up is not in his plans. Lake said he would rather build the company up and go public.

(Editing by Robin Paxton)

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Reuters: Small Business News: Tomatoes, peppers, strawberries in Greenland's Arctic valleys

Reuters: Small Business News
Reuters.com is your source for breaking news, business, financial and investing news, including personal finance and stocks. Reuters is the leading global provider of news, financial information and technology solutions to the world's media, financial institutions, businesses and individuals. // via fulltextrssfeed.com
Tomatoes, peppers, strawberries in Greenland's Arctic valleys
Mar 26th 2013, 13:09

Kim Ernst, the Danish chef of Roklubben restaurant, which is nestled by a frozen lake near a former Cold War-era U.S. military base, looks over his greenhouse in Kangerlussaq March 5, 2013. REUTERS/Alistair Scrutton

1 of 4. Kim Ernst, the Danish chef of Roklubben restaurant, which is nestled by a frozen lake near a former Cold War-era U.S. military base, looks over his greenhouse in Kangerlussaq March 5, 2013.

Credit: Reuters/Alistair Scrutton

By Alistair Scrutton

KANGERLUSSUAQ, Greenland | Tue Mar 26, 2013 9:09am EDT

KANGERLUSSUAQ, Greenland (Reuters) - On the Arctic Circle, a chef is growing the kind of vegetables and herbs - potatoes, thyme, tomatoes, green peppers - more fitting for a suburban garden in a temperate zone than a land of Northern Lights, glaciers and musk oxen.

Some Inuit hunters are finding reindeer fatter than ever thanks to more grazing on this frozen tundra, and for some, there is no longer a need to trek hours to find wild herbs.

Welcome to climate change in Greenland, where locals say longer and warmer summers mean the country can grow the kind of crops unheard of years ago.

"Things are just growing quicker," said Kim Ernst, the Danish chef of Roklubben restaurant, nestled by a frozen lake near a former Cold War-era U.S. military base.

"Every year we try new things," said Ernst, who even managed to grow a handful of strawberries that he served to some surprised Scandinavian royals. "I first came here in 1999 and no-one would have dreamed of doing this. But now the summer days seem warmer, and longer."

It was minus 20 degrees Centigrade in March but the sun was out and the air was still, with an almost spring feel. Ernst showed his greenhouse and an outdoor winter garden which in a few months may sprout again.

Hundreds of miles south, some farmers now produce hay, and sheep farms have increased in size. Some supermarkets in the capital Nuuk sell locally grown vegetables during the summer.

Major commercial crop production is still in its infancy. But it is a sign of changes here that Greenland's government set up a commission this year to study how a changing climate may help farmers increase agricultural production and replace expensive imported foods.

Change is already underway. Potatoes grown commercially in southern Greenland reached over 100 metric tons in 2012, double that of 2008. Vegetable production in the region may double this year compared with 2012, according to government data.

Some politicians hope global warming will allow this country a quarter the size of the United States to reduce its dependency on former colonial master Denmark for much of its food as political parties push for full independence.

Greenland, which is self-governing aside from defense and security, depends on an annual grant from Denmark of around $600 million, or half the island's annual budget. But the thawing of its enormous ice sheets have seen a boost in mining and oil exploration, as well as an interest in agriculture.

"I expect a lot of development in farming sheep and agriculture due to global warming," said Prime Minister Kuupik Kleist, whose government set up the commission. "It may become an important supplement to our economy."

Locals love recounting how Erik the Red first arrived in the southern fjords here in the 10th century and labeled this ice-covered island "Greenland" to entice others to settle. There is evidence that the climate was warmer then, allowing Viking settlements to grow crops for five centuries before mysteriously dying out.

FROM COWS TO CROPS

The scale of this new agriculture is tiny. There are just a few dozen sheep farms in southern Greenland, where most of the impact of climate change can be seen. Cows may number less than a hundred. But with 57,000 mostly Inuit human inhabitants, the numbers to feed are also small.

"You need to put this into perspective. We used to be high Arctic and now we are more sub Arctic," Kenneth Hoegh, an agronomist and former senior government advisor. "But we are still Arctic."

The symbolism is enormous, however, highlighting a changing global climate that has seen temperatures in the Arctic increase by about twice the global average - about 0.8 degrees Celsius since pre-industrial times.

"There are now huge areas in southern Greenland where you can grow things," said Josephine Nymand, a scientist at the Greenland Institute of Natural Resources in Nuuk. "Potatoes have most benefited. Also, cabbage has been very successful."

Sten Erik Langstrup Pedersen, who runs an organic farm in a fjord near Nuuk, first grew potatoes in 1976. Now he can plant crops two weeks earlier in May and harvest three weeks later in October compared with more than a decade ago.

He grows 23 kinds of vegetables, compared with 15 a decade ago, including beans, peas, herbs and strawberries. He says he has sold some strawberries to top restaurants in Copenhagen.

But Pedersen is skeptical about how much it will catch on.

"Greenlanders are impatient. They see a seal and they immediately just want to hunt it. They can never wait for vegetables to grow."

There is still potential. Hoegh estimates Greenland could provide half its food needs from home-grown produce which would be competitive with more expensive Danish imports.

But global change is not all about benefits. While summers are warmer, there is less rain. Some experts say that Greenland could soon need irrigation works - ironic for a country of ice and lakes.

"We have had dry summers for the last few years." said Aqqalooraq Frederiksen, a senior agricultural consultant in south Greenland, who said a late spring last year hurt potato crops.

On the Arctic circle, a flash flood last summer from suspected glacier melt water - which some locals here blamed on warm weather - swept away the only bridge connecting Ernst's restaurant to the airport. It came right in the middle of the tourist season, and the restaurant lost thousands of dollars.

It was an ominous reminder that global warming will bring its problems. Still, for Pedersen and his fjord in Nuuk, the future looks good.

"The hotter, the better," Pedersen said. "For me."

(Additional reporting by Katja Vahl in Nuuk; Editing by Sonya Hepinstall)

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Reuters: Small Business News: Bulk versus bottle dilemma for South African wine

Reuters: Small Business News
Reuters.com is your source for breaking news, business, financial and investing news, including personal finance and stocks. Reuters is the leading global provider of news, financial information and technology solutions to the world's media, financial institutions, businesses and individuals. // via fulltextrssfeed.com
Bulk versus bottle dilemma for South African wine
Mar 26th 2013, 13:06

A worker checks the certification labels on wine bottles on a conveyor belt at the Rostberg bottling plant near Cape Town in this November 29, 2012 file photo. REUTERS/Mike Hutchings/Files

1 of 12. A worker checks the certification labels on wine bottles on a conveyor belt at the Rostberg bottling plant near Cape Town in this November 29, 2012 file photo.

Credit: Reuters/Mike Hutchings/Files

By Tosin Sulaiman

STELLENBOSCH, South Africa | Tue Mar 26, 2013 9:06am EDT

STELLENBOSCH, South Africa (Reuters) - At South Africa's Rostberg and Co., green bottles filled with a ruby liquid clink as they march along a conveyor belt, destined for wine-lovers from Paris to Shanghai.

But if a trend toward bulk shipping continues, the music of the Rostberg bottling plant may be about to stop.

Set in lush vineyards in Stellenbosch, one of South Africa's most famous wine communities, Rostberg has been operating below capacity for the past two years due to a shift to shipping wine in 24,000-litre polypropylene "flexitanks".

The trend has spread through other "New World" wine-producing countries like Chile, Argentina, Australia and New Zealand, which all have distant markets and, in the latter two cases at least, relatively strong currencies that are forcing them to cut costs to stay competitive.

Bottlers in South Africa are frantic about the likely loss of jobs. But another concern for some industry experts and government officials is the potential impact on South Africa's brand: when wine is bottled outside the country, winemakers lose control of a key part of the production process.

These are big concerns for South Africa, where the wine industry plays an outsized role in reshaping the country's image after years under apartheid, which ended in 1994.

"Wine has a tremendously important role to play in the development of Brand South Africa," said Anthony Budd, managing director of Cape Town-based wine exporter Diverse Flavours. "Wine is that much more romantic and seen as premium and coming from a beautiful location."

The number of people working directly or indirectly in South Africa's wine industry has risen to more than 275,000 people from just under 160,000 in 2000, and now represents 1.5 percent of the workforce in an economy dominated by natural resources.

The industry has made huge inroads as a producer of high-quality wines since overseas markets opened up after apartheid, said Michael Fridjhon, visiting professor of wine business at the University of Cape Town's business school.

"In 1994, we were the darling of the world," he said. "Everybody wanted to do something for the 'Rainbow Nation'... Since then, we've been on a steep learning curve."

Exports have soared more than 700 percent to a record 409 million liters in 2012. Now the country's biggest agricultural export earner, wine sets South Africa apart from other sub-Saharan African countries known for exporting predominantly raw materials.

Seventy percent of the 26 billion rand ($2.8 billion) it contributes to the national economy is focused on the Western Cape province, which boasts ideal conditions for wine-making with its Mediterranean climate, mountain slopes and valleys, and sea breezes from the Atlantic and Indian Oceans. The Western Cape is also where the majority of bottlers are located.

JOBS

Nearly half of all wine from South Africa, Australia, New Zealand, Chile and Argentina is shipped in bulk, up from around a fifth a decade before, according to a report published last year by Dutch bank Rabobank entitled 'The Incredible Bulk. The Rise in the Global Bulk Wine Trade'.

As recently as 2009, just over 61 percent of South African wine exports were bottled domestically but that share dropped to 40 percent last year, according to industry export and promotion group Wines of South Africa (WOSA).

Bulk exports overtook bottled shipments in Australia for the first time in January 2011, industry group Wine Australia said. Major Australian producers like Jacob's Creek are now bottling in Britain, the world's largest wine import market.

Bevan Newton Johnson, managing director at First Cape, the largest South African wine brand in Britain, said the company mothballed its own bottling facility nearly two years ago, laying off around 40 people.

"Our products were not profitable in the overseas markets," he said.

The South African government is concerned about the effect on employment. Close to 1,000 jobs were lost due to the shift to bulk as of the end of 2011, according to the Department of Trade and Industry, and industry representatives said the trend suggests that more cuts are coming.

In South Africa, where the unemployment rate has remained at 25 percent for years, that has a multiplier effect - the country has one of the highest "dependency ratios" in the world at an average of three non-working people supported by every worker, according to a January 2013 report by the South African Institute of Race Relations.

Two bottling plants in Stellenbosch have closed since 2010. Consol Glass, South Africa's biggest glass manufacturer, is preparing to cut production this year because of the sharp fall in demand for wine bottles. Its wine sector business, which accounts for a quarter of revenues, has declined by more than 20 percent over the last three years.

Rostberg, located on the Rust en Vrede wine estate which produced the wine served at former President Nelson Mandela's Nobel Peace Prize dinner, had to shut down one bottling line in 2010, and was forced to lay off 35 staff, half its workforce.

"The only way we can create more jobs is if we could bottle our wine locally," said Leo Burger, Rostberg's managing director.

The government has threatened to retaliate against the UK, the world's biggest market for imported wine, by importing bulk whisky from Britain for bottling in South Africa.

"The big winners in this trend are the bottlers who operate in the UK and the EU," said Stephen Hanival, director of agro-processing at the Department of Trade and Industry. "Jobs and capacity have been lost in developing countries like South Africa."

Bottlers and the wine industry are trying to counter the growth in bulk exports by diversifying to China, Japan and other parts of Africa, where the demand for premium wine is growing.

South Africa exported 5.5 million liters of packaged wine to China in the year to February 2013, a 24 percent increase from the previous year.

SUPERMARKET LABELS

A big factor in the shift to bulk is the growing influence of supermarkets.

Retailers in Europe have been able to squeeze pricing from their suppliers to attract customers recovering from the recession, said Stephen Rannekleiv, Rabobank's executive director of food and agribusiness research.

Some have created competing private label wine brands using foreign-sourced bulk wine.

Fraser Thompson, head of the IPL Wine subsidiary at Asda, the British arm of U.S. retailer Walmart, said countries like South Africa have had no choice but to shift to bulk to stay competitive. Asda has increased its sourcing from South Africa in recent years, partly thanks to UK bottling, he said.

"South Africa is competing on a global stage with every other wine-producing nation," he said. "Without shipping in bulk there's a danger that South Africa would lose considerable export trade to the UK and across the world."

Around a third of the wine imported by Asda is now bottled in the UK, where it set up its own bottling plant in December 2011 in Snetterton, Norfolk.

South African industry and government officials have expressed concern about what happens to the wine after it leaves the polypropylene tanks.

Hanival was particularly worried about the potential for South African wine to be blended with a lower quality wine and marketed as South African, which could have consequences for its hard-won reputation for high quality at the right price.

"In the past the UK consumer saw South African wine as moderate-to-low quality but at a very low price point," he said. "These days South African wine is seen as of moderate-to-good quality, still at a good price point ... I think we have managed to lose that label of cheap and cheerful, relatively low-quality wine."

A spokeswoman at Asda strongly denied any trans-national blending took place at Asda. Tesco and Sainsbury's, the two other big supermarket chains in Britain, did not respond to requests for comment on this story.

Bottling in South Africa includes a trackable certification seal, with various guarantees for the consumer, Rostberg said.

"Our wine certification system ensures the origin, cultivar (grape variety) and vintage only up to the harbor when it is exported in bulk, but no further," he said.

The reputational risk around the possibility of blending is uncomfortably high, some in the industry say.

"Odds are that it will adversely affect the reputation (of South African wine)," said Fridjhon. "Effectively what you're doing is turning wine into a commodity."

($1 = 9.1960 South African rand)

(Editing by Pascal Fletcher and Sonya Hepinstall)

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Reuters: Small Business News: Yahoo acquires mobile news start-up Summly

Reuters: Small Business News
Reuters.com is your source for breaking news, business, financial and investing news, including personal finance and stocks. Reuters is the leading global provider of news, financial information and technology solutions to the world's media, financial institutions, businesses and individuals. // via fulltextrssfeed.com
Yahoo acquires mobile news start-up Summly
Mar 26th 2013, 12:16

Nick D'Aloisio, aged 17, who developed the smartphone news app Summly, displays the app as he poses for a photograph at offices in central London March 26, 2013. REUTERS/Suzanne Plunkett

Nick D'Aloisio, aged 17, who developed the smartphone news app Summly, displays the app as he poses for a photograph at offices in central London March 26, 2013.

Credit: Reuters/Suzanne Plunkett

By Alexei Oreskovic and Paul Sandle

SAN FRANCISCO/LONDON | Tue Mar 26, 2013 8:16am EDT

SAN FRANCISCO/LONDON (Reuters) - Yahoo Inc has snapped up mobile news aggregator Summly, the latest in a string of small acquisitions intended to bolster the Web portal's mobile services.

Summly, founded by 17-year-old Nick D'Aloisio two years ago from his home in London, sorts news by topics in quick bites for smartphones. The start-up works closely with News Corp and is backed by Chinese investor Li Ka-Shing and angel investors including actor Ashton Kutcher and artist Yoko Ono.

Terms of the deal were not disclosed, though technology blog AllThingsD reported that Yahoo paid roughly $30 million, citing anonymous sources.

D'Aloisio said Yahoo would use the technology that powers Summly to reinvent the delivery of information such as news, weather, stocks and finance for mobile devices.

"What I am excited about with Yahoo is under the new leadership of Marissa Mayer, it's a classic Internet company that has such a big opportunity," he told Reuters.

Yahoo said it will shut down the Summly app but will integrate the company's natural language processing and machine-learning technology across Yahoo's various online services, particularly Yahoo's line-up of mobile services.

Yahoo Chief Executive Mayer is stepping up the company's efforts to build online services for the smartphones and tablets that consumers increasingly use to access the Web. Yahoo has acquired a handful of small, mobile start-ups since Mayer took over in July, though the company has yet to do any large acquisitions.

Three Summly employees will join Yahoo as part of the deal, which is expected to close in the second quarter, according to Yahoo Senior Vice President of Mobile and Emerging Products Adam Cahan. Summly founder D'Aloisio will remain in London and be Yahoo's youngest employee, Cahan told Reuters.

D'Aloisio, a pupil at King's College School, said he was unperturbed about moving from a start-up to multinational.

"I'm looking forward to it because they've built a really great environment for start-ups and founders," he said.

He said he planned to invest his multi-million pound windfall, although he added that due to his age, he "could not really touch it" yet.

Shares of Yahoo, which have surged roughly 50 percent since Mayer became CEO, rose 19 cents to $23.45 Monday afternoon.

(Reporting by Jennifer Saba in New York, Alexei Oreskovic in San Francisco and Paul Sandle in London; Editing by Richard Chang and Mark Potter)

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Reuters: Small Business News: Just do it, says Yahoo's teen app millionaire

Reuters: Small Business News
Reuters.com is your source for breaking news, business, financial and investing news, including personal finance and stocks. Reuters is the leading global provider of news, financial information and technology solutions to the world's media, financial institutions, businesses and individuals. // via fulltextrssfeed.com
Just do it, says Yahoo's teen app millionaire
Mar 26th 2013, 12:45

Nick D'Aloisio, aged 17, who developed the smartphone news app Summly, poses for a photograph at offices in central London March 26, 2013. REUTERS/Suzanne Plunkett

1 of 5. Nick D'Aloisio, aged 17, who developed the smartphone news app Summly, poses for a photograph at offices in central London March 26, 2013.

Credit: Reuters/Suzanne Plunkett

By Paul Sandle

LONDON | Tue Mar 26, 2013 8:45am EDT

LONDON (Reuters) - Got a tech idea and want to make a fortune before you're out of your teens? Just do it, is the advice of the London schoolboy who's just sold his smartphone news app to Yahoo for a reported $30 million.

The money is there, just waiting for clever new moves, said 17-year-old Nick D'Aloisio, who can point to a roster of early backers for his Summly app that includes Yoko Ono and Rupert Murdoch.

"If you have a good idea, or you think there's a gap in the market, just go out and launch it because there are investors across the world right now looking for companies to invest in," he told Reuters in a telephone interview late on Monday.

The terms of the sale, four months after Summly was launched for the iPhone, have not been disclosed and D'Aloisio, who is still studying for school exams while joining Yahoo as its youngest employee, was not saying. But technology blog AllThingsD said Yahoo paid roughly $30 million.

D'Aloisio said he was the majority owner of Summly and would now invest the money from the sale, though his age imposes legal limits for now on his access to it.

"I'm happy with that and working with my parents to go through that whole process," he said.

D'Aloisio, who lives in the prosperous London suburb of Wimbledon, highlights the support of family and school, which gave him time off, but also, critically, the ideas that came with enthusiastic financial backers.

He had first dreamt up the mobile software while revising for a history exam two years ago, going on to create a prototype of the app that distils news stories into chunks of text readable on small smartphone screens.

He was inspired, he said, by the frustrating experience of trawling through Google searches and separate websites to find information when revising for the test.

Trimit was an early version of the app, which is powered by an algorithm that automatically boils down articles to about 400 characters. It caught the eye of Horizons Ventures, a venture capital firm owned by Hong Kong billionaire Li Ka-shing, which put in $250,000.

That investment attracted other celebrity backers, among them Hollywood actor Ashton Kutcher, British broadcaster Stephen Fry, artist Ono, the widow of Beatle John Lennon, and News Corp media mogul Murdoch.

That all added up to maximum publicity when Summly launched in November 2012, but the backers brought more than just cash for an app that has been downloaded close to a million times.

"It's been super-exciting, (the investors) found out about it in 2012 once the original investment from Li Ka-shing had gone public," said D'Aloisio. "They all believed in the idea, but they all offered different experiences to help us out."

His business has worked with around 250 content publishers, he said, such as News Corp's Wall Street Journal. People reading the summaries can easily click through to the full article, driving traffic to newspaper websites.

"The great deal about joining Yahoo is that they have a lot of publishers, they have deals with who we can work with now," D'Aloisio said.

He taught himself to code at age 12 after Apple's App Store was launched, creating several apps including Facemood, a service which analyzed sentiment to determine the moods of Facebook users, and music discovery service SongStumblr.

He has started A-levels - English final school exams - in maths, physics and philosophy, and plans to continue his studies while also working at Yahoo's offices in London. He aims to go to university to study humanities.

Although he has created an app worth millions, D'Aloisio says he is not a stereotyped computer geek.

"I like playing sport," he said. "I'm a bit of a design enthusiast, and like spending time with my girlfriend and mates."

(Editing by Alastair Macdonald)

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Monday, March 25, 2013

Reuters: Small Business News: Analysis: The end of Indian IT staffing as we know it

Reuters: Small Business News
Reuters.com is your source for breaking news, business, financial and investing news, including personal finance and stocks. Reuters is the leading global provider of news, financial information and technology solutions to the world's media, financial institutions, businesses and individuals. // via fulltextrssfeed.com
Analysis: The end of Indian IT staffing as we know it
Mar 26th 2013, 00:38

Newly recruited employees attend a training session inside Tech Mahindra office building in Noida on the outskirts of New Delhi March 18, 2013. REUTERS/Adnan Abidi

1 of 11. Newly recruited employees attend a training session inside Tech Mahindra office building in Noida on the outskirts of New Delhi March 18, 2013.

Credit: Reuters/Adnan Abidi

By Harichandan Arakali and Tony Munroe

BANGALORE/MUMBAI | Mon Mar 25, 2013 8:38pm EDT

BANGALORE/MUMBAI (Reuters) - India's IT outsourcers are promoting "mini CEOs" capable of running businesses on their own, while trimming down on the hordes of entry-level computer coders they normally hire as they try to squeeze more profits out of their staff.

The shift by Infosys Ltd and others is symptomatic of a maturing industry that wants more revenue from its own intellectual property instead of providing only labor-intensive, lower-margin information technology and back-office services.

For young graduates who see the $108 billion IT industry as a sure pathway to modern India's growing middle class, the transformation is unsettling.

Dozens of industry aspirants who were recruited on campus by No. 4 player HCL Technologies recently protested outside its offices in several cities. They were offered jobs in 2011 before graduating last year but have not yet been given joining dates - or paychecks.

"Dear H.R. You were also a fresher... once," read a sign carried by two protesters in a photo in The Hindu newspaper.

HCL's December quarter profits and revenues rose while staff numbers shrank - a rare trick in an industry that has long aspired to break the linear relationship between headcount and revenue growth.

Just 20 percent of the 5,000-6,000 campus recruits offered HCL jobs in 2011 have been taken on board since graduation last summer, and HCL said it made no offers in 2012 to students who would graduate in June 2013.

Slower growth, fewer people leaving, greater demand by customers for experienced staff, and increased productivity through automation and software have put pressure on all recruits, according to HCL, which said it expects to accelerate bringing entry-level staff on board from August.

"It's not that the demand doesn't exist. It exists for different skills," said Ajay Davessar, HCL's head of external communications.

"Typical roles which a student thinks, 'I'll just go there and start coding, and have a good life,' are being tested to reality... Any applicant, be it fresher or senior, will have to have flexibility in applying the skills elsewhere."

FEWER 'CODING COOLIES'

Tech Mahindra Ltd, the No.5 player, is naming 100 of what it calls mini-CEOs who will be given broad latitude to run their parts of the business.

"We're moving towards a situation like the developed economies, where we're asking the people to be more deep," said Sujitha Karnad, who heads human resources at Tech Mahindra.

"We want more solution architects to be here. We don't want the coding coolies anymore, that's clear," Karnad said, employing a term commonly used in India in association with menial laborers.

While plenty of Indian back office work such as technical support, processing insurance claims or staffing call centers will remain labor-intensive, software services firms are looking to move up the value chain, which means relying less on the time and toil of staff.

Growth in revenue per employee across the industry could expand to 5 percent a year in the next two years from about 3 percent over the past five, said Forrester Research principal analyst Frederic Giron. The growth rate is likely to accelerate from around 2015 as intellectual property-based work accounts for a growing share of the total, he said.

India's IT services industry grew in large part because of the availability of cheap skilled labor, an advantage that is eroding as wages and other costs in India rise.

In years past, it was cost-effective for IT companies to hire new graduates by the thousands and keep a portion on the "bench" awaiting deployment on a client project.

But budget-constrained clients now demand shorter lead times. IT vendors that might have hired people six months in advance of an expected contract are now working with a one- or two-month window, said Surabhi Mathur Gandhi, senior vice president at TeamLease, a staffing consultancy.

Traditionally, about 30 percent of Indian IT services industry staff are on the bench at any given time, often in training, as they await deployment to client work.

In the December quarter, about 70 percent of Infosys staff and less than 65 percent at No. 3 provider Wipro were deployed on billable projects. At Tata Consultancy Services, the largest Indian IT services company, the figure was 72 percent, within what Ajoyendra Mukherjee, its human resources head, calls the comfort range of 70 to 74 percent utilization.

"I think we can push it up to 75, 76," he said.

Another IT services company, iGate Corp, envisions a future where just 10 percent of staff sit on the bench, said Srinivas Kandula, its human resources head, who predicts that the size of its bench will shrink by 2 or 3 percentage points a year over the next five years.

BACK-UP PLAN

Shorter benches mean a smaller share of hiring is direct from campuses, as seasoned professionals moving from a competitor would be less willing to wait to be deployed and firms are reluctant to pay them to do so.

Companies are also binding hires, especially experienced ones, with three-month notice periods and no-buy-out clauses, compared with one-month notice periods previously.

Among top-tier companies that are most actively trying to push non-linear growth where revenues are not constrained by the size of the work force, about 70 percent of employees are experienced staff, up from 60 percent in 2008, said Rajiv Srinivas, an associate director at Tech Mahindra, who expects that to rise to about 90 percent in the next two or three years.

At Infosys, while the net quarterly addition of employees fell from 4,906 people in the March quarter last year to 977 in the December quarter (excluding an acquisition), lateral recruitment held steady at an average of about 4,300 staff per quarter through December, meaning the percentage of campus hires was much lower.

"Earlier, the focus was more on career ... You get into a job, you start learning, and slowly acquire knowledge over a period of time," said Sunil Gupta, who joined Infosys as vice president of quality about six months ago from the Indian unit of CGI Group's Logica Plc.

"Today the value of a professional is judged by how quickly you're learning, how quickly you're adapting yourself and changing along with the environment," he said.

For young Indians who saw IT as a ticket into the middle class, the change means that career path is becoming less clear. Those who do break in and build valuable skills will remain in demand, but the days of young IT staffers brandishing five or more competing offers are over.

Yet that hasn't necessarily translated into slower wage growth. Mercer LLC expects industry salaries to grow 12 percent this year, the same as in 2012. As India's economy diversifies, graduates have more attractive career options, including at multinationals with a growing India presence, such as Google Inc, which means IT vendors must fight to stay attractive.

"We see IT companies as a back-up," said S. S. Jayaram, a final-year engineering student in Bangalore who says he chose a job in India with Mu Sigma Inc, a fast-growing U.S.-based data analytics company, over offers from IBM and TCS.

(Editing by Emily Kaiser)

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Reuters: Small Business News: Analysis: The end of Indian IT staffing as we know it

Reuters: Small Business News
Reuters.com is your source for breaking news, business, financial and investing news, including personal finance and stocks. Reuters is the leading global provider of news, financial information and technology solutions to the world's media, financial institutions, businesses and individuals. // via fulltextrssfeed.com
Analysis: The end of Indian IT staffing as we know it
Mar 25th 2013, 16:03

Employees walk inside Tech Mahindra office premises in Noida on the outskirts of New Delhi March 18, 2013. REUTERS/Adnan Abidi

1 of 10. Employees walk inside Tech Mahindra office premises in Noida on the outskirts of New Delhi March 18, 2013.

Credit: Reuters/Adnan Abidi

By Harichandan Arakali and Tony Munroe

BANGALORE/MUMBAI | Mon Mar 25, 2013 12:03pm EDT

BANGALORE/MUMBAI (Reuters) - India's IT outsourcers are promoting "mini CEOs" capable of running businesses on their own, while trimming down on the hordes of entry-level computer coders they normally hire as they try to squeeze more profits out of their staff.

The shift by Infosys Ltd and others is symptomatic of a maturing industry that wants more revenue from its own intellectual property instead of providing only labor-intensive, lower-margin information technology and back-office services.

For young graduates who see the $108 billion IT industry as a sure pathway to modern India's growing middle class, the transformation is unsettling.

Dozens of industry aspirants who were recruited on campus by No. 4 player HCL Technologies recently protested outside its offices in several cities. They were offered jobs in 2011 before graduating last year but have not yet been given joining dates - or paychecks.

"Dear H.R. You were also a fresher... once," read a sign carried by two protesters in a photo in The Hindu newspaper.

HCL's December quarter profits and revenues rose while staff numbers shrank - a rare trick in an industry that has long aspired to break the linear relationship between headcount and revenue growth.

Just 20 percent of the 5,000-6,000 campus recruits offered HCL jobs in 2011 have been taken on board since graduation last summer, and HCL said it made no offers in 2012 to students who would graduate in June 2013.

Slower growth, fewer people leaving, greater demand by customers for experienced staff, and increased productivity through automation and software have put pressure on all recruits, according to HCL, which said it expects to accelerate bringing entry-level staff on board from August.

"It's not that the demand doesn't exist. It exists for different skills," said Ajay Davessar, HCL's head of external communications.

"Typical roles which a student thinks, 'I'll just go there and start coding, and have a good life,' are being tested to reality... Any applicant, be it fresher or senior, will have to have flexibility in applying the skills elsewhere."

FEWER 'CODING COOLIES'

Tech Mahindra Ltd, the No.5 player, is naming 100 of what it calls mini-CEOs who will be given broad latitude to run their parts of the business.

"We're moving towards a situation like the developed economies, where we're asking the people to be more deep," said Sujitha Karnad, who heads human resources at Tech Mahindra.

"We want more solution architects to be here. We don't want the coding coolies anymore, that's clear," Karnad said, employing a term commonly used in India in association with menial laborers.

While plenty of Indian back office work such as technical support, processing insurance claims or staffing call centers will remain labor-intensive, software services firms are looking to move up the value chain, which means relying less on the time and toil of staff.

Growth in revenue per employee across the industry could expand to 5 percent a year in the next two years from about 3 percent over the past five, said Forrester Research principal analyst Frederic Giron. The growth rate is likely to accelerate from around 2015 as intellectual property-based work accounts for a growing share of the total, he said.

India's IT services industry grew in large part because of the availability of cheap skilled labor, an advantage that is eroding as wages and other costs in India rise.

In years past, it was cost-effective for IT companies to hire new graduates by the thousands and keep a portion on the "bench" awaiting deployment on a client project.

But budget-constrained clients now demand shorter lead times. IT vendors that might have hired people six months in advance of an expected contract are now working with a one- or two-month window, said Surabhi Mathur Gandhi, senior vice president at TeamLease, a staffing consultancy.

Traditionally, about 30 percent of Indian IT services industry staff are on the bench at any given time, often in training, as they await deployment to client work.

In the December quarter, about 70 percent of Infosys staff and less than 65 percent at No. 3 provider Wipro were deployed on billable projects. At Tata Consultancy Services, the largest Indian IT services company, the figure was 72 percent, within what Ajoyendra Mukherjee, its human resources head, calls the comfort range of 70 to 74 percent utilization.

"I think we can push it up to 75, 76," he said.

Another IT services company, iGate Corp, envisions a future where just 10 percent of staff sit on the bench, said Srinivas Kandula, its human resources head, who predicts that the size of its bench will shrink by 2 or 3 percentage points a year over the next five years.

BACK-UP PLAN

Shorter benches mean a smaller share of hiring is direct from campuses, as seasoned professionals moving from a competitor would be less willing to wait to be deployed and firms are reluctant to pay them to do so.

Companies are also binding hires, especially experienced ones, with three-month notice periods and no-buy-out clauses, compared with one-month notice periods previously.

Among top-tier companies that are most actively trying to push non-linear growth where revenues are not constrained by the size of the work force, about 70 percent of employees are experienced staff, up from 60 percent in 2008, said Rajiv Srinivas, an associate director at Tech Mahindra, who expects that to rise to about 90 percent in the next two or three years.

At Infosys, while the net quarterly addition of employees fell from 4,906 people in the March quarter last year to 977 in the December quarter (excluding an acquisition), lateral recruitment held steady at an average of about 4,300 staff per quarter through December, meaning the percentage of campus hires was much lower.

"Earlier, the focus was more on career ... You get into a job, you start learning, and slowly acquire knowledge over a period of time," said Sunil Gupta, who joined Infosys as vice president of quality about six months ago from the Indian unit of CGI Group's Logica Plc.

"Today the value of a professional is judged by how quickly you're learning, how quickly you're adapting yourself and changing along with the environment," he said.

For young Indians who saw IT as a ticket into the middle class, the change means that career path is becoming less clear. Those who do break in and build valuable skills will remain in demand, but the days of young IT staffers brandishing five or more competing offers are over.

Yet that hasn't necessarily translated into slower wage growth. Mercer LLC expects industry salaries to grow 12 percent this year, the same as in 2012. As India's economy diversifies, graduates have more attractive career options, including at multinationals with a growing India presence, such as Google Inc, which means IT vendors must fight to stay attractive.

"We see IT companies as a back-up," said S. S. Jayaram, a final-year engineering student in Bangalore who says he chose a job in India with Mu Sigma Inc, a fast-growing U.S.-based data analytics company, over offers from IBM and TCS.

(Editing by Emily Kaiser)

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