Now, it is targeting people many have never heard of on its home turf.

The company, part of India’s flagship conglomerate, the Tata Group, has launched a new business unit called iON—for information technology services that are available all the time. It offers services aimed at India’s small and medium-sized businesses, a sector traditionally overlooked by outsourcers that have focused on winning large accounts from major companies in the West.

The new campaign is based on cloud computing–meaning that small companies can download software that allows them to effectively manage their data and other computing needs from a remote server run by Tata Consultancy. Most clients will pay Tata Consultancy on a per-user basis, and, in some cases, with a portion of their revenues.

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This will be short and–considering the topic–bittersweet.

Despite a report in TechCrunch saying layoffs at Yahoo might be imminent, previously reported termination of employees in its product unit will not take place this week.

Actually, according to sources familiar with the situation, they will take place in about two weeks, around December 13th.

As BoomTown previously reported earlier this month, the cuts in staff will total about 10 percent and be almost completely centered on the product organization under Chief Product Officer Blake Irving.

That would mean layoffs of about 650, since that part of Yahoo has about 6,500 employees.

In addition, said sources, the layoffs might result in the outsourcing of some functions at the company.

The move will surely be yet another blow to morale at the much-buffeted Silicon Valley Internet giant.

Google recently gave each of its employees a 10 percent pay raise and $1,000. Facebook, similarly, is showering benefits on its fast-growing pool of workers.

Yahoo currently has just over 14,000 employees. It has undergone many restructurings and layoffs.

Yahoo is indeed preparing to lay off employees, in a reduction in force that will be done in December.

But the layoffs, first reported in TechCrunch at 20 percent, will be closer to 10 percent and be almost completely centered on the product organization under Chief Product Officer Blake Irving, said sources close to the situation.

That would mean layoffs of about 650, since that part of Yahoo has about 6,500 employees.

Yahoo, in fact, just put out a statement saying the 20 percent figure was “inaccurate.”

Said the company in a statement: “Yahoo! is always evaluating expenses to align with the company’s financial goals. However, a 20% reduction in Yahoo’s workforce across the board is misleading and inaccurate.”

Well, kind of, because it is a big layoff nonetheless.

In addition, said sources, the layoffs might result in the outsourcing of some functions at the company.

Even at a lower figure, the move will surely be yet another blow to morale at the much-buffeted Silicon Valley Internet giant.

Just this week, for example, Google gave each of its employees a 10 percent pay raise and $1,000. Facebook, similarly, is showering benefits on its fast-growing pool of workers.

Along with a spate of top-level executive departures, Yahoo is under scrutiny by Wall Street, as well as the subject of much takeover speculation.

This has put Yahoo CEO Carol Bartz under even more pressure to show results after almost two years as top manager.

Known as an exec who knows how to cut costs, she has yet to prove she can grow the Yahoo business with new innovations.

Yahoo has just over 14,000 employees. It has undergone many layoffs and restructurings, but only once in a major one under Bartz.

In 1999, Paul Flanagan became one of the early employees at StorageNetworks Inc., a company that rented and managed data storage equipment so its customers wouldn’t have to buy their own. The company was an immediate hit, reaching $123 million in annual sales in its third year of business.

But StorageNetworks ultimately fell into bankruptcy because the technology that would let it add more customers without spending too much capital on the back-end just wasn’t there yet. “When I wrote the financial model for StorageNetworks, the worst part [of the business model was] owning all the back-end infrastructure,” recalled Flanagan, who later became the company’s chief executive.

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With staff attrition inching higher toward pre-recession levels, Indian outsourcers are now searching for talent in the lost sheep lot. Infosys Technologies and Tata Consultancy Services, the country’s two big outsourcers, are welcoming back performers who’ve left their companies in search of greener pastures.

Infosys, the country’s second largest software exporter by sales, has opened a “green channel” initiative, whereby employees who have left the organization can join again with minimum processing time. The policy currently only applies to positions in India.

The new initiative follows a less successful human resources program called Infosys Role and Career Enhancement, or iRACE, which created tougher performance benchmarks and less-frequent promotions, resulting in several experienced staff exiting the firm. Infosys management maintains the “green channel” program will help it leverage employees’ learnings from other experiences.

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Another strong sign of improving times was a 5.2 percent on-month growth in business volume, as well as the addition of 47 new clients and the hiring of more than 9,000 employees.

“The results are pretty decent for the quarter. The guidance definitely indicates that they are feeling pretty confident about their ability to grow in the given environment,” said Tejas Doshi, vice president of research at Sushil Financial Services Pvt. Ltd.

Infosys’ consolidated net profit in the three months through March was 16.00 billion rupees ($360.6 million), down one percent from 16.15 billion rupees a year earlier and compared with 15.59 billion rupees in the previous quarter.

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Over the past two years, H-P, Dell and Xerox have spent billions to muscle their way into better positions in tech services. The market, traditionally led by International Business Machines Co. (IBM), is regarded as attractive because it provides steady revenue from customers who pay recurring amounts to outsource their tech systems like email or payroll.

But even as the total number of new services contracts awarded each year more than doubled globally between 2000 and 2009, the amount spent on those new contracts fell to $74.5 billion from $90 billion in the same period, according to tech-consulting firm TPI.

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Say this about the toolbar and distribution deals, which Yahoo CEO Carol Bartz keeps saying were too pricey for the Internet portal: They have certainly given Microsoft’s search offering, Bing, a very nice boost.

In all likelihood, it is that and more causing Bing to make solid gains on Yahoo (YHOO), whose market share declined yet again this month, according to comScore’s monthly report of search market share in the United States.

According to comScore (SCOR), Microsoft (MSFT) saw its share rise to 11.5 percent in February, up from 11.3 percent in January.

Meanwhile, Yahoo dropped from 17 percent to 16.8 percent, another month in a troubling run of them. Each point of share lost, according to many sources and analysts, represents about $100 million in online advertising revenue.

Bartz has also repeatedly said Yahoo’s share would improve soon, as the company innovates its consumer search experience in the wake of outsourcing search technology to Microsoft as part of a recent deal.

And it goes without saying, still at the tippy-top as the mice battled, elephantine search giant Google (GOOG) also managed to eke out a small gain, rising to 65.5 percent 65.4 percent.

Is there more than one way to skin a social graph?

Yesterday, Yahoo (YHOO) took another step in its efforts to play fast catch-up in the social networking arena, by dramatically expanding its relationship with Twitter and integrating the microblogging service broadly throughout its Web site.

In much the same way it did recently with Facebook, Yahoo’s move is part of a massive integration of more innovative and popular third-party social networking sites across the giant Internet portal, which is code-named internally “Project Rushmore.”

Some think outsourcing the job to more capable companies is yet another monument to Yahoo’s failure at its own much touted plans to socialize itself.

And while this is true to a large extent, BoomTown is not so sure it’s a bad idea, especially compared with the flailing experienced by Google (GOOG) recently from its own attempts to compete with Facebook and Twitter via the rollout of Google Buzz.

That has certainly turned out to be a confusing mishmash so far and most definitely a privacy quagmire for the search giant, which–let’s be honest–might not be able to grok social even if it got poked in the head relentlessly.

And while Google execs have loudly claimed that they are not aiming at the social networking’s twin phenoms, the air of aggressive desperation–or maybe desperate aggression–is palpable.

That’s why what the Silicon Valley icon is doing might be the best solution for it at this point–if you can’t innovate, aggregate!

“We want to integrate across all social networks to give consumers a better experience,” said Cody Simms, senior director of product management for Yahoo’s open strategy, in an interview yesterday. “Yahoo then becomes a network of social networks, making it easier for users.”

And that effort to make Yahoo the one place to gather it all is just what it seems to be trying to do. In December, Yahoo announced it would integrate Facebook Connect with its many properties–from its powerful media sites to its Flickr photo service to its email.

That has now been followed by the weaving of Twitter’s real-time feed throughout the service in a variety of ways. Under terms of the deal, users can access the data stream of tweets while on Yahoo, make status updates and share Yahoo content.

In addition, Yahoo said that search and media properties “like News, Finance, Entertainment, and Sports will include real-time public Twitter updates across a variety of topics.”

Yahoo sources said the company would be striking similar deals with other social networking sites, and MySpace and LinkedIn are likely candidates for the next two spots on Yahoo’s social monument.

This kind of search and presentation improvement is key, of course, as Yahoo must present a more innovative palette of tools to consumers as Microsoft (MSFT) takes over its search technology and others offer users an increasing number of features.

Without naming Google Buzz, Jim Stoneham, Yahoo’s VP of Communities, said he thinks it is the best course at this point in the game, in which Facebook and Twitter have run far ahead with the social ball and do not show any signs of slowing down quite yet.

“I don’t think yet another social network, no matter how you try to force it on consumers, is what people want,” said Stoneham, in a not-so-veiled slap at Google Buzz. “So, Yahoo will obviously not be doing another social network.”

That’s the best news I have heard in a long time from Yahoo. Now, let’s see if it can turn not making something into, well, something.

Caso says the group is likely to take another leg down, forecasting that April conference call season will see most of the companies issue guidance below Street expectations. He writes that “demand remains lackluster and decision-making slow.” Customers budgets are down 10-20 percent this year, he contends, but with many operating on a month-to-month basis and focused solely on cutting costs. Caso writes that he is hearing pricing has come down close to 10 percent, and that existing contracts are being repriced. He also says the sector is seeing increasing competition for deals from Accenture (ACN) and IBM (IBM).

Caso cut his ratings today on Cognizant (CTSH), Wipro (WIT), Infosys (INFY) and Syntel (SYNT) to Underperform from Market Perform. He also reduced EPS estimates for all four companies. Caso said the stocks could see another 15-30 percent decline from Friday’s close.

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Egypt seems like an unlikely place for Western companies to send tech work and open call centers, but Tarek El-Sadany, a government official in charge of helping to grow the country’s information-technology industry, says that the country is well positioned to do these tasks–literally. Egypt is only two hours off of Greenwich Mean Time, so daytime there corresponds nicely with the European workday. For U.S. companies committed to outsourcing, Egypt can be a hop between the U.S. and India.

Another benefit, according to El-Sadany, is that the weekend in Egypt is observed on Thursday and Friday. People typically work on Saturday and Sunday so companies won’t have to pay extra for those shifts–or get stuck with second-class workers–as they might in other countries.

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Pichel offered three reasons for his more cautious approach to the stock:

• He contends the company is “rapidly losing its polysilicon cost advantage” as the price of polysilicon approaches $100/kg and as “competition intensifies in an over-supplied environment.”
• Pichel says he has “little visibility” into the company’s new strategy to outsource production in Asia.
• The company’s balance sheet “leaves little flexibility for pursuing alternative expansion strategies in Asia.”

He says the stock at $2 “represents an option on solar’s growth in the U.S.,” but that “future growth and profitability prospects have become murkier in the last two months in an intensely competitive environment.”

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Headless Story Found in Rumor-Filled Bar?

[Image Credit: New York Post]

And it could not come a minute too soon.

Yahoo has been unusually quiet about the issue, after weeks of Google’s more aggressive and listen-to-us-big-brains approach (along with some creative fake-blurbing of BoomTown!).

That’s all resulted in more Justice Department scrutiny and more critics piling on, including the typically dulcet Canadians, who might also be launching an antitrust investigation.

Thank goodness, then, that the first foray by Yahoo President Sue Decker (pictured here) makes the case in a much more sensible and straightforward manner, which has been sorely needed on the Yahoogle side.

In her piece on Yahoo’s corporate blog–the inexplicably named Yodel Anecdotal–called “Myth-busting and the Yahoo!-Google Agreement,” Decker’s just-the-facts-ma’am approach is well done.

Writes Decker:

“Here’s the bottom line:
Yahoo! will use this agreement to help us become a stronger competitor in all aspects of online advertising; and Yahoo! is not exiting the sponsored search business. We plan to remain a strong player in sponsored search.”

That said, Decker does take aim at a lot of paper tigers and makes some assertions about the strength of Yahoo’s search business that stats belie.

I have been pretty clear, as have many, that the pair will not fix prices; nor are they merging their businesses in some fashion to create a search behemoth that controls more than 80 percent of the market.

In addition, Decker’s assertion that Yahoo did not do an exclusive deal to avoid the monopoly issue is kind of moot–never ever would the pair have been allowed to strike such an agreement.

Nonetheless, even in this looser partnership, there is reason to be worried.

Most people’s problem, actually, is over whether the No. 1 and No. 2 players in any market should be allowed to partner at all.

And what most are nervous about is what happens if Yahoo (YHOO) becomes too dependent on Google (GOOG) as its search market share declines (and it is declining, to be sure, according to all stats on the subject).

Nonetheless, it is hard not to like Decker’s examples of how Yahoo cannot fill up all search page results with ads, such as a search about the “elevation of Mount Elbert.” (That lovely highest peak in the Rocky Mountains is pictured at left.)

Decker also does not spend a lot of time playing victim to the mean lobbying of Microsoft (MSFT). While she does mention it, she does not dwell on it, as Google has.

And, surprising to me, Decker does clearly admit that Yahoo is doing this deal because advertisers pay more for Google queries than for those on Yahoo.

With some enthusiasm, she also tries to make the case that Yahoo is attempting to change that.

Writes Decker:

“We will implement the agreement in a way that respects an important principle you may know as the Hippocratic Oath: ‘first, do no harm.’ That is, we will not use Google ads in a manner that would create a significant risk to the health of our own sponsored search business.

“It’s important for us to recognize when using Google ads is beneficial for users and advertisers. Queries for which we have no coverage, low depth, and/or low relative monetization are all circumstances in which backfilling probably makes sense–they indicate that Yahoo! is not currently delivering enough value for that inventory. If Google can deliver that value where we currently don’t, then everyone wins–including the advertiser and the consumer.”

I like the idea of backfilling, even if I don’t like the fact that it is the too-powerful Google that is doing this heavy lifting for Yahoo.

But, at the very least, Decker is being honest that Yahoo has come up short and needs help, as it tries to right itself.

Admitting you have a problem, of course, is the first step to recovery. So, let’s hope the cure Yahoo is using–better and more search ads from Google–does not kill it.

Here’s Decker’s whole post on the Yahoogle deal:

Myth-busting and the Yahoo!-Google Agreement
Posted September 26th, 2008 at 12:23 pm by Sue Decker, President

Sue Decker
President

After the markets closed today, Yahoo (YHOO) filed its extremely redacted version of the agreement it made with Google (GOOG) for outsourcing some of its search advertising.

The agreement has been a controversial sticking point amidst the Yahoo-Microsoft (MSFT) takeover battle, and has even seen action in Congress.

Here’s the top of the agreement with a link below to the rest.

More on what it means, soon…

SERVICES AGREEMENT

NOW, THEREFORE, in consideration of the promises, the mutual covenants and agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are expressly acknowledged, the Parties hereto, intending to be legally bound, agree as follows:

Here’s the rest of the very long and (not very) detailed document filed.

Yet that’s exactly how Jerry Yang marked his one-year anniversary as CEO of Yahoo (YHOO). Yesterday Yang paid a visit to Capitol Hill in the hopes of tempering antitrust concerns over the Internet company’s proposed search-advertising pact with rival Google (GOOG).

During his one-day visit, Yang met with Sen. Herb Kohl (D., Wisc.), who chairs the antitrust subcommittee and has raised concerns about the long-term implications of Yahoo’s proposed deal with Google. Yahoo maintains its venture with Google won’t have an anticompetitive impact on the online-search market because it involves only a portion of Yahoo’s search business. But others (read: Microsoft [MSFT]) disagree and argue it’s the beginning of a process that will end with Yahoo outsourcing all of that business to Google and consolidating, oh say … 90% of the search-advertising market in the search sovereign’s hands.

“On the surface, it may be a compelling argument,” Rebecca Arbogast, an analyst at Stifel Nicolaus, said of Yahoo’s claim that the deal is benign. But she added: “Over time, what this is doing is setting up a trajectory where [advertisers] move over to Google and they become the only game in town.”

Here’s an email I got from a high-ranking Yahoo (YHOO) employee today after the Microsoft (MSFT) deal was declared dead and the ad-outsourcing deal with Google (GOOG) announced hours later:

“Out of the frying pan, into the fire. At least, the frying pan was a slower death.”

And here’s an email from a major Yahoo investor–no, not Carl Icahn!:

“The Board and Jerry are idiots.”

And those are people who presumably like Yahoo, since they work there and buy its stock.

Well, both got a big dose of disappointment today, as Yahoo shares dipped to $23.50, losing 10% of their value.

It’s just as ouch as that old pick-up line: “Did it hurt when you fell from heaven?”

Yahoo, of course, has fallen from a little lower in the stratosphere.

But the abandonment of a $33-per-share deal that Microsoft might have meant is gone, baby, gone and the prospect of a lot of negative attention over a questionable partnership with Google adds up to a lot more turmoil ahead.

Of course, turmoil has been the weather forecast for Yahoo for far too long now.

And there is possibly more to come. Many, many sources told BoomTown to expect more major departures from Yahoo’s ranks, including from its board.

According to people familiar with the situation, not every board member was thrilled with Yahoo’s Google alternative.

But not every board member, like a lot of Yahoo employees, has a lot of control over the troubled Internet company.