Archive for April, 2015

TCS net up 13.5 percent for fiscal 2015

April 23rd, 2015

Tata Consultancy Services (TCS) posted net profit of Rs.21,696 crore for the just-concluded fiscal 2014-15, registering a 13.5 percent year-on-year (YoY) growth as per the Indian accounting standards.Outsourcing32

In a regulatory filing to the stock exchanges on Thursday, the IT bellwether said revenue for the fiscal under review (FY 2015) increased 15.7 percent YoY to Rs.94,648 crore under the Indian financial reporting standards.

Under the International Financial Reporting Standards (IFRS), gross income grew 15 percent YoY to $15.5 billion and net income 12.8 percent YoY to $3.5 billion.

Earlier, the global software major reported net profit of Rs.5,906 crore for fourth quarter (January-March) of the fiscal under review, registering 11.5 percent YoY and 8.5 percent sequential growth.

Revenue for the quarter under review (Q4) increased to Rs.24,220 crore, reflecting 12.4 percent YoY and 1.6 percent sequential growth.

Under IFRS, gross income grew 11 percent YoY to $3.9 billion and net income 10.5 percent YoY to $951 million.

“Operating profit was Rs.25,424 crore for fiscal and Rs.6,591 crore for quarter, while operating margin increased to 26.9 percent for fiscal and 27.2 percent for quarter and volume growth was 16.9 percent YoY and 1.4 sequentially.”

“We are living in a world where technology is not just becoming integral to business but to our daily lives. We are playing a leading role in this ongoing revolution, helping our clients navigate and leverage digital to help grow their businesses,” TCS chief executive N. Chandrasekaran told reporters here later.

Though the IT outsourcing major hired a whopping 67,123 people last fiscal, a record 47,931 employees left the company during the last 12 months, resulting in net addition of 19,192 techies, taking the total headcount to 319,656 at the end of March 31.

Similarly, in fourth quarter, gross addition was 14,395 and net addition 1,031, as 13,364 techies left the company between January and March, resulting in its attrition rate touching 14.9 percent on annualised basis.

On the outlook for the new fiscal (2015-16), the chief executive said a strong foundation had been laid for growth and investments in platforms, digital and automation were gaining traction with clients.

“We are upbeat on seeing more opportunities in the ensuing quarters to partner with customers across multiple industries in the US, Europe and Japan where we have invested substantially in tools and people,” Chandrasekaran asserted.

To mark the company’s 10 years of going public, the board announced a special reward to all its employees who completed one year service.

“Employees completing one year of service will be eligible for the special reward, which will be equivalent to a week’s salary for every year of service,” the company said in a statement.

The reward will cost the IT sourcing major Rs.2,628 crore ($423 million)

“We have maintained our profitability in a challenging operating environment, where currency has been a strong headwind for some time,” chief financial officer Rajesh Gopinathan said on the occasion.

Noting that there was holistic growth across markets and industries during the fiscal under review, Gopinathan said Europe led growth in major markets, while Britain and North America grew in line with the company average.

“All major industry verticals grew in double digits led by retail, manufacturing, life sciences & healthcare and BFSI (banking, financial services and insurance) in the fiscal,” Gopinathan added.

The company made 25,000 offers on engineering campuses for trainees who will join from second quarter (July-September) of this fiscal (2015-16).

“Our attempts to build a next-gen organisation that is social, mobile, engaged and collaborative continues. We are also extending the model of using social and platform-based collaboration tools to connect with students from colleges across India and globally,” TCS’ human resources head Ajoy Mukherjee said.

TCS also crossed the milestone of employing over 100,000 women, with gender diversity of 33 percent and 122 nationalities represented in its global workforce.


Shortage of IT security professionals not unique to government

April 17th, 2015

The federal government is not the only entity struggling to fill its ranks with talented information security professionals. The entire world appears to be in the same boat, according to a new study.Outsourcing31

Conducted by growth consulting company Frost & Sullivan, the (ISC)² Global Information Security Workforce Study polled almost 14,000 information security professionals around the world. Twenty percent of those polled indicated they were government employees.

The survey discovered a clear consensus: The world is not producing enough information security professionals to keep up with demand.

“A perfect storm is enveloping the information security workforce with the resulting wake being a widening gap between the number of security professionals needed and the actual number available to be hired,” the report stated.

More than 60 percent of respondents said their organizations currently have too few information security workers. That’s up 6 percent from from the same survey in 2013.

Two years ago, the majority of the survey’s respondents stated the dearth was because of insufficient funds, or “that business conditions could not support additional personnel.”

This year, respondents said the personnel shortage is because organizations have a difficult time finding qualified workers has climbed by 8 percent since 2013.

Although the number of information security professionals is expected to surge by almost 200,000 people over the next year, it won’t be a quick enough, according to the report.

Over the next five years, the expected shortfall — the difference between the projected workforce demand and the number of professionals predicted to actually be in the field — is 1.5 million, according to the report.

The shortfall appears to have little to do with job conditions. More than three-fourths of the poll’s respondents said they were either “somewhat satisfied” or “very satisfied” with their job.

On average, the annual salary of those polled was nearly $100,000.

Cybersecurity has topped the report’s list of security concerns for the past two surveys. In 2015, almost 75 percent of respondents said they found application vulnerabilities and malware to be a concern.

To combat the information security workforce shortage, organizations are expected to spend more on security tools and technologies, according to the report. Over half of respondents stated they anticipate a boost.

The survey also found almost one-third of those polled expected their organizations to spend more money on outsourcing.

But the report didn’t foresee these changes fully making up for the lack of qualified cyber job candidates. It suggested organizations adopt a proactive approach to both security awareness and accountability.

“Needless to say, a lack of action will aggravate the shortage,” the report concluded.


Yahoo, Microsoft Search Renewal Could Help Portal Renew Its Own Search Tech

April 17th, 2015

Yahoo and Microsoft have agreed to renew their search alliance, but in a way that could help Yahoo renew its own search technology.Outsourcing30

In 2009 the two companies struck a deal that would have Microsoft’s Bing search engine exclusively provide the search results and automate search ad buys on Yahoo’s sites and Yahoo handle direct search-ad deals with advertisers. Industry experts viewed the deal as Yahoo — one of the most dominant early search engines before Google overtook the market — outsourcing its search technology to Microsoft.

Since former Google search exec Marissa Mayer took over Yahoo as CEO in July 2012, she has reportedly been trying to wiggle out of the agreement in order to reassert Yahoo’s search business. For example, the deal’s exclusivity clause only applied to desktop, so under Ms. Mayer, Yahoo was able to roll out an ad marketplace called Yahoo Gemini to automate the sale of Yahoo’s mobile search ads.

Now Yahoo has blown the loophole wide open. Under the renewal terms announced on Thursday, Yahoo’s deal with Microsoft is no longer exclusive on desktop or mobile. That means Yahoo could strike similar deals with other companies that own search engines like Google, Facebook or Amazon to also source their results within its search pages.

But perhaps more importantly, it means Yahoo can rebuild its own search technology. Google and Facebook have been able to build multibillion-dollar ad businesses that are bigger than Yahoo’s by being able to dig into all their user data to personalize search results and social feeds as well as the adjoining ads. Yahoo has been able to do that to a point, but operating its own search engine could give it more data and more ownership of that data.

It’s hard to say how positive the search alliance has been for Yahoo. Yahoo has credited it for 35% of the $4.62 billion in revenue it made last year, but Microsoft has had a hard time meeting certain agreed-upon revenue markers that has hurt how much money Yahoo makes per search query. And Microsoft’s and Yahoo’s combined share of the global search ad market this year will be only 6.5% compared to Google’s 54.5% share, according to eMarketer estimates.

A rebuilt Yahoo search engine could help the portal strike that search deal with Apple it’s reportedly been trying to negotiate that would have it oust Google as Apple’s Safari web browser’s default search engine, as Yahoo did with Mozilla’s Firefox web browser last year.

From a revenue perspective, Yahoo’s search business has been a rare bright spot. While the company’s display advertising business hasn’t had a quarter of year-over-year revenue growth since the third quarter of 2012, Yahoo’s search business has grown its quarterly revenue year-over-year for each of the past four quarters. If Yahoo is able to take advantage of the loosened search alliance, that trend could be expected to continue.


TCS Bids ‘Ta-Ta’ to Fast Growth

April 17th, 2015

Shares in Tata Consultancy Services are priced for perfection. Little wonder that investors rush to part ways at the slightest sign of trouble.Outsourcing29

The information technology outsourcer posted mildly disappointing earnings on Thursday evening. In the three months to March, revenue in U.S. dollar terms fell 0.8% from the previous quarter; analysts had expected a slight increase.

That might not seem like a big miss, but investors took the news hard, sending TCS shares down 4% in morning Mumbai trading. This follows a similar episode two quarters ago, when a slight miss on top-line estimates for the September quarter sent shares down 9% in a single session.

TCS is the first of India’s major IT companies to report earnings for the March quarter. As the country’s biggest outsourcer by revenue, it is also an industry bellwether. The entire sector faces challenges from the strong dollar, as well as declining spending by energy companies in the wake of the oil-price bust.

TCS reports revenue in dollars, but gets around a quarter of its revenue from the U.K. and continental Europe. In the first three months of 2015, the pound fell 5% against the U.S. dollar, and the euro dove 12%, making revenue look worse in dollar terms. Costs are mostly in rupees, which have been stable against the dollar.

Longer term, the weaker euro will boost the competitiveness of Europe’s own IT providers such as Capgemini and Atos, notes Jefferies analyst Atul Goyal, lessening the appeal to European companies of going offshore.

Research firm Gartner sees total world-wide IT outsourcing spending falling slightly this year due in part to the drag from technology-expense cutbacks in the fossil-fuel industry. The impact on TCS won’t be huge, as energy and utility companies together account for just 4% of revenue, but it is another headwind.

The bigger issue is where TCS will find growth to underpin investor’s lofty expectations. From fiscal year 2011 to 2014, its annual profit growth averaged 21%. Those days are gone. For fiscal year 2015, which ended in March, the pace slowed to 13%.

Even that excludes the impact of a generous one-time employee bonus. Including the bonus, profit for the year was up just 2.3%. While the current fiscal year may not see such a magnanimous outlay, compensation costs are rising. TCS’s employee-attrition rate has worsened as developers increasingly hopscotch from firm to firm.

Analysts see profit growth excluding bonuses slowing to 9% for the current fiscal year. Despite this, TCS’s shares are still trading at 20 times forward earnings, in line with their five-year average. That may have made sense at one time, but not anymore.


TCS sees FY revenue growth beating industry estimates

April 17th, 2015

India’s largest software services exporter Tata Consultancy Services (TCS.NS) posted a better than expected rise in net profit led by strong worldwide client spending and said it expected revenue growth in the year starting in April to top industry estimates.An employee of Tata Consultancy Services (TCS) works inside the company headquarters in Mumbai

TCS, which has been growing revenues faster than rivals Infosys Ltd (INFY.NS) and Wipro Ltd (WIPR.NS), will benefit from investments in newer digital technologies and automation, Chief Executive N. Chandrasekaran said.

“We have laid a strong foundation for growth in FY 16,” Chandrasekaran said, adding that the company’s revenue will likely beat an industry lobby group’s estimates for the current fiscal year.

Exports by India’s IT outsourcing sector are expected to rise 12-14 percent in the current fiscal year, according to the National Association of Software and Services Companies.

TCS, which posted a 30.7 percent fall in net profit for the fourth quarter due to a one-off bonus paid to employees, had in March warned that currency fluctuations would affect its operating margins by 40 basis points.

The dollar’s biggest quarterly rise against other major currencies since 2008 has undermined sales of India’s IT services firms in non-U.S. markets, including Europe, in what is already a seasonally slow period.

TCS, part of India’s diversified Tata Group, makes about 18 percent of its revenue from Europe.

However, excluding the employee bonus payment of 26.28 billion rupees, TCS reported a net profit for the period of 57.73 billion rupees ($927.37 million). That was up 7.7 percent compared to the year-ago quarter helped by strong client spending in a seasonally slow period.

Analysts, on average, had expected the company to report profit of 54.15 billion rupees.

Shares in TCS, the largest company in India by market value, closed down 1.5 percent ahead of the results on Thursday, while the broader market closed 0.46 percent lower.


Global BPO Market in the Public Sector 2015-2019

April 17th, 2015

Research and Markets has announced the addition of the “Global BPO Market in the Public Sector 2015-2019″ report to their offering. Outsourcing28

The analysts forecast the Global BPO market in Public sector is set to grow at a CAGR of 6.0% over the period 2014-2019

BPO is a segment of outsourcing, which consists of subcontracting certain business processes of an organization to a third-party vendor that has expertise in the required domain. The Public sector refers to government services such as the military, police, public education, public transit, healthcare services as well as employees working for government organizations. The BPO services in Public sector support governments to perform various functions such as e-governance initiatives, taxation, asset registration, pensions, and welfare programs, including financial assistance for the unemployed, and in a cost-effective manner.

The Global BPO market in Public Sector can be categorized into four segments: F&A Outsourcing, CRM BPO, HR Outsourcing, and Procurement Outsourcing. This report covers information about the market share of the Global BPO market in Public sector by services and by geography.
One of the major trends upcoming in this market is the shift to omni-channel to increase the accessibility of end-consumers and to strengthen customer relationships. The omni-channel helps governments to synchronize and store detailed information about customers which eventually leads to easy tracking of complaints and customer queries.

According to the report, the Global BPO market in the Public sector is witnessing high growth because of the increased collaboration of IT services in the BPO sector. IT has facilitated the automation of various activity segments such as procurement, orders to pay, invoicing, accounts receivable, payroll outsourcing, and many others. Automation is increasingly being adopted to mitigate productivity problems and to control rising costs.

Further, the report states that one of the major challenges for the Public sector organizations is the need to spend cautiously because of market dynamics and the need to withstand budgetary pressures. These factors have forced government agencies to revise their outsourcing budgets, which eventually reduces contract sizes and number of contracts.

Key Vendors

Serco Global Services

Other Prominent Vendors

3i Infotech
Amadeus IT Group
ATS Group
HCL Technologies
NCO Financial Systems
Northrop Grumman


Indian IT companies may outdo MNCs in $13 billion renewals

April 16th, 2015

Indian IT is gearing for a slugfest with global peers like IBM and HP as mega billion-dollar IT contracts come up for renewal. London-based IT research firm Ovum estimates that contracts worth $13 billion will be up for renewal this fiscal year.Outsourcing27

This includes UK’s publicly-funded healthcare system National Health Service’s (NHS) $3.7 billion IT outsourcing contract that involves application maintenance and development (ADM) and systems integration (SI). US-based IT major CSC is the current primary vendor for the contract.

Detroit-based General Motors, whose brands include Chevrolet and Cadillac, had awarded a $2-billion IT outsourcing contact in 2011 for ADM, SI and infrastructure management that will come up for renewal in July this year.

Hansa Iyengar, IT analyst in Ovum, said that many large deals coming up for renewal have a sizeable infrastructure component to them and most of these involve very large, complex legacy systems that need to be modernized. “We have anecdotal evidence of Western incumbents walking out of the deals as they perceive them to be too risky for the given contract values and these are some of the deals that the Indian vendors are picking up,” she said.

Last year Cognizant bagged a $2.7 billion deal from HealthNet and Wipro won a $1.2 billion IT outsourcing deal from Canadian logistics and utilities provider Atco.

Such mega contracts are rarely awarded to a single entity any more; clients prefer to take a multi-supplier approach. Ian Brown, senior analyst-IT services in Ovum, said one consistent factor in all of the high-end deals is that they are primarily IT infrastructure outsourcing deals – with the exception of Wipro/Atco, they are either single or twin infrastructure towers (data centre and end-user). “But the infrastructure towers, especially data centre, is very complex with a lot of expensive legacy assets, much of which needs to be written down and which partly accounts for the very high contract values. HCL and Wipro already play in this high-end infrastructure market, while TCS, Infosys, and Cognizant are all investing in their infrastructure practices,” he said.

Indian IT firms are seen to be using lower prices as a means to win the big contracts, and some of them are tweaking their onsite-offshore ratios and deploying automation tools to lower costs to ensure margins are not adversely affected. “We see Wipro, HCL, and Cognizant leading the way in using price aggressively in mega deals, with the other Indian firms following close behind. HCL, Wipro and TCS are all looking to utilize automation to change the game and come in at very aggressive price points,” said Peter Bendor Samuel, CEO of Everest Group.


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