Posts Tagged ‘HCL’

In-sourcing of IT operations gains traction

October 24th, 2014

“There has been shift towards in-sourcing by U.S. firms over the past three years in the manufacturing sector and also in specific areas of high intellectual property value in companies.”Outsourcing40

In a reversal of trend, major firms are now looking to move back their information technology functions in-house or what is termed as in-sourcing, from their earlier stance of outsourcing to low-cost providers in India.

Firms such as auto major General Motors, Target, Zynga, Nordea and AstraZeneca have looked to build their own information technology team.

“There has been shift towards in-sourcing by U.S. firms over the past three years in the manufacturing sector and also in specific areas of high intellectual property value in companies. The desire has been to keep vital IP and know-how within the company,” said Mary E. Shacklett, President, Transworld Data, a technology analytics, market research and consulting firm.

British-Swedish pharma major AstraZeneca is looking to bring down its IT outsourcing to 30 per cent in the next three years from 70 per cent now. It works with eight vendors, out of those HCL Technologies mainly handles infrastructure, while Cognizant, Infosys and Accenture do application development and maintenance.

The company’s global IT budget is roughly $1.3 billion, which it aims to halve in the coming years. “In-sourcing is a silent trend. Companies like General Motors are on it for the last three years. This is unlike the earlier outsourcing trend, which had people shouting from rooftops. So, nobody is talking about ‘in-sourcing,’ at least not yet,” David Smoley, Chief Information Officer, AstraZeneca, said. The firm has launched is own captive arm in Chennai which will handle in-house IT work and support its 51,500 employees worldwide.

In 2012, General Motors Chief Information Officer Rondy Mott embarked on a plan to bring back its IT work inwards. At that time, 90 per cent of General Motor’s IT services where provided by Helwett-Packard/EDS, IBM, Capgemini and Wipro and only 10 per cent was in- house. The plan is to reverse this ratio in three years. Mr. Mott is of the view that GM cannot be creative or fast enough with outsourced IT.

When contacted, a GM spokesperson said, “All we can confirm at this point is that GM IT’s in-sourcing strategy is on track”.

AstraZeneca’s Mr. Smoley said that one of the reasons why his firm looked at in-sourcing was to take control from an IT prospective and to improve efficiency in terms of faster delivery of drugs.

Research firm Gartner said it was seeing a fundamental shift in the approach to digital business causing organizations to rethink their approaches to sourcing. “The threat many Indian providers will face is from the shift happening from labour to technology arbitrage. How quickly Indian providers can change gears to grab the opportunity and move forward even if that means constructive destruction of some of the existing business models could define future success,” D.D. Mishra, research director at Gartner, said.

“The shift to captives represents a long-term commitment to offshore-based services. Overall, companies in Europe and the U.S. are looking to perform more work offshore in India, not less. Captives are not a threat for vendors, but, in the short-term, can cannibalize a vendor’s business,” said Peter Schumacher, President and Chief Executive of Germany-based consulting firm Value Leadership Group Inc. “Offshore services firms with strategic vendor status, and those that are organizationally agile and collaborative, are likely to be least impacted – some may even benefit.”


HCL Tech quarterly profit up 32 percent, shares fall over 9 percent

October 20th, 2014

HCL Technologies Ltd, India’s fourth-largest software services exporter, posted a 32 percent rise in quarterly net profit, beating estimates, as sales in the Americas, the company’s biggest market, rose.To match Insight INDIA-OUTSOURCING/

Shares in HCL Technologies, however, closed 9.1 percent lower on Friday, as the technology outsourcing company’s revenue growth of 12.8 percent in dollar terms was below street expectations, stock market dealers said.

For most IT services companies, analysts and investors track the dollar sales numbers as clients oversees get billed in that currency.

HCL earned 18.73 billion rupees ($303.44 million) in profit in the September quarter, compared to 14.16 billion rupees last year. Analysts, on average, were expecting the profit to be at 17.29 billion rupees, as per Thomson Reuters data.

HCL relies heavily on contracts to manage data centres and networks for revenue growth, whereas peers Tata Consultancy Services Ltd (TCS.NS) and Infosys Ltd (INFY.NS) earn a greater proportion of revenue from higher-margin software services.


HCL Technologies Q1 net profit grows 2.1% QoQ, 32% YoY to Rs 1873 crore

October 17th, 2014

India’s fourth largest software services provider HCL TechnologiesBSE -7.97 % today reported 32.3 per cent rise in consolidated net profit at Rs 1,873 crore for the first quarter ended September 30 on the back of strong growth in Europe and business services. Outsourcing27

The company had posted a net profit of Rs 1,416 crore in the year-ago period, it said in a BSE filing.

Consolidated revenues grew 9.7 per cent at Rs 8,735 crore in the July-September quarter of this fiscal as against Rs 7,961 crore in the same quarter of the previous fiscal.

The firm follows July-June as the fiscal year. In dollar terms, net profits rose by 36.1 per cent to $307.2 million in the first quarter of the current fiscal as against $225.6 million in the year-ago period.

Revenues rose by 12.8 per cent to $1.43 billion during the review period from $1.27 billion in the corresponding quarter last fiscal.

“We have posted another healthy quarter of broad-based growth led by a revenue increase of 3.2 per cent quarter-on- quarter in constant currency,” HCL Technologies CEO Anant Gupta said.

Customer acquisition momentum continues with yet another billion dollar quarter driven by strong growth in global infrastructure services at 16.9 per cent year-on-year and engineering and R&D services at 14.1 per cent y-o-y, he added.

“Going forward, our investments will continue in the three strategic markets of ITO, Engineering Services Outsourcing and the emerging Digitalization space which will enable a continued balanced business portfolio performance for the company,” he said.

Revenues from Europe grew 20.8 per cent y-o-y, while that from Americas grew 11.1 per cent during the said quarter.

Americas crossed the USD 3 billion in revenue milestone on LTM basis.

HCL Technologies added 11,631 employees (gross) during the September quarter taking the total headcount to 95,522.

It signed 15 transformational engagements with more than USD one billion of Total Contract Value in this quarter.

The company has declared an interim dividend of Rs 6 per equity share of Rs 2.

“HCL’s performance has exceeded the market expectations. It’s showing signs of healthy growth but not industry leading as yet,” Greyhound Research Chief Analyst and Group CEO Sanchit Vir Gogia said.

The company holds a strong foothold in infrastructure management which has been generating a steady stream of revenue for the company, he added.


Top 5 IT players likely to report robust growth in Q2

October 9th, 2014

Top IT stocks fell sharply on Wednesday after touching record intra-day levels a day earlier. Citi Research India, in a report, said it was toning down optimism over the sector’s future performance, apart from downgrading Infosys ratings from buy to neutral, Tech Mahindra from neutral to sell, and Mindtree from buy to sell, a move which left investors wary of the sector. These stocks may exhibit greater volatility in coming weeks, depending on the quarterly performance of the companies.Outsourcing3

However, despite the scepticism, top five IT players are expected to report robust sequential growth in revenue and net profit for the September 2014 quarter because of better demand traction in the US and a reviving European market for IT outsourcing. A lack of sharp appreciation in the rupee against major currencies compared with the quarter-ago levels, too, augurs well.

The sample of TCS, Infosys, Wipro and Tech Mahindra is expected to report a growth of 5.7% in sales and 3% in net profit sequentially. It’s based on average of estimates reported by eight brokerages, including Barclays Research India, Citi Research India, Edelweiss Securities, Kotak Institutional Equities, Motilal Oswal Securities, MSFL, Anand Rathi Research and Religare Institutional Research, and internal estimates of the ET Intelligence Group.

Compare this with a lacklustre 0.1% growth in revenue and 1.9% drop in profit sequentially for the June 2014 quarter. TCS will stand out due to expected higher organic growth and the benefit from integration with Mitsubishi joint venture.

Historically, the demand scenario is upbeat during the September quarter for Indian IT outsourcing companies. This will benefit top players such as TCS and HCL Technologies, which have shown aggression in bagging large multi-year projects from the US and European clients.

Among the top five, TCS is expected to report the highest dollar-denominated revenue growth of 5-7% sequentially. Apart from growth in existing business, it also includes an increase of 2-2.5% due to integration of revenue from the joint venture with Mitsubishi. This will translate into 8% growth in revenue at Rs 23,847 crore, according to average estimates.

Other players in the top five are likely to report 4-4.5% revenue growth in rupee terms. Apart from revenue growth, TCS will also lead the pack on the net profit front with a likely 7% growth sequentially. Companies including Wipro and HCL Tech are likely to show deceleration in net profit due to the impact of increase in wages. Their operating margin is expected to drop by 30-40 basis points.

Investors will closely track the management commentary of Infosys for initial signs of recovery. It will be the first full quarter for the company under new CEO Vishal Sikka.


Indian IT firms like Wipro, HCL Tech likely to bid for CSC if it splits operations

October 3rd, 2014

Indian information technology companies, including Wipro and HCL Technologies, could bid for Computer Science Corp if the US-based IT company splits its public sector and commercial operations before putting itself up for sale. Senior executives at both Noida-based HCL Technologies and Bangalore-based Wipro said they could “consider” the commercial business of Computer Science Corp as it will help them scale up their presence in the United States and Europe.Outsourcing42

“Local data centres and existing IT infrastructure business can make for a risky, but good asset to buy—we will surely consider if it’s split,” said an executive at one of the top five Indian software firms. CSC has infrastructure business contributing 35% to its topline while global business services, including application services and consulting, account for 34% while the North American public sector brings the remaining 31%.

“If the business is split, HCL should be the favourite,” said a Mumbai-based analyst at a domestic brokerage, adding hat the company’s own application delivery business has not seen much traction and a buyout should help the company. CSC, which reported nearly $13 billion (Rs 80,000 crore) in revenues last fiscal, has reportedly reached out to private equity group, Blackstone and Bain Capital to gauge this interest in management-led buyout, Bloomberg reported on Tuesday. ET independently could not confirm if the company will split its commercial business operations from those of the government contracts. Both Bain Capital and Blackstone declined to comment while an email sent to CSC remained unanswered. Last year, CSC stitched a deal with country’s fourth-largest IT firm HCL Technologies under which the two firms aim to modernise applications run by their customers. The addressable market for applications services totaled $210 billion in 2014, according to Gartner’s 2014 Market Forecast for IT Services. Some experts, however, remain scepti cal if the company’s efforts in the two years are enough to entice interest from suitors. Indian IT firms like Wipro, HCL Tech likely to bid for CSC if it splits operations “The company has made efforts to transform its traditional consulting and outsourcing business and is embracing an operating model relying a lot more on software assets and platformbased delivery models,” said Frederic Giron, VP and research director, Forrester Research.

“But this is still the beginning of the journey and the transformation will require a lot more freedom of operation. Hence the idea of LBO (leveraged buyout), which would make sense taking the company private—similar to what Dell did.” Giron said the public sector chunk had about $4 billion in annual revenues.

“I believe Indian centric firms are interested in different types of acquisitions: software assets like Trizetto, targeted continental Europe presence like Alti, and potentially some digital capabilities.”

To be sure, twice in the past – 2006 and last year – management at CSC has tried to find buyers for the company but a deal could not be reached. The company, which employs nearly 79,000 employees and counts the US government as one of its 2,500 clients, ended last year with Rs 4,250 crore in cash.


Giant HCL Tech Outsourcing Project Adds 1,237 Jobs in Wake County

September 25th, 2014

Another good news headline for Cary: Global IT services provider HCL Technologies is planning to expand its existing development center in Wake County and create an additional 1,237 jobs there by the end of 2018.Outsourcing26

According to the Triangle Business Journal, the company is working with Axon Technologies in the project, which would bring a new Global Development Center to Cary, as well as jobs with an average annual wage of $51,653. The expansion entails an investment of approximately $9 million.

HCL already has 800 employees in Cary. The company will now be expanding into 200 Lucent Lane, a four-story building previously occupied by Progress Energy and located just down the street from its current facility on Regency Parkway. The property is owned by a joint venture between Intercontinental Real Estate Corp. of Boston and Spectrum Properties of Charlotte. The partnership acquired the building in May for $14.4 million.

HCL will benefit from a $19.6 million incentive grant recently approved by the Economic Development Investment Committee in Raleigh. According to North Carolina economic development officials, New York, Arizona and Texas were also competing for this giant HCL project.

“HCL has been steadily building its Wake County presence, and one reason is the incredible talent pool the Triangle region has to offer IT companies,” Governor McCrory said in a news release. “Providing a well-trained and motivated workforce that meets the real-world needs of employers is evidence of the importance that North Carolina puts on helping employers grow.”

Cary is also benefiting from MetLife’s decision to locate its new global technology hub in the region.

HCL Technologies is a leading global IT services company based in India, with consolidated revenues of $5.4 billion, as of June 30th, 2014. In America, the company is headquartered in Sunnyvale, Calif. With more than 8,000 employees in 15 states, HCL’s business in the U.S. contributes more than 50 percent of its global revenues.


Pharma major AstraZeneca launches IT facility in Chennai

September 17th, 2014

UK-based pharma and biopharmaceutical major AstraZeneca has launched its first Global Technology Centre (GTC) to develop its world-class IT capacity, in Chennai as part of its strategy to cut down its IT budget and improve operational efficiency and data safety. With this the company would reduce the outsourcing currently handled by eight vendors, increasing the inhouse IT capability in near future.outsourcing55

The facility has 75 people on ground at present and it would increase to over 300 by the end of the year. While the new facility is set up with an investment of around $9 million for the physical infrastructure, the second GTC would be set up in San Fransisco in 2015 and the third probably in Eastern Europe in a couple of years, said David Smoley, Chief Information Officer, Astra Zeneca.

The company is looking at reversing its IT outsourcing operations to inhouse, considering it would be more cost efficient, and would give operational and technology leadership, the control of the main IT operations. According to earlier reports, the vendors the company has been engaged with include HCL Technologies, Cognizant, Infosys and Accenture.

“There is a shift in the strategy with most of the outsourcing works will become inhouse operations. At present 70 per cent of the IT spend is with third parties and this would become 30 per cent in next three years,” said Smoley, adding that the facility will start with SAP and middleware integration.

The IT team in its GTS would help the company to grow its own IT technolgy and operational excellence and provide support survices to global IT services. It would also help the company to simplify its support structures and improve its responsiveness to business needs, he said.

While outsourcing is generally a process to decrease the inefficency in the system, over a period of time there would be issues in that model also while inhouse operations would help the company to better co-ordinate. He said that the reverse trend of expansion in inhouse IT capabilities from outsourcing operations has started changing in many companies.

He added that the model would help the company in customer focus, technology leadership, control on technical aspects and simplification of technology, among others. The company is also looking at implementing more cloud solutions in its operations.

The IT division of the company has around 9,000 employees including in its contract and outsourcing firms and the company is expecting this to reduce by half in next two years. “The IT spend of the company was aorund $1.3 billion last year and over a period of time, the company plans to reduce this. This would also help the company to reduce the time taken in developing and bringing a new drug to the market,” he added.

The biopharmaceutical company is focusing on discovery, development and commercialistion of prescription medicines, primarily for the treatment of cardiovascular, metabolic, respiratory, inflammation, autoimmune, oncology, infection and neuroscience diseases.


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