Posts Tagged ‘Indian’

Indian IT companies lag behind global peers in SaaS space

December 12th, 2014

The rise of software-as-a-service cloud delivery model poses a threat to the dominance of the homegrown software exporters as most of them lag behind the foreign companies, including IBM and Accenture in offering services to customers.Outsourcing12

Although significant investments are currently being made by Infosys and Wipro in strengthening their cloud offerings, some of the fastest growing SaaS firms globally do not even name any of the country’s largest IT firms as their strategic partners.

“We’ve got strong partnerships with Deloitte and Accenture and IBM and increasingly, PWC and KPMG, Towers Watson and Aon Hewitt,” said Aneel Bhusri, co-founder and co-CEO of Workday, in an analyst call last month, underlining the fact none of the Indian tech giants made the list.

For now, Indian companies are catching up with the foreign IT firms, as Wipro entered into a partnership with Workday in 2011, three years after Accenture first became Workday’s global deployment partner.

“We are there but we may not be matching them (IBM, Accenture)…It requires a lot of investments. They are ahead of us,” said Satishchandra Doreswamy, chief business operations officer at Wipro. “(But) we are also picking up…we are currently building cloud business platforms.”

Software-as-a-service, in which companies pay for software based on their usage, is expected to top $22 billion through 2015, up from about $14 billion in 2012, according to research firm Gartner.

The impact of this is most visible in Indian tech giants losing out to global software exporters when it comes to migrating existing infrastructure to cloud model. One of the examples is when IBM won a 10-year, multi-billion dollar deal to provide computer infrastructure services to Dutch bank ABN Amro running on its cloud systems. As in most deals, the biggest names, including Infosys and Wipro were in the race to bag this contract.

Another wrinkle for Indian tech majors is the inability to offer IPs in cloud space which can help them bag large contracts when competing for large deals.

“We have acquired industry leading cloud intellectual properties (IPs) which help us provide our customers with a strong orchestration layer to manage diverse cloud platforms in a seamless manner,” claims Anand Sankaran, president, Infrastructure and cloud computing at privately-held Dell services.

For this reason, some analysts believe cloud could pose a long-term challenge, capping upside potential in a sector growing at 13-14% annually.

“In the long run (5-10 years), we think cloud will eat into the enterprise application services (EAS) revenues of India’s IT services companies (15-20% of total), assuming ‘ERP on cloud’ becomes a reality,” Yogesh Aggarwal, an analyst with HSBC Securities said in a report dated November 25. “In the near term, the risk is more manageable at just 5-6% of total business, as cloud companies have achieved little in terms of operating metrics.”

To be sure, some of that impact is already showing. The time-and-material model of payment, where companies pay for the effort rather than the outcome, has been dropping steadily over the past few years.

“Clients are asking for a significant sub set of the existing work to be converted into a pay for use model. This will pose significant challenges to the Indian based providers which currently utilize an FTE base model,” said Peter Bendor Samuel, CEO of outsourcing advisory firm Everest. “Its impacts are already showing in the slowing growth and the increased need for investment.”

A senior executive of Infosys acknowledges the company’s limitations, with lack of certified consultants who can help customers to move to cloud space.According to the HSBC Securities report, Accenture leads the pack among IT outsourcers, with about 3100 certified Workday consultants. Additionally, the outsourcer also has 1800 Salesforce-certified consultants. In comparison, top five Indian IT firms collectively have a little more than 2,000 Salesforce certified professionals.

Still all is not lost as some believe a recognition by the leading IT firms to increase their investment can help them battle again the likes of Accenture when it comes to winning large deals.

“The two things that they need to do is to build these strategic alliances with companies that have cloud-based products and second is to have hosting either in their own data centres in geographies where they want to provide these services or they should have tie-ups with data centres in those regions,” said Biswajeet Mahapatra, research director at Gartner.

To combat the long-term threat, companies will also have to change how their services are delivered as the lowered complexity of cloud-based solutions will reduce the need to employ armies of engineers.

“Companies will have to invest in robotic process automation, artificial intelligence, analytics tools and capabilities, business process skills, consulting talent. They will need to change the revenue model from one driven by selling just labour to one selling products and expertise weaved into those services,” Phil Fersht, CEO of advisory firm HfS Research, said.

Source:http://timesofindia.indiatimes.com/tech/it-services/Indian-IT-companies-lag-behind-global-peers-in-SaaS-space/articleshow/45491781.cms

SoftBank betting $10 billion on Indian Internet market

October 29th, 2014

Japanese telecommunications and Internet company SoftBank is planning to invest US$10 billion in India, the country’s government said after meetings with the company’s chairman and CEO Masayoshi Son.Outsourcing51

The SoftBank head met with India’s leaders including Prime Minister Narendra Modi and Minister for Communications Ravi Shankar Prasad during a visit this week to the country.

SoftBank also announced Tuesday an investment of $627 million in online retailer Snapdeal, making it the largest investor in the company. SoftBank is also leading an investment of $210 million in Ola Cabs, a company that links consumers with cab drivers through mobile apps, the Web and call centers.

SoftBank did not comment on the investment plan in India, although it said in a statement that it planned to “deploy significant capital in India over the next few years.” Son told a TV channel that he had a “strong wish and willingness to invest more like” $10 billion in India in the next 10 years.

The company hopes to benefit from opportunities for developing the country’s nascent online market, created by its large Internet user base.

Amazon.com said in July it was investing $2 billion more in the country, attracted by the online retail opportunities. The online retailer did not say how or over what period it will make the investment.

SoftBank already has made investments in India, including in a joint venture in 2011 with Bharti Enterprises group, which has India’s largest mobile operator, Bharti Airtel, as a group company. Bharti Softbank Holdings is focused on the mobile Internet.

Source:http://www.cio.co.nz/article/558403/softbank-betting-10-billion-indian-internet-market/

Indian IT firms expected to be more acquisitive going forward: Peter Bendor-Samuel

October 24th, 2014

Peter Bendor-Samuel,  founder & CEO of management consulting and advisory firm Everest Group is one of the few global consultants who have been watching the Indian IT outsourcing landscape quite closely. In an interview with Bibhu Ranjan Mishra , he talks about how the Indian IT services firms have now reached a level of maturity when they are expected to be more acquisitive. He also talks about how Tata Consultancy Services (TCS) has been able to differentiate itself from rest of the pack backed by consistency in strategy and execution. Edited excerpts:Outsourcing37

Recently we saw Cognizant, an offshore-centric IT services company showing rare aggression BY acquiring US-based healthcare solutions provider TriZetto for a whopping $2.7 billion. What does it mean for Indian IT services companies?

It (Cognizant’s acquisition of TriZetto) is really going to change the competitive dynamics. But there is no doubt that companies like Infosys and TCS can do it because they have got great balancesheets to do these kinds of things. My guess is they will (do it). This is time for the industry to consolidate and this is an appropriate time for Indian heritage firms to step up their inorganic growth pursuits.

You have been tracking the Indian IT services companies quite closely for long. Are you seeing any change in the way these companies operate now as compared to few years ago?

Clearly, the Indian IT services majors are a matured lot now. They have got much more seasoned leadership. Look at TCS; it has a very seasoned and matured leadership team, very strategic in operation. They are riding a huge wave. They are running down the hill. I can say that no one else at the moment has that kind of capability. The next step for them is to be acquisitive.

How has TCS managed to leapfrog the rest of the peers?

For TCS, much has to do with their leadership team. From the early days when they were about an in-ward focused company, TCS was among the earliest ones to take a customer-centric view. TCS thought about value to clients whereas Infosys continued to focus on maintaining high margin. So, TCS was more forward looking and more consistent in their approach. I think Infosys struggled with that. They (Infosys) were too much focused on growth and profits, and customers did not agree.

But TCS has now improved its profit margins to one of the industry leading?

That’s true. But just think how they are doing it? From the very beginning, Infosys was focused on making a margin play whereas TCS became a low cost producer. They (TCS) drove huge investments in labour pyramid to make it flatter and more efficient. They invested more in automation and productivity tools. I think the other aspect is, in this business scale helps. So TCS was able to benefit from the scale advantage. It is particularly important in two aspects. They were able to get large wallet share in big clients while they were able to price lower than Infosys.

With Vishal Sikka at the helm, people say perhaps Infosys is going to make a much larger product play now that before. What is your view?

I think they will unlikely do so at this stage of their services business. They have to do significant intellectual property (IP) acquisition. Infosys has a huge capacity to do that. They have got a great balance sheet and the right structure. They have got a separate organisation which they can run differently for products. I like that structure. Putting the investment to the product side makes a lot of sense. I think that will be a very attractive strategy to look for.

What are the key changes that you are seeing at Infosys after the joining of Vishal Sikka?

I think he is still trying to have the feet on the ground. He has met many clients. But these are still early days. I think his next step will be get talents. I won’t be surprised if he does not get talents from outside. It is not that Infosys does not have enough of them inside, but more so to drive the kind of changes he wants to. I would encourage him to bring in non-Indian talents. Infosys needs to do with multi-cultural aspects as it is very Indian-centric now.

What are your view about Wipro and HCL Technologies?

There is no doubt that Wipro has become a much aggressive company, led by T K Kurien. Wipro is competing in the multi-tower transactions in domains which used to be the focus of companies like IBM and Accenture earlier. So, they are certainly seeing a lot of momentum right now. As far as HCL is concerned, while they are very much focused on infrastructure services, they need to strengthen their applications and BPO offerings.

Beyond these four companies, any other companies that come to your mind who can be the challenger in the IT services space?

The guy you should keep an eye on is Virtusa – they are very aggressive, very strong in digital; they are quite well-positioned to take advantage of the new technologies. They are growing very fast. So also is Syntel; they are growing very fast backed by a very aggressive management team. Syntel’s success lies in their ability in turning some key accounts to very large accounts. Then there are companies like Mindtree, but I think they have really to figure out how to differentiate in a market where scale really matters.

Source:http://www.business-standard.com/article/companies/indian-it-firms-expected-to-be-more-acquisitive-going-forward-peter-bendor-samuel-114102300505_1.html

More IT Cos Now Screens Start-Ups For Partnerships

October 15th, 2014

Startups seem to be expanding and successfully attaining higher rates of success by building a larger consumer base not only in their own country, but around the globe as well. Startups are not only gaining the consumers trust but are making the mega corporations turn their heads towards them. It seems that after Infosys and Wipro more IT companies are investing in start-ups.Outsourcing22

Infosys and Wipro explored more in order  to pick up stake in startups focused on disruptive technologies have made investment bankers optimistic that country’s declining outsourcing sector could see more deals in the coming months.

However, both foreign and domestic bankers believe that the small acquisitions and partnerships would not be enough and a big buy-out has to be done before the rainmakers interfere and help companies merge and raise capital.

It sees that Wipro isn’t the only IT services company eyeing a model of acquiring a minority stake in a software product start-up, keeping it at arm’s length from its core business and, possibly, playing the role of a venture capitalist. There is company like Mindtree which is looking forward to explore this model.

This venture-capital model is in line with those of global technology companies. It is only in recent months that Indian IT services majors like Infosys and Wipro — announced setting aside $100 million each towards investment in start-ups. The way these funds will be utilized hasn’t been decided yet.

“This is certainly a trend that has picked up in recent days. Last year, when we were looking to raise funds for expansion, a few technology companies had approached us. Now, we are approached every day,” said Nishant Singh, chief executive of Noida-based CRMnext. “This is what I call ‘lazy innovation’.

A company with a size exceeding $1 billion finds it really hard to innovate. “Huge companies sitting on huge funds can easily keep some money aside and plant it into 20 different planters and wait for it to grow,” Adds Singh. CRMnext, is a cloud-based customer relationship management solution company, which works with several IT services companies such as Tata Consultancy Services, Wipro, Tech Mahindra and Polaris Financial Technology.

Source:http://www.siliconindia.com/news/startups/More-IT-Cos-Now-Screens-StartUps-For-Partnerships-nid-173927-cid-100.html

SOS to Indian enterprises: SMAC IT to them!

October 13th, 2014

At the India edition last week, of EMC Forum — the annual tech conference and showcase of the global leader in IT storage hardware and Big Data solutions — the Cloud loomed large, hovering over almost everything that was discussed. Indeed Social (media), Mobile Analytics and Cloud ( SMAC) was seen as the winning combo for Indian enterprises.Outsourcing17

Vishnu Anand spoke to two EMC experts for their take on what cloud strategy might be a best fit for India.

‘Hybrid cloud is a strategy, not a product’

CIOs across the globe have started to adopt hybrid cloud technologies to optimize cost and modify their IT and computing backbone with rapidly changing business needs and increased consumer demands. But it is also essential to make hybrid cloud technologies a part of your business strategy, not just a product that you deploy.

Christoph Thelsinger, VP, Systems Engineering, Asia Pacific & Japan, EMC says: “Most organizations in Asia approach us with one common challenge – having to meet consumer demands swiftly to ensure business agility. We always advice them to embrace hybrid cloud as a broad strategy, and not just a product.”

Thelsinger’s reasoning is that organizations that have already virtualised their systems, and are already operating in a cloud environment, experience the ‘burst’ scenario where there is a sudden – sometimes seasonal — need for compute power for a short span of time. After this time has elapsed, it is business as usual. “Since you cannot predict when the burst is going to occur, it makes sense to invoke compute power as and when you need it. This provides you the agility of a public cloud and the security of a private cloud”, he says. In such a scenario, the IT organization can take back control whenever it decides to.

Organizations that have explored the hybrid cloud are increasingly open to putting critical data on public cloud and accessing them on-demand. “The as-a-service model has a cost benefit to it. It may not be a decision initiated by the IT team. There is a definite cost advantage in putting your core ERP on the cloud, or even extending your data centre to the cloud. This cost consideration, in the days to come, will drive the market towards hybrid clouds”, suggests Thelsinger.

‘Nobody understands Cloud-as-a-Service better than India’

The concept of Cloud-as-a-Service, where organizations — big or small — can invoke computing power as and when they need it, dial-in/dial-out whenever business demands, is catching up in India and Japan. EMC, the global storage, virtualization and cloud services provider has identified a unique characteristic of India that makes it conducive to embrace and use cloud technologies at a greater pace than rest of the world.

David Webster, President, APAC & Japan said: “The IT ecosystem in India has grown up on the concept of outsourcing, and outsourcing is all about sub-contracting your IT operations to a third party and focusing on your core business. The guiding principle of Cloud-as-a-service is very similar to outsourcing, and this is precisely why India is today at the forefront of adopting new Cloud technologies.”

Webster went on to explain that the new-age consumer demands the same level of computing of an advanced laptop or a desktop, in a mobile smartphone. “With 81% of the country’s population using mobile devices, more and more Indians are using their personal mobile phones for official work, including business critical operations like secure bank transactions, stock market monitoring, and even managing their office ERP systems.”

He however cautions: “In order to woo the new-age Indian mobile consumer, organizations and service providers need to pull up their socks and create a smooth and uninterrupted computing that is cross-platform and device agnostic.”

Explaining how the SMAC ideology is a ‘best fit’ for India, Webster said, “The mobile is in more ways than one a ‘third platform’ in computing. The mainframes defined the first platform, while the PC and client/server architecture defined the second platform. EMC believes that the third platform is all about mobile interspersed with Big Data, analytics, Cloud and social business. And India will have a huge role to play”.

Source:http://www.deccanchronicle.com/141013/technology-latest/article/sos-indian-enterprises-smac-it-them

Infosys shares bounce ahead of strategy update

October 13th, 2014

Shares in Infosys jumped 6 per cent on Friday as the Indian IT bellwether reported an improvement in margins and a bonus share issue, as investors await guidance from the company’s new chief executive.Outsourcing14

Vishal Sikka, who took the reins in August, is expected to outline his strategy later today, as the former SAP executive looks to revive the struggling outsourcer with new high-growth software development in areas such as cloud computing and data analytics.

In the first set of results under his leadership Infosys posted better than expected net profit of Rs31bn ($500m) in the three months ended in September, up 29 per cent year-on-year, on revenues of Rs133.4, up 2.9 per cent.

The Bangalore-based group had previously forecast net profit of Rs29bn on revenues of Rs132.1bn, according to analysts’ consensus predictions by Thomson Reuters.
The cash-rich company also announced an interim dividend of Rs30 per share, and said it planned to issue one bonus share for every share held.

“The board approved and recommended the issuance in order to increase the liquidity of its shares and to expand the retail shareholder base,” the company said.
The second quarter of the financial year is a seasonally strong period for the IT services sector, as client spending is solid. Indian groups have also been helped by currency movements and the fact that wage increases occurred earlier in the year.

“This is sentiment positive for the stock,” says Ankita Somani, an IT analyst at MSFL research. “But what I want to see now is what Infosys is planning in terms of its big bets? What are they going to do to catch up with peers in terms of dollar revenue growth rates?”

A pioneer in the IT outsourcing sector, Infosys has fallen behind rivals such as Tata Consultancy Services, and Mr Sikka has suggested it may be another two years before the group’s financial results improve again.

Mr Sikka on Friday said that the company’s core services business would not be compromised by the new focus on innovation. “Without one we are just dreamers and without the other one we are just grinders,” he said.

Industry analysts remain concerned about high staff turnover at the group. At least 10 senior executives have quit in roughly a year, prior to Mr Sikka’s appointment and the new leader is not planning further restructuring.

“We are very fortunate to have a young, dynamic and a very passionate management team,” Mr Sikka said. “I see no structural reasons to make any changes at this point.”
The churn began after co-founder and outsourcing pioneer, Narayana Murthy, returned to the group to shore up the troubled company.

Before he stepped down as executive chairman in June, Mr Murthy had focused on cutting costs and reinforcing Infosys’s bread-and-butter services business, following a mistimed attempt to move into higher value services under the “Infosys 3.0” strategy.

“This is the right time, when the macroeconomic environment is improving, they have a new leader who’s a tech visionary,” said Shashi Bhusan, an analyst at Mumbai-based brokerage Prabhudas Lilladher. “I think many of the initiatives they started two or three years back will flourish under this new leadership.”
Infosys shares were up 6 per cent by 10am in Mumbai at Rs3,837.70.

Source:http://www.ft.com/cms/s/0/31a4bada-503b-11e4-8645-00144feab7de.html#axzz3FzzzgUGS

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.

Source:http://economictimes.indiatimes.com/markets/stocks/news/top-5-it-players-likely-to-report-robust-growth-in-q2/articleshow/44729430.cms

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