Posts Tagged ‘Indian’

Accenture results: Takeaways for Indian IT

September 29th, 2014

Accenture Plc reported decent results for the year ended August, although its outlook for the next year is a tad disappointing. The company said it expects revenue to grow between 4% and 7% in constant currency, despite the fact that revenue grew 8% and 7%, respectively, in the preceding two quarters. Outsourcing31

Also, according to consensus estimates, the firm is expected to grow 6% in dollar terms in the year till August 2015; adjusted for a forex headwind of 2%, dollar revenue growth is expected to be between 2% and 5%, according to Accenture. US-based analysts at Citigroup Research said in a note to clients, “The Q1-FY15 revenue guide of $7.55-7.80 billion (consensus $7.8 billion) implies a possibly slower start to the year in spite of acquisition impact.” Not surprisingly, the Accenture stock dropped a bit after the results were announced; the shares have declined 3.4% year-to-date.

Indian IT stocks shrugged off this news, and the National Stock Exchange’s CNX IT index rose marginally. The index continues to be perched close to its all-time highs. For some time, Indian IT stocks have charted their own course, on the back of market share gains by companies such as Tata Consultancy Services Ltd.

In mid-July, International Business Machines Corp. (IBM) reported weaker-than-expected results for its services business. Later, Citi’s India-based analysts wrote in a note to clients that most factors that affected IBM’s services business were not applicable to Indian IT firms. “Pricing pressure from competitors—offshore competition and commoditization of lower end services may be putting some pressure (on IBM)—an industrywide phenomenon. For Indian players, pricing is flattish as commoditization at the lower end is largely offset by increase in higher priced service lines such as digital (services).” Another factor that has helped sustain investor sentiment for Indian IT is that the rupee has depreciated by more than 5% in the past four months against the dollar.

It must also be noted that not all aspects of Accenture’s results were disappointing. In the quarter ended August, the company did better than expected, with reported revenue being higher than consensus estimates. Much of the upside came from the outsourcing business, while the amount of new business bookings was lower than estimates, at $8.3 billion.

The company said in a call with analysts that consulting bookings last quarter reflected good demand for systems integration and management consulting.

But as Citi’s India analysts point out, the key takeaway from Accenture’s results for Indian IT is the company’s use of cash. Last year, it gave back 93% of its cash flow from operations to shareholders through dividend and share buybacks. This has helped the company sustain valuation multiples. Indian companies could take a leaf or two out of Accenture’s books. Many of them are holding large amounts of cash, resulting in mediocre return for shareholders. Returning cash or making prudent acquisitions is the need of the hour as growth continues to slow off a high base.

Source:http://www.livemint.com/Money/zcqqoqI1DmqoS5CwBNRWAO/Accenture-results-Takeaways-for-Indian-IT.html

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.

Source:http://www.cpexecutive.com/cities/raleigh-durham/giant-hcl-tech-outsourcing-project-adds-1237-jobs-in-wake-county/1004104337.html

IT veterans from Infosys and Wipro to help Dell treble services revenue in few years

September 23rd, 2014

Michael S Dell wants to more than treble the software services revenue in a “few years”, an ambition that the entrepreneur is betting on his team of leaders handpicked from Indian outsourcing giants such as InfosysBSE -1.36 % and Wipro. Outsourcing15

Significantly, the founder, chairman and CEO of the Texas-based computer hardware and services firm believes ever since going private, Dell has been able to focus more on clients without being distracted by “activist shareholders” and invest in some of the long-term strategies, including investing in cloud, security and analytics space.

“We want to double, triple, quadruple our (services) business,” Dell said in a phone interview last week, outlining his ambitions on services play for the first time. “There are 10 companies which have 1% of the $3 trillion IT industry, we have about 2%. We would want to have 3-4% in the years to come,” he said from Brussels where he’s been meeting customers. To be sure, Dell had a services unit in addition to selling desktops before it was taken private earlier this year.

The company first handpicked WiproBSE -0.70 % veteran Suresh Vaswani in December 2012 to steer its services business, who since then has aggressively built a core team by poaching executives from Infosys, Wipro and Hewlett Packard. “(But) remember the IT industry itself will be more than $3 trillion in years to come, and with internet of things (IoT), industry will grow beyond $3 trillion and we would want to bring solutions to capture a bigger share of the growing pie,” Dell said.

INSIDE DELL STRATEGY

The centerpiece of Dell’s turnaround strategy is based on combining existing IPs within to create software platforms and build newer solutions around disruptive technologies in IoT. Dell’s chest thumping on IP hinges on its aggressive play in acquiring companies — it has bought over two dozen firms in the last five years, from StatSoft in advanced analytics to SecureWorks in security space, thereby helping it provide end-toend solutions to its customers.

Over the past one year, Vaswani has been able to convince top Indian IT executives such as Anand Sankaran, a Wipro veteran, Prasad Thrikutam, a high profile Infosys leader among others, to join Dell — “the world’s largest startup” as described by its founder.

“If you look at the industry, it needs some freshness, and I will say we are providing that freshness,” Vaswani told ET in an interview. “Indian IT services come from a particular angle and HP, EDS are monoliths so to speak. We say a different story, and we don’t have legacy. And we have lots of IP.”

Thrikutam, who was hired by Nandan Nilekani in 1995 at Infosys, joined Dell last month. “Most companies have a constraint on which path they can take because if they are a public company, they have to follow quarterly targets. Michael said I can choose the path I want, so I have control over my destiny — that was the clincher for me to join,” Thrikutam said.

Source:http://economictimes.indiatimes.com/tech/ites/it-veterans-from-infosys-and-wipro-to-help-dell-treble-services-revenue-in-few-years/articleshow/43189559.cms

Indian IT companies battle it out for Rs 11k-cr Australian pie

September 15th, 2014

Indian IT companies will be fiercely competing with MNCs for five big IT contracts in Australia valued at over A$2 billion (Rs 11,000 crore).infosys

Infosys, Wipro, TCS and HCL Technologies are participating alongside IBM, HP and Capgemini in request for information (RFI) and request for proposal (RFP) for incremental IT outsourcing work coming from Sydney Water, Rio Tinto, Jetstar, Aurizon and Transport for NSW, said an Australian IT consultancy firm that did not want to be named.

Incumbent IT vendors IBM, Infosys and Accenture have sought RFIs and RFPs to participate in mining major Rio Tinto’s A$750 million IT-BPO contract. The work is in HR, analytics, engineering and logistics. Rio Tinto had previously outsourced procurement to Infosys and finance & accounting (F&A) to IBM. Accenture was engaged with the mining major for ERP and application support, while CSC maintained its IT infrastructure. These previously outsourced 10-year contracts were worth A$3 billion.

Jetstar, a wholly-owned subsidiary of the Qantas Group, is considering outsourcing work related to ticketing, customer loyalty programme, analytics, HR and F&A. Wipro TCS and Genpact are participating in the RFIs/RFPs. “Jetstar is currently using Lincom for virtual desktop support. It has been subcontracted through Tech Mahindra. Jetstar’s customer support is partially outsourced to Teleperformance and Convergys,” the consultancy said.

Australian companies are reviewing monolithic contracts and are breaking them down into smaller ones to drive operational and cost efficiencies.

The Australian IT services market has gone through several cycles of IT outsourcing with strong demand particularly from public sector utilities. Last year, New South Wales (NSW) Transport had floated an expression of interest (EoI) for next generation infrastructure services (NGIS) that includes server and webhosting, data centre infrastructure and end user computing. Infosys, Wipro, HCL and TCS, as also HP and IBM, participated in the EoI.

“Analytics and BPO will lead the charge (in contracts). Public sector contracts have opened up in a big way. There will be at least 7-8 RFPs in both federal and state governments in the next six months,” said Mohit Sharma, director of Australia-based advisory firm Mindfields.

Siddharth Pai, president in outsourcing advisory firm ISG Asia Pacific, says Australia is one of the early adopters of offshoring, with Telstra using offshoring a decade back. Infosys counts the telecommunication and media company as one of its top ten customers.

Australia’s largest rail freight operator Aurizon is floating an incremental A$500 million contract for IT and BPO services. The freight operator is looking to outsource F&A, procurement and analytics, for which Capgemini, Wipro, Genpact and WNS have sought RFIs and RFPs.

Source:http://timesofindia.indiatimes.com/tech/tech-news/Indian-IT-companies-battle-it-out-for-Rs-11k-cr-Australian-pie/articleshow/42493940.cms

Why TCS is betting again on Chandrasekaran

September 12th, 2014

When N. Chandrasekaran was named chief executive officer (CEO) and managing director (MD) of Tata Consultancy Services Ltd (TCS) five years ago, analysts and insiders started talking of the firm’s acronym being short for “Take Chandra Seriously”.
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Chandrasekaran proved them so right that no one was surprised when India’s largest software services exporter last week appointed the marathon runner CEO and MD for a second five-year term effective 6 October. Given his track record, shareholder approval to the appointment seems to be a mere formality.

In an industry where at least three big information technology (IT) firms—Infosys Ltd, Wipro Ltd, and Nasdaq-listed Cognizant Technology Solutions Corp.—have faced leadership challenges that have either affected, or threaten to affect, their fortunes, TCS’s numbers speak volumes for Chandrasekaran’s performance since he succeeded his mentor S. Ramadorai in 2009.

At $13.4 billion as of 31 March, TCS’s revenue made up a little more than 11% of the $118 billion IT industry. Its 305,431-strong workforce is a little over 10% of the number directly employed by the industry.

There’s more. Women composed 32.7% of its workforce as of 31 March, making it the largest employer of women among private sector companies. When the quarter ends on 30 September, the company will have easily surpassed the 100,000 women employee mark.

On Thursday, TCS’s market capitalization, at a little over $85.55 billion, almost equalled the combined $86.37 billion market cap of the next four biggest Indian IT firms—Infosys, Wipro, HCL Technologies Ltd and Tech Mahindra Ltd.

Cognizant, whose market cap is about $28 billion and is listed overseas, and US-based Accenture Plc, with a market cap of about $51.3 billion, aren’t in the list although most of their employees work out of India.

Chandrasekaran, who has been with TCS for almost 28 years, never applied for any other job. He started at TCS as a software programmer in 1987, having completed his master’s in computer applications from the Regional Engineering College, Tiruchirappalli (now National Institute of Technology, Trichy), in 1986. In the final year of his master’s programme, he took up a project with TCS, and never looked back, rising to the helm of the firm where he learnt the ropes of the IT business.

The transition was well-planned, say analysts. Chandrasekaran, they insist, was identified for the CEO’s role around 2004-05, but that became apparent only somewhere around 2007. When he eventually rose to the top at the age of 46, he became one of the youngest CEOs in the Tata group.

His rise in TCS was rapid. In 1999, he started the company’s e-business unit and expanded it to an over $500 million segment in four-and-a-half years. In September 2007, he was co-opted on the TCS board and named chief operating officer (COO).

As COO, he drove the company’s acquisition strategy—the purchase of Citigroup Global Services for $505 million in October 2008 is credited to him.

Under Chandrasekaran, TCS has consistently posted results that have beaten market expectations. The company does not provide quarterly or annual revenue forecasts, but it exceeded software industry lobby Nasscom’s 12-14% revenue projection for the year ended 31 March and is expected to easily beat the 13-15% revenue forecast for the current year.

Analysts expect Chandrasekaran to retain the growth momentum in his second innings. And TCS may soon become India’s first $100 billion market cap company as analysts from securities houses JPMorgan Chase and Co. and CLSA wrote in June when TCS’s market cap was about $61 billion. To be sure, that pales in comparison with the $190 billion market value of International Business Machines Corp. (IBM).

“While Chandra was expected to be re-elected for a second term, in his second innings we would expect him to foray deeper into new service lines like digital technologies, including social media, mobility, analytics and cloud (SMAC), and continue to outperform the industry, maintaining the 16-17% growth rate for the year that Chandra had earlier indicated,” said Dipen Shah, head of private client group research at Kotak Securities Ltd.

TCS is expected to hit $100 billion in market value soon, said an analyst from an international securities house who did not want to be named because he is not authorized to talk to the media.

“We are also expecting a possible merger or acquisition of a small digital enterprise, given that peers Infosys and Wipro have made many such digital acquisitions recently, although TCS hasn’t. Besides, TCS generally makes at least one small merger or acquisition every year, and the company is expecting digital to contribute significantly to revenue going forward,” said the analyst.

Rivals wane, challenges loom

Chandrasekaran’s first term at the helm coincided with a steady decline in the fortunes of Infosys and Wipro, its two closest rivals.

Once the bellwether of the Indian IT industry, Infosys got embroiled in leadership issues that took a toll on its profits. The firm will take time to recover under its new CEO Vishal Sikka, who took charge on 1 August. Wipro, under the leadership of T.K. Kurien, is also trying to rebuild.

Even Cognizant is showing chinks in its armour. On 6 August, Jennifer Hamel, an analyst at research firm TBR, noted that for the first time since the June quarter of 2011, Cognizant had not outpaced TCS in year-on-year revenue growth in the three months ended 30 June. In response to an unexpected dip in client spending, Cognizant pared its annual revenue growth forecast from 16.5% to 14% for 2014.

On 18 August, Mahesh Venkateswaran, the head of Cognizant’s $500 million SMAC business, stepped down. The 18-year veteran used to report to CEO Francisco D’Souza.

To be sure, TCS—and its rivals—does face its set of challenges.

Although automation has started taking over the traditional labour arbitrage lever for IT services delivery, TCS maintains a robust pace of hiring people (10% year-on-year in the quarter ended 30 June), mainly freshers, since it can keep employee costs low, said Bozhidar Hristov, an analyst with research firm TBR.

“However, hiring freshers in bulk could put pressure on TCS’s ability to deploy resources in timely manner, impacting its credibility and ability to maintain a competitive edge,” added Hrsitov.

And despite all the digital talk, traditional services continue to account for a major portion of the revenue of Indian IT firms, while SMAC technologies still account for less than 10% of the total revenue of IT companies.

Application, development and maintenance work alone accounts for 35-40% of the revenue of most IT firms. But with increased automation and platform-based services that can be replicated across segments and non-linear initiatives, analysts agree that SMAC will allow the IT industry to offer more value to clients.

Non-linear initiatives, unlike in the traditional model, are not dependent on the number of people engaged in a project for their revenues.

Much will depend on the ability of companies such as TCS to offer solutions that integrate new business models such as analytics and cloud-based services—which are part of SMAC—with traditional ones.

Scale is another issue TCS will have to deal with.

TCS has handled challenges related to size and scale very well, but in the future it will have to balance the need for linear, or headcount-related, growth with that of reducing costs through automation and by templating solutions that can be replicated across industries without the need to add additional labour. As TCS continues to grow, it will have to hire more laterals, or professionals, too, along with freshers to feed an increase in onsite project demand and the need for SMAC professionals. This will add to wage costs since the salaries of professionals, on average, start from Rs.7-10 lakh while freshers, on average, can be recruited for Rs.3-5 lakh.

Moreover, as TCS continues to expand in geographies other than the US, which include Europe, Continental Europe, Latin America, Japan, Africa and China to name a few, it will be forced to hire more local or onsite employees due to increasing pressure from those governments to hire locals. This will add to dollar costs and reduce its labour arbitrage, which it will have to compensate by more value-added work like digital, automation and templatization of solutions that can be replicated across industries—similar to what companies such as Accenture and IBM do.

Last, but not the least, if a proposed US immigration Bill gets passed in its current form, it will add to the wage costs of TCS and reduce its margins, analysts warn.

According to a 26 May note by research firm Offshore Insights, TCS employs about 27,000 staff in the US, of which 9,000 are US citizens and green-card holders. The rest are employed on H-1Bs and L-1 visas.

“Should the Bill (that limits the proportion of H-1B/L-1 Visa workers to 50% to that of US employees) gets passed in 2017, TCS’s US staff size would be estimated 35,000-36,000. This means it will need 18,000 US citizens which includes 9,000-10,000 new recruits. This doesn’t stop here; TCS will have to stop issuing any H-1Bs in coming two years. Clearly a huge hit, as constraints like talent acquisition, billing rates, margin pressures and similar others are bound to affect its operations onsite,” the note said.

Building for the future

The TCS management is not resting on past laurels.

TCS spent Rs.913.76 crore on research and development (R&D) and innovation in fiscal 2014 compared with Rs.776.58 crore in the year earlier, according to the company’s 2013-14 annual report. This is not much when compared with the billions of dollars that a company such as IBM spends on R&D, but sizeable given that TCS started out as an outsourcing firm that relied on low-cost labour in its home market to drive profits.

Till date, TCS has filed for 1,746 patents and 114 patents have been granted. The company opened its first R&D lab in 1981 when the technology industry in India was just taking shape. Across industries and services, TCS has established a global network of Innovation Labs. Its Co-Innovation Network has partnerships with academic institutions, start-ups and venture funds.

TCS has also invested significantly in digital technologies. It has invested in building a network of cloud data centres across the globe. The company has set up a digital enterprise unit in Silicon Valley to club its SMAC services, headed by Satya Ramaswamy, vice-president and global head of TCS Digital Enterprise, who joined TCS in 2010 after the company acquired Brightfon Inc., a mobile solutions firm he founded in July 2008.

Investments in digital initiatives are increasingly dictating “TCS’s go-to-market strategy as the company realizes that the pace of adoption of developing digitally enabled, vertical-specific portfolio is the key to remain competitive in the fast-evolving IT services market”, Hristov of TBR wrote in a 17 July report.

He added that to accelerate its portfolio and foothold expansion and offset potential margin pressure, “we expect TCS to pursue an acquisition of a Europe-centred technical consultancy with vertical-specific capabilities focus, as developing IP (intellectual property) through R&D can be more expensive and riskier than making an acquisition”.

Chandrasekaran earned compensation of Rs.18.68 crore in the year ended March, compared with Rs.11.7 crore the previous year. The pay excluded his earnings from the 88,528 shares he held in the firm as of 31 March.

The nearly 60% hike in Chandrasekaran’s annual salary in fiscal 2014 made him the highest-paid CEO in India’s IT industry. But in July, Infosys said it will pay Sikka $5.08 million in annual salary and stock options worth $2 million.

Judging from TCS’s performance in the past five years, Chandrasekaran, it appears, has earned his pay and his second term in office. At least for now.

Source:http://www.livemint.com/Companies/rOdIn7znrOi5oCfnRi46FO/Why-TCS-is-betting-again-on-Chandrasekaran.html

Wipro, Infosys bet on Internet of Things to revive telecom business

September 10th, 2014

Indian IT service providers such as Infosys and WiproBSE -0.76 % expect Internet of Things and adoption of cloud computing to open up new revenue streams in their telecom business even as telcos cut down spending on their traditional outsourcing contracts.
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“There is huge opportunity due to the potential of Internet of Things,” said Ayan Mukerji, chief executive of Wipro’s media and telecom strategic business unit and product engineering services. Internet of Things, or IOT, refers to interconnection between different objects and devices through the internet.

“In many ways, we are going back to centralised computing, i.e., intelligent cloud platforms, digital highways and connected devices. Products and services will increasingly be available across automotive, banking, and other industries,” Mukerji said. Wipro’s engagement with clients such as British telecom giant BT around domain-specific operational projects is helping it tide over the current challenging times, he said.

“Revenue share from non-core areas is increasing, i.e., in cloud services, networking and data center services and the IOT opportunity.” This comes at a time when traditional revenues decline. Some of the world’s largest telecom companies, including AT&T and BT, which outsource significant IT work to Indian firms, are seeing voice revenues declining at a faster clip than an increase in data revenues.

At the same time, the likes of Skype and Google that provide voice calls, do almost all their IT backend work themselves. Yet the new opportunities have started having an impact on IT firms’ revenues. Although telecom and media contribution to Wipro’s revenues has been declining over the last few years — from 18 per cent in 2011 to 13.8 per cent by the end of March 2014 — the unit has posted a growth of more than 4 per cent in both the fourth quarter of last fiscal and the first quarter of this fiscal year.
One of the factors, according to Mukerji, that helped the division do better than overall company’s growth has been the demand for telecom network design as “telecom IT and the network are becoming more integrated”.

Tom Reuner, an analyst at a London-based IT research firm Ovum, said: “Wipro is a good example of developing longterm client relationships around domain-specific operational projects and scaling them out over time. Examples for this are their contracts with BT and Talk-Talk in the UK.”

Wipro’s rival Infosys, too, expects its existing telecom clients such as AT&T to open up new revenue streams for the company. “AT&T has launched AT&T Digital Life services, where they are offering to take care of home security, automation and climate control at per month subscription,” said a senior executive of the company, adding that the US telecom giant is extending this to Europe and other international markets.

“So Infosys is going to partner with AT&T to provide billing and web solutions, which will be offered to AT&T on pay per use model and this will allow us a vehicle and give entry to Infosys to entry to the European markets,” the person said. Infosys’ share of revenues from telecom unit declined from 9.7 per cent in FY 2013 to 8.3 per cent in FY2014 as most of its client face pressure from “over-the-top” players such as Skype and Google. IT companies are now looking to win more transformational deals.

Wipro’s Mukerji said the industry will see more transformational deals in the range of “$100-250 million” than mega deals, including northwards of $500 million. “My objective is very clear that the telecom and media business unit should not be margin dilutive within the company,” he said.

Source:http://economictimes.indiatimes.com/tech/ites/wipro-infosys-bet-on-internet-of-things-to-revive-telecom-business/articleshow/42123494.cms

TCS attains Rs 5 lakh crore market-capitalisation

September 4th, 2014

Tata Consultancy Services (TCS), the country’s largest software services exporter, on Wednesday, attained a market valuation of over Rs 5 lakh crore after over a month. outsourcing35

At the end of today’s trade, the market-capitalisation (m-cap) of TCSBSE 0.75 % soared to Rs 5,09,523.91 crore, the highest for the company since its listing in 2004. Shares of the outsourcing giant ended the day at Rs 2,601.30, up 2.45% on the BSE. In intra-day trade, it rose by 2.9% to Rs 2,612.95.

In dollar terms, TCS’ market valuation rose to $84 billion.TCS, the first Indian company to achieve the feat, had earlier crossed Rs 5 lakh crore market-cap in July this year.

The IT bellwether is also currently the country’s most valued company in terms of market valuation. TCS is followed by state-run ONGCBSE -1.06 % whose m-cap stood at Rs 3,74,730.47 crore, Reliance IndustriesBSE -0.50 % (Rs 3,33,400.02 crore), ITC (Rs 2,78,020.71 crore) and Coal India (Rs2,37,495.30 crore).

The market valuation of other big IT players such as Infosys stood at Rs 2,14,454.24 crore, Wipro (Rs 1,42,478.12 crore), HCL Technologies (Rs 1,16,142.59 crore) and Tech Mahindra (Rs 57,293.10 crore).

Source:http://economictimes.indiatimes.com/markets/stocks/stocks-in-news/tcs-attains-rs-5-lakh-crore-market-capitalisation/articleshow/41617909.cms

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