Posts Tagged ‘Indian’

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.


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.


Indian outsourcing is booming in the Nordic countries

April 13th, 2015

Indian IT service providers are securing more and more high-profile outsourcing deals in the Nordics, involving the likes of Nokia, DNB and ABB. And with companies such as HCL Technologies and Wipro announcing further investments in the region, their presence is expected to grow.Outsourcing23

Gartner research analyst Mika Rajamäki said: “Based on 2013 figures, Indian IT suppliers have been growing faster in the Nordic market than the traditional service providers. If the annual growth of the traditional suppliers has been 2-3%, Indian companies have been growing by almost 20% a year.”

Indian IT companies have not yet hit the Nordics’ top 10 IT suppliers list, but this is likely to change. Because Indian service providers focus mainly on the biggest fish in the manufacturing, finance and telecoms industries, one major deal can boost their market share significantly.

“Sweden has the largest market, but Indian companies seem to have the highest market share in Finland, around 4%,” said Rajamäki. “In Denmark, Sweden and Norway, their market share is around 1%, but these figures are from 2013 and there were some major deals last year, so the figures have definitely grown. Average market share for Indian companies in the Nordics is probably around 4-5%, closer to 5%, and in Finland it will grow to 6-7% this year.”

Some Indian IT suppliers have been operating in the Nordics since the 1990s, but the real challenge has begun over the past five years. Their aim is to shake up a static market dominated by local and multinational suppliers such as Tieto, Evry, KMD, IBM and Accenture.

Increasing investments in the region include HCL’s seven-year deal with Norway’s DNB bank, worth $400m. While most services are still offshore, companies such as Tata Consultancy Services (TCS), HCL Technologies, Wipro, Infosys and Tech Mahindra have several offices in Nordic countries and a growing number of local delivery centres.

Johan Hallberg, research manager at IDC Nordic, said: “In the past, Indian IT suppliers were doing lower-level outsourcing and were often invited as subcontractors by medium-size Nordic players. But they have learnt that they can’t sell on price alone. They understand that they need more than a sales force in the Nordics and have started to market themselves in a different way.”

The Nordic appeal
But why the Nordics? Hallberg says the Nordic IT services market has been growing more quickly than in continental Europe, especially in Sweden, which has not been hit as hard by the economic crisis as many other European countries. The Nordics also have a relatively mature market and a large public sector with a major IT budget, he adds.

According to IDC figures, the IT services market in the Nordics was worth $24.4bn in 2014. Outsourcing is worth $12.6bn of that and it remains the main area where Indian suppliers operate.

While it is an attractive market, a key fact about the Nordics is that they still value local presence. A 2013 Ernst and Young study found that most outsourced services remained ‘onshore’ (in the same location or country). This is especially true of Sweden, where 87% of outsourced services were located onshore. Denmark was at the other end of the spectrum with 59% of services onshore, while Finland (74%) and Norway (80%) sat in the middle.

“The Indian suppliers have understood that they need to have local sales forces, local consultants and local datacentres,” said Hallberg. “It has become even more important for Nordic services companies to show their understanding of local business culture, laws and rules. Nordic suppliers have also started to specialise to meet Indian competition.”

The importance of a local presence is echoed by TCS, the biggest Indian IT supplier in the Nordics. Amit Bajaj, the company’s head of North Europe, says TCS has more than doubled the size of its operation in the Nordics since 2010 and has increased local hiring.

“We see the Nordic countries as a very interesting market,” said Bajaj. “This region hosts a number of very innovative and internationally competitive firms – just the kind that are a good match for us.”

Shaking up customer service
Gone are the days when the success of Indian IT suppliers could be measured only in cost savings. In recent years, Indian service providers have shown up well in customer satisfaction surveys. In Whitelane Research’s 2014 Nordic IT Outsourcing Study, TCS led the pack with 83% for contract satisfaction, with Infosys close behind at 79%, both well above the average of 71%. Three out of the top 10 companies in the survey were Indian.

IDC Nordic’s Hallberg added: “Many companies in the Nordics are in their third generation of outsourcing and are often mature in their requests. This has led to services companies needing to be even better in their customer understanding and to be closer to customers.

“The local revenue of some Indian suppliers has grown by more than 30% year-on-year. They are usually in the final selection phase in larger deals, which was not the case just a couple of years ago.”

Gartner’s Rajamäki pointed out that Indian companies can be very agile in their operations and act like small companies.

“Indians are slightly more daring in taking risks [than traditional players] and share the risk of their customers,” he said. “They are also efficient in the transition phase. Most deals today are taken over from competitors, and completely new deals are a rarity. What Indian suppliers do very well is to rapidly take over a customer and invest in the relationship.”

The deals Indian companies are winning are not just focused on one area, but range from help desks and IT infrastructure to application development and modernisation of legacy systems.

Breaking down barriers
Hallberg and Rajamäki both believe competition in the Nordic market can only grow. Indian IT suppliers are starting to gain a foothold in other IT services, such as project services. They are also starting to challenge traditional players for public sector deals as language barriers can be overcome by hiring locally, forming local partnerships or even acquisitions.

“Traditional Nordic and multinational players will increase offshoring where it is viable, such as cloud services, while Indian suppliers have come to the Nordics to stay and will continue to build their presence here,” says Rajamäki.

At the same time, the IT services market is undergoing a wider transformation. Although Bajaj cannot comment on TCS’s future plans in the Nordics, he highlights the internet of things, cloud services, digitisation and BYOD trends as drivers of change in the industry.

“The market is in a state of dramatic and constant change,” says Bajaj. “It has been predicted that in 10 years’ time, 40% of the current Fortune 500 companies will no longer exist.

“In this changing environment, organisations are fighting to get a lead on the digital re-imagining of their business, to simplify their processes and systems and to secure appropriate governance in terms of security, risk management and compliance. As Gartner pointed out, global IT spend will continue to grow at over 3% for this year.”

The changing Nordic market presents both an opportunity and a challenge for services providers, but one thing is certain: competition is increasing, and so are the rewards.


Indian IT Companies On The Global Tech Field

January 13th, 2015

India is renowned for a world class skilled talent pool, especially in the technology and science field. When talking about India and technology, the word IT quickly comes to mind. Worldwide IT spending is expected to rise by 2.4% in 2015 and the IT sector is expected to cross $3.8 trillion. A sizable cOutsourcing44hunk of this business is expected to be handled by Indian IT companies. Most of the amply funded technology companies have made it big in a short while and earned big bucks for the investors and stakeholders. Two prominent Indian IT stocks which quickly come to mind are Infosys Limited (INFY) and Wipro Limited (WIT). Both companies provide Business Consulting, Information Technology solutions, Software Services and Outsourcing solutions. Both companies aggressive compete with each other in the Indian and global market.

Infosys and its Global Footprint

Infosys Limited, with a market cap of close to $37 billion, is an Indian software technology giant which has found its way on the list of the most preferred Indian IT stocks. Infosys provides IT Consulting, Software Development and Outsourcing services. Infosys clients are spread across 50 countries which it services through 72 global offices. Its annual revenue exceeded $8 billion and the company made a profit of $1.75 billion in 2014. According to Gartner, Infosys is poised to become the leader in Magic Quadrant for International Retail Core Banking solutions. This is the eighth time that Infosys has managed to bag the leader position in Magic Quadrant. The company has more than 15 offices and development centers in USA alone. Some of its US clients include Kellogg’s (K), Harley Davidson (HOG), JFK Health Systems, and NovaSom Inc., The company’s stock is currently trading at $33. Aspen Technology Inc. (AZPN), Advent Software Inc. (ADVS), CoreLogic Inc. (CLGX) are some of its closest competitors.

Wipro Trots the Global Path

Wipro Limited is a provider of comprehensive IT solutions and services which include Consulting, System Integration, Information Systems Outsourcing, IT enabled and R&D services. Wipro is also amongst the preferred Indian IT stocks listed on NYSE since 2000. It is currently trading at $11 and has a market cap of $28 billion. The company revenue exceeded $7.3 billion in 2013-14 and the profit made in the same year was approximately $1.3 billion. The company has achieved ISO 14001 certification and ISO 9000 certification. US based Technology Infrastructure Consulting company cMango Inc., is amongst one of its international acquisitions. NCI Inc. (NCIT), Datalink Corporation (DTLK), Globant S.A. (GLOB) are some of its competitors operating in a similar price band. Besides IT, Wipro also has Consumer Care and Lighting businesses. This division manufactures Personal care, Baby care, Wellness, Lighting, Electric Wire devices and Modular office furniture.

Some other IT companies to watch out: Few other IT MNC’s which have large development centres in India and compete with Infosys and Wipro in the Indian and Global Markets are US based Cognizant Technology Solutions (CTSH), Ireland-based Accenture Inc (ACN) and France-based Capgemini S.A. (CGEMY).

Last Impression

Infosys and Wipro are in the forefront of the race to grab a big chunk of $3.8 trillion global IT business. The stock forecast for both companies looks bullish. From an investor’s perspective, considering the rapid foray that the Indian economy is making in the Global arena, it would be a good idea to make some space in your investment portfolio for these Indian stalwarts to add a good variety to your portfolio and stand at the gaining position with the world economy heading towards India and China.


Indian IT staff could unionise, putting offshore model into question

January 8th, 2015

Trade union organisations in India are calling on millions of Indian IT workers to unionise as fears over mass redundancies spread across the country’s IT services industry.Outsourcing39

Talk of Tata Consultancy Services (TCS), India’s biggest IT services provider, reducing its workforce of more than 300,000 by 10% has fueled fears in India’s IT sector.

It’s also been speculated IBM is planning to cut its workforce in the country by 50,000. According to a report from India, the IT giant has already reduced its India-based workforce from about 165,000 in 2011 to 113,000 in 2014.

According to the International Business Times, the All India Trade Union Congress and the Centre of Indian Trade Unions has asked software engineers to plan a strategy to resist the alleged workforce cut planned by India’s largest software services firm. This collective activity would amount to unionisation.

Unionisation a major shift in Indian IT

Unionisation would be a major shift in the industry as Indian IT workers are not actually allowed to unionise. It would also make offshore services delivered from the country less competitive as staff demand higher pay and better working conditions.

Staff cuts in India are inevitable as the outsourcing sector goes through a period of major change. The traditional offshore model, where businesses paid for full-time equivalents, is less relevant today with the advent of modern technology, such as automation software and cloud services.

IT services firms traditionally grew in a linear way – typically, they win more business, then add more staff to support it. In many cases this has involved building large offshore workforces.

But service providers are now trying to reach the holy grail of non-linear growth. This means adding business without needing to add to the workforce to support it – reducing the proportional increase in the cost of providing an additional service.

At the same time, increased use of cloud-based IT is forcing IT services firms to add more higher-level support services, while the move to platform-based services in the cloud means there is less need for businesses to develop their own software.

The lack of labour rights in India also benefits businesses that want a flexible workforce that can be scaled up and down easily.

Massive consquences for offshore IT services
One IT outsourcing industry source said unionisation will have massive ramifications on offshore IT services.

“This will mean less flexibility,” he said. “Offshore IT operations will no longer be able to be ramped up and scaled down easily because it will no longer be easy to lay people off.”

He added if talk of TCS laying off 30,000 people in India is true, it will be evidence of the company’s move towards non-linear business models.

“Because TCS is a bellwether this could spread across the Indian IT industry,” he said.

Indian companies need to change if they are to continue to grow. According to ISG, between 2005 and 2008, Indian suppliers’ revenues grew at a combined annual growth rate of 32%.

But the recession, which began in 2008, has been a shot across the bows. In the years since, Indian firms have experienced half the growth rate, at 16%.


IT stocks gain on weak rupee

December 30th, 2014

Five IT stocks rose by 0.37% to 0.85% at 13:35 IST on BSE as rupee edged lower against the dollar.Outsourcing32

Meanwhile, the S&P BSE Sensex was up 199.16 points or 0.73% at 27,440.94.

Among IT stocks, Infosys (up 0.6%), Tech Mahindra (up 0.56%), TCS (up 0.59%), HCL Technologies (up 0.85%) and Wipro (up 0.37%) gained.

A weak rupee boosts revenue of IT firms in rupee terms as the sector derives a lion’s share of revenue from exports.

In the foreign exchange market, the rupee edged lower against the dollar due to appreciation of the greenback against other currencies overseas. The partially convertible rupee was hovering at 63.68, compared with its close of 63.57 on Friday, 26 December 2014.

Optimism about growth of US economy also supported IT stocks, US is the biggest outsourcing market for the Indian IT firms.


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.


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