Posts Tagged ‘Indian’

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. 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.


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.


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.


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”.


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.


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.


Jack Palmer’s New Infosys Lawsuit Shows Indian IT Industry’s Visa Troubles Won’t Go Away

October 7th, 2014

Jack Palmer, the former Infosys Ltd. employee whose lawsuit alleging harassment by the Indian IT services provider was thrown out in 2012, has filed a new suit against the company. The move highlights the $118 billion outsourcing industry’s woes that arise from its dependence on American work visas.Outsourcing45

The new lawsuit, filed in New Jersey District Court on Oct. 2, names Infosys, founder Narayana Murthy, former CEO SD Shibulal and others as defendants. In the original whistleblower lawsuit, which a court in Alabama threw out, Palmer had claimed he was harassed by Bangalore-based Infosys for pointing out alleged wrongful use of certain types of short-term work visas.

“Palmer’s current complaint in the United States District Court in New Jersey is a repetition of issues that were tried and dismissed by a federal court in 2012,” Infosys said in an emailed statement to International Business Times on Monday. “Palmer resigned in 2013 November and released the company from the charges he has alleged in the complaint. We believe this is without any legal merit and will vigorously defend this complaint. We expect the issue to be resolved at the earliest.”

India’s IT outsourcing industry, which includes large India-based centers of U.S. multinational companies, takes advantage of the H-1B visa to place short-term work visa holders at client sites in the U.S. when required, avoiding the costlier option of hiring U.S. citizens locally. The non-immigrant visa allows skilled workers to work in the U.S. for up to six years. The practice has attracted close scrutiny from U.S. lawmakers, including visa fee increases and a Justice Department investigation that Infosys settled for $34 million last year. There are ongoing attempts to change the rules governing H-1B visas such as those proposed in the larger immigration overhaul being debated in Congress.

Changes proposed to H-1B rules were only one part of the bill S. 744, titled Border Security, Economic Opportunity, and Immigration Modernization Act, introduced in the spring of 2013 by a bipartisan group of eight senators, with Sen. Charles Schumer as the main sponsor. The bill seeks to overhaul America’s immigration system, from securing its borders to fixing the status of some 11 million illegal immigrants.

Changes to the H-1B visa program could include barring any company, which has more than 15 percent of its staff holding H-1B or L1 visas, from placing those staff at client sites in the U.S. Instead, the company would have to use locally hired Americans. The L1 visa is another type of non-immigrant work visa used mostly for intra-company transfers.

This would directly hit the Indian IT outsourcing model, which relies heavily on H-1B visas. Typically, two-thirds of the staff of Indian IT companies in the U.S. are those imported on these visas. The ban would mean either providing services from outside the U.S. or hiring locals, which would in turn mean a higher cost of doing business.

The House of Representatives was looking to debate its own version of the bill, passed by the Senate in June 2013, even as the Indian IT industry lobbied Washington hard to water down those proposals. However, events including House Majority Leader Eric Cantor’s defeat in the Virginia primaries overtook the lower house’s debate on the bill, diminishing the prospect of the proposals becoming law soon.

“We’re certainly not assuming it (immigration reform) as dead or gone away, we’re viewing it more as postponed,” Gordon Coburn, president of Cognizant Technology Solutions Corp., told investors in a meeting organized by Deutsche Bank on Sept. 10.

Cognizant, with the bulk of its staff in India, and its Indian rivals such as Tata Consultancy Services Ltd. and Infosys, are among the biggest beneficiaries of the H-1B visa program.

“Immigration bill, though it is still not off the table, there is not much noise in the last couple of quarters, but with the mid-term elections you could again see noise levels building up,” Rajiv Bansal, chief financial officer of Infosys, told investors at a conference organized by brokerage CLSA Ltd. in Hong Kong on Sept. 14. He was, however, speaking in the context of why it’s important for Infosys to maintain a large cash reserve.

A second, less onerous, change proposed was that companies must progressively reduce the proportion of their U.S. staff holding non-immigrant visas (predominantly H-1B and some L1 visas) from the fiscal year after 2016. At most, 50 percent of their U.S. staff could be non-immigrants and the other half must be U.S. citizens.

The current annual cap on the number of H-1B visas awarded is 65,000, with an additional 20,000 that can go to graduates of advanced degrees from U.S. universities. This is for the fiscal year 2015 that begins Oct. 1 this year. The immigration bill, however, includes provisions to raise the cap to as much as 180,000. U.S. Citizenship and Immigration Services said on April 7 that it had received enough applications to hit the cap for the current year, and a computer-generated random selection process will be used to select those who get the visas.

Palmer’s original lawsuit that was dismissed included an allegation that Infosys misused another type of visa, the B-1 visa, to send IT staff from India to U.S. client sites, though such visas can only be used for purposes like business meetings and not for billable work.


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