Posts Tagged ‘Infosys’

Infosys creates healthcare unit HILife

May 26th, 2015

In what appears to be an effort to increase its focus on healthcare, Infosys will transfer the healthcare business of its US-based, wholly-owned subsidiary Infosys Public Services to itself for a consideration of $100 million . Outsourcing4

In its latest annual report, Infosys said it has created a new business unit called HILife to provide services to healthcare, insurance and life sciences businesses. The new unit will presumably combine its existing healthcare and life sciences business, which accounts for about 7% of its overall revenue of $8.7 billion, with the healthcare business of Infosys Public Services.

The thrust in healthcare comes at a time when industry rivals like Cognizant and Wipro are aggressively focusing on the space, with Obamacare opening up outsourcing opportunities that aims to brings millions of people under the healthcare insurance fold in the US. Both healthcare providers and payers as well as life sciences customers, including pharmaceutical, biotech and medical device companies, are outsourcing work to IT service providers.
Almost a quarter of Cognizant’s revenue comes from healthcare, while for Wipro, that figure is close to 12%, both significantly higher than for Infosys. Last year, Cognizant acquired TriZetto, a healthcare IT software and solutions provider, for $2.7 billion to strengthen its healthcare capabilities. Wipro’s healthcare business is expected to touch $1 billion this fiscal.

In his note to shareholders in the annual report, Infosys CEO Vishal Sikka described the company’s full year performance as “average”. “There were hard fought battles in a difficult climate, one in which clients’ expectations are changing, new emerging technologies are rapidly coming to market and where the landscape of services companies has become vastly more competitive,” Sikka said. He said the company faced internal challenges that lagged growth and a string of senior level exits put pressure on its business and performance.

India’s second-largest IT services firm’s growth lagged those of its peers last year. Revenue grew 7.1%, just about meeting the lower end of its guidance of 7%-9%.

“When we look at Infosys today, we can see that it has been a year of great transition for the company…We are learning to work in a new environment and in new ways and it has been a difficult learning experience. But with learning comes the promise of renewing ourselves and the opportunity to pursue entirely new horizons,” Sikka said.


Indian IT firms like TCS, Infosys to gain from HP’s enterprise services cost cuts, say analysts

May 25th, 2015

Hewlett-Packard’s decision to cut $2 billion (about Rs 12,700 crore) in costs in its enterprise services business could open up opportunities for Indian technology firms such as Tata Consultancy Services and InfosysBSE -0.08 %, said analysts tracking the development. Outsourcing48

Infrastructure contracts such as HP’s $400-million data centre outsourcing deal with oil company BP in 2010 and its $700-million deal with German energy provider E.ON could be taken over by Indian firms when renewed, they said. HP’s troubled enterprise services businesses provides technology consulting, outsourcing and support services and competes with companies such as TCS, Infosys, Wipro, IBM and Accenture.

“In the infrastructure space, certainly they are being challenged by cheaper Indian providers,”said an Indian IT industry consultant, declining to be identified. “And the constant round of cost-cutting is a distraction and makes them less competitive.”

The 75-year-old company faces increasing pressure in India where its pricing is much higher than that of traditional outsourcing firms, and some shedding of contracts will happen with the split, giving Indian IT companies an opportunity to take over HP’s market share, said a second industry expert who also did not want to be named.

“HP has been in constant restructuring for a while; the whole company has been in flux,”said Tom Reuner, managing director at HfS Research. “It’s caught between two big rocks –the secular trend of asset light, more cloud-based IT and its own internal troubles.”

The planned cuts in the enterprises services division can come from staff reductions, moving more work offshore, delaying or eliminating investments, and writing down assets that are being deprecated, said Peter Bendor-Samuel, chief executive at consulting firm Everest Group.


IT shares trade firm; HCL Tech, Tech Mahindra up 3%

May 21st, 2015

Shares of information technologies (IT) companies were trading firm on the bourses, gaining upto 4% each, on the back of positive corporate announcements and weakening rupee.Outsourcing43

HCL Technologies, Tech Mahindra, Tata Consultancy Services (TCS), Persistent Systems and Cyient rose 3%-4% each, while Infosys, Wipro, Hexaware Technologies, Polaris Consulting & Services and MindTree gained 1%-2% each on the National Stock Exchange (NSE).

At 1311 hours, CNX IT index was the largest gainer among sectoral indices, gaining 1.8% compared to sub-1% gain in the benchmark CNX Nifty.

Tech Mahindra spurted by 3% to Rs 640 after the company said Ontario Ministry of Energy and the company invested in innovative Smart Grid solution powered by analytics.

Tech Mahindra announced that it will build an Intelligent Electric Vehicle Charging System (IEVCS) designed to help build Ontario’s clean energy future. The project, sponsored by the Ministry of Energy and funded in part through the Ontario Smart Grid Fund initiative, will analyze the effects of electric vehicle charging on transformers by creating a real-time transformer monitoring and analytics solution.

TCS gained 2% at Rs 2,563 after its client, Euroclear Finland launched platform, Infinity powered by TCS BaNCS for market infrastructure.

Infinity is a multi-year program powered by TCS BaNCS for Market Infrastructure and is a key component of Euroclear Finland’s outsourcing its securities settlement processing to TARGET2Securities (T2S) as part of the European Central Bank’s fourth migration wave in February 2017, TCS said in a statement.

Meanwhile, the rupee depreciated by 11 paise to 63.78 against the US dollar at the Interbank Foreign Exchange in early trade today as the American currency appreciated in wake of strong economic data, the PTI report suggests.


Wipro, Infosys and TCS See Europe as an “Achilles Heel”

May 14th, 2015

Although Europe is frequently seen as the next big frontier for the major Indian service providers, companies such as Wipro, Infosys and TCS are finding the continent to be an increasingly vulnerable place to do business.Outsourcing36

One reason is the euro’s volatility. Furthermore, the top Indian IT firms, previously enjoying growth rates of 25-30 per cent in Europe, are also now struggling due to top customers in the region, such as AstraZeneca, cutting down on their spending.

As a result, the Indian Economic Times has found that revenues for the majority of Indian’s biggest service providers operating in Europe have declined in the last quarter of 2014 and first quarter of 2015.


India’s IT incumbents struggle to adapt as outsourcing industry changes

May 14th, 2015

India’s massive outsourcing industry is changing. Growth in its traditional markets has flattened as the country’s biggest IT providers struggle to adapt.Outsourcing35

Companies like TCS, Infosys and Wipro have repeatedly blamed the stronger US dollar for poor results as a good number of clients are based stateside.

But the underlying reason is simply that fewer businesses need their services.

“The traditional labour-based service delivery is now being cannibalised by access-based, cloud-based, platform-based and automation-based service delivery,” said Arup Roy, research director at Gartner India Research and Advisory Services.

India’s IT providers have long been aware of this global shift to cloud and mobile computing, and some have been quicker than others to adapt.

“We have seen TCS acting in a more nimble fashion compared to others such as Infosys and Wipro,” said Dhananjay Sinha, head of research and strategist at Emkay Global Financial Services.

“TCS has been fairly ahead of the curve in terms of getting into Europe and other specific verticals which has actually aided them to show a relatively strong growth to others. If you look at Wipro, it would be third or fourth year when the dollar revenue growth would be sub 10 per cent. Likewise, Infosys has decelerated.”


But a key issue is that Indian IT firms remain averse to consolidation. Many are stuck in the old mindset and see big acquisitions as risky. Data from trade body Nasscom also show they have not scaled back hiring. TCS alone brought in close to 60,000 people last year.

To survive, analysts say these firms will need to invest a whole lot more on research and development, and start looking beyond their horizons.

Roy said: “If we talk about China, it has been a difficult a market for most of the service providers, likewise Brazil, Saudi and European countries.  I am talking about the Dutch country, Norwegian region as well as to a certain extent the eastern European regions.”

But even if they find new markets, analysts say they can no longer charge what they used to. Price wars have reportedly broken out as firms vie to retain marquee customers like American Express and Citigroup.

“Competitive pressure is going to intensify so as a result of that,” said Sinha. “As the industry has also matured, the clients are also demanding competitive pricing. I don’t think that there will be a consolidation happening as far as large players are concerned.”

While it is not ideal, sacrificing margins for a greater share of the market may be their only option for now.


Infosys CEO Vishal Sikka overseeing 1,000 top outsourcing projects to improve revenue

April 14th, 2015

InfosysBSE 0.26 % chief executive Vishal Sikka has started personally overseeing about 1,000 customer outsourcing projects, adopting a hands-on approach at a time when India’s second largest software exporter is looking to strengthen ties with top outsourcing customers like Bank of America in a bid to generate more incremental revenues.Outsourcing24

A few weeks ago, Sikka got on a call with about 1,000 of the company’s project managers across the globe, spoke about the broader contours of how customer projects could deliver more value and discussed ways to identify high-value work in each of them, two people directly familiar with the matter said on the condition of anonymity.

Sikka has picked these projects as part of a pilot to improve revenue from top customer accounts and is personally monitoring them, even writing codes and architecting solutions wherever needed, one of the persons said. “What Sikka wants to do is raise value of the projects that are being delivered to customers – this is part of his broad ‘New and ReNew’ strategy,” the person said.

In all, Infosys is currently running 23,000 projects. Sikka, since he took over as CEO in August last year, has been attempting to inject new technology solutions into these projects for customers. An Infosys spokeswoman did not respond immediately to an email seeking comment. The company is currently in a so-called silent period ahead of its annual results announcement on April 24.

Sikka is betting that deeper, more meaningful engagements with top clients will translate into more business, at a time when Infosys is chasing large outsourcing deals to script a turnaround in its fortunes and regain industry-level growth rates. He has made an organisationwide push towards design thinking and forced employees to think of creative solutions to solve complex business problems for customers, as part of his vision to make technology the centrepiece of every client engagement.

“From my perspective what I did not expect…what I did not anticipate was the degree to which I find this mindset that we don’t use our imagination, our creativity, we do what we are told,” Sikka has said in an interview with ETin February. With commoditisation of traditional IT services, Sikka wants to focus on delivering more innovative, high-value solutions .

Recent SAP hires such as Abdul Razack and Navin Budhiraja are also playing a significant role, the people cited earlier said. “Sikka is making everyone at Infosys go through design thinking and I think it’s an interesting move – I don’t think it will change much among the 170,000 Infoscions. But at least there is a strong message coming from Infosys that is saying ‘we need to change and we need to reinvent the way we engage with our clients, we need to reinvent the way we deliver value to accounts’ . I think that’s a very good start,” said Fred Giron, vice president and research director at Forrester Research.

Sikka has interacted directly with randomly picked engineers and programmers to get feedback on certain projects, people directly involved with the projects said. Holger Mueller, vice president and principal analyst at Constellation Research, said, “Infosys is at a unique inflexion point now, where the company has people who understand traditional business and also have all these new SAP hires.”


Infosys, Wipro, TCS caught in outsourcing price war

March 26th, 2015

Top software service exporters are under pressure to drop prices to retain contracts with marquee customers such as American Express and Home Depot that are up for renewal this year, according to executives and experts involved in the contract negotiations.Outsourcing17

Rates have fallen by double digits for some of the biggest customer accounts in the past six months, with companies such as Infosys and Wipro sacrificing profit margins to gain market share and incremental revenue from these key accounts, they said.

Retaining strategic outsourcing contracts — that generate at least $100 million annually — is crucial to top IT firms such as TCS, Infosys and Wipro.

“We’re definitely feeling the heat in some of our key accounts — and there’s no way we can afford to lose a top customer since gaining new logos to make up for the shortfall is not an option,” said a Wipro executive, who requested anonymity.

An executive at another top IT firm, also declining to be identified, said as traditional businesses have become commoditised, no company could afford to charge a premium.

“Top customers are more aware now of the changing dynamics in the market and are taking the opportunity to negotiate multi-million dollar contracts at lower prices,” this person said.

Experts tracking the contract negotiations said prices could drop further over the next 3-4 quarters.

“It’s become a dog-eat-dog business more than ever,” said Phil Fersht, chief executive of outsourcing advisory firm HfS Research. “There is a clear downward pressure on all IT services pricing. We estimate this is a 3% price decrease per FTE (full time equivalent) per deal, on average, over the last 6 months.”

TCS, Cognizant and Infosys declined to comment for the story.

Infosys, TCS and Wipro are increasingly automating commoditized businesses like infrastructure management to improve margins but are forced to pass on a majority of the benefits to key customers such as Bank of America and Citigroup.

“We are seeing big price movement, some of it betting on increased maturity of autonomics. TCS, Wipro and Infosys have all signaled their move away from (automation company) IPSoft and towards internally developed autonomics solutions. I assume that this will give them more pricing flexibility than they were getting with third-party software,” said Bill Huber, a former IBM executive and managing director at outsourcing advisory firm Alsbridge.

For Infosys and Wipro, which have lagged average industry growth rates over the past three to four years, gaining market share at the cost of margins seems to be their best option in the near term to revive double-digit growth rates.


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