Posts Tagged ‘TCS’

It will take a while to get growth back, says Infy

August 27th, 2014

Infosys Ltd, the country’s second largest software exporter, has said it is on track to meet its growth estimate of 7-9 per cent this fiscal despite macroeconomic volatility and lower demand from top clients, but added that it will take a while for the company to report higher growth.outsourcing19

Infosys’ growth estimate is much lower than the industry guidance, which, according to Nasscom, is in the range of 13-15 per cent for FY-2015.

Addressing Motilal Oswal analysts in Mumbai, UB Pravin Rao, chief operating officer, said: “We have definitely underperformed over the last few years and it will take a while for us to get growth back.”

The company’s margins are expected to be in the range of 24-25 per cent, lower than market leader Tata Consultancy Services’ 28.8 per cent. “Our focus is on growth and the company cannot sustain margins without growth,” Rao said.

Acquisition plan

Signalling the company’s intent to grow business through acquisitions, he added Infosys will look at buying firms in the life sciences and IT infrastructure management segments in markets such as Latin America and Japan.

On Tuesday, the company’s scrip closed marginally down at ₹3,620.60 on BSE.

‘Market is stable’

Infosys, along with other IT companies, believes demand for outsourcing continues to be strong and the situation looks better at this point compared to the year-ago period. “Our pipeline is good and the market is stable,” said Rao. Also, the company is seeing traction in financial services, communications and energy sectors.

Rao added that high attrition is an area of concern and it will take several quarters to bring it down to 14 per cent, from 20 per cent now. Rao attributed this to the distraction around CEO succession, coupled with a spate of top management exits. “With the new leadership in place, that distraction will go away.” Infosys, in June, appointed Vishal Sikka as the first non-founding CEO of the company.

Rao also maintained that the company would use its $100-million venture fund to invest in start-ups, something that Sikka has outlined as a part of his strategy since taking over the company.


TCS, Cloudera tie up to provide analytics services

August 26th, 2014

Tata Consultancy Services Ltd (TCS), India’s leading software services exporter, has tied-up with US-based Cloudera, an enterprise analytics data management provider, to offer Big Data and analytics services globally.

As part of the deal, TCS’s global team of Big Data experts will be certified through the Cloudera Certified Professional (CCP) programme, and its products will be validated through the Cloudera Certified Technology Programme (CCTP), TCS said on Monday.

While Satya Ramaswamy, global head for TCS Digital Enterprise said Big Data “is playing a central role in helping enterprises re-imagine their businesses”, Tom Reilly, chief executive officer of Cloudera, said the TCS’s investment in Cloudera has made it “the world’s largest group of Cloudera certified professionals”.

TCS is banking on revenue from emerging technologies such as social, mobility, analytics and cloud (SMAC) to stay ahead of the pack. In June 2013, it set up a separate digital enterprise unit in Silicon Valley to club its SMAC computing technology services under a single roof. outsourcing12

Last month, TCS said in a global trend report that digital spending by enterprises globally is expected to be a $113 million in 2014, as these organizations see digital initiatives, such as Big Data, analytics, cloud computing, mobile and pervasive computing, social media, robotics and artificial intelligence, as being crucial to their business success in this decade.

According to a February report by research firm Offshore Insights, Global 2000 firms will spend 15-16% of their information technology (IT) services and outsourcing budgets on SMAC and India will export $15 billion worth of SMAC software and services in fiscal 2017, despite SMAC currently accounting for less than 10% of the revenue of IT services firms.

According to global research firm International Data Corp. (IDC), Indian IT vendors will generate at least $225 billion in SMAC-related revenue in 2020. TCS made the announcement after market hours. On Monday, shares of TCS closed up 2.42% at Rs.2,521.15 on the BSE, while the benchmark Sensex index rose 0.07% to close at 26,437.02 points.


TCS’ Diligenta secures deal with UK-based Friends Life

August 20th, 2014

Tata Consultancy Services (TCS)’s British business process outsourcing subsidiary, Diligenta, on Tuesday announced a new multi-million pound and a multi-year contract with UK-based Friends Life Management Services for its international operations.Outsourcing50

In a notification to the stock exchange, the country’s leading information technology services, consulting and business solutions company said Diligenta would configure and implement TCS BaNCS, a globally acclaimed core platform, to support the international operations of Friends Life—Friends Provident International.

However, financials of the deal were not disclosed by TCS.

With the help of TCS BaNCS platform, Friends Provident International will be able to deliver seamless services to its customers spread over Asia Pacific and West Asian region, said the notification.

“This new deal will enable us to streamline our systems, improve services to our customers and put us in a strong position to continue growing new business,” the notice quoted John Van Der Wielen, CEO International at Friends Life as saying.
Diligenta’s track record of successfully migrating over 6 million Life and Pensions policies on to our industry-leading platform solution TCS BaNCS, contributed directly to this win,” said Suresh Menon, CEO at Diligenta.

Friends Life is not a new client for Diligenta. In 2011, the TCS subsidiary had taken over the IT and customer services functions of the UK business of Friends Life for 15 years.

The deal worth $2.2 billion was one of the largest deals TCS had won through an organic route then.


Success is creating wealth for all stakeholders: Susir Kumar

August 18th, 2014

What gets a qualified company secretary to give up a lucrative senior position in Housing Development Finance Corp. Ltd (HDFC) after a 12-year-long stint and take a leap into the unknown? It was the desire to create wealth and be directly responsible for the profit and loss of a business that nudged Susir Kumar in 2000 to sever the safety line of a regular salary and take the bait of entrepreneurship.

And it was not just any business, but an unproven idea of business process outsourcing (BPO) industry. This is how Kumar came to be a part of Intelenet Global Services. “I wanted to do something bigger that made me directly responsible for profits and losses and the growth of an organization,” he recalled.

It was during this phase of introspection that the universe came together; or rather, HDFC and Tata Consultancy Services Ltd (TCS) came together for a joint venture in the BPO industry. Kumar didn’t take the reins immediately; it was only after some time that he realized he was involved too deeply in a company which he was only meant to assist on the risk front.

“From half a day a week, I ended up working 2-3 days a week on various aspects of starting up the company and soon S. Ramadorai (the then chief executive officer of TCS) pitched to Deepak Parekh (chairman of HDFC) saying he wanted me to head the company. It wasn’t an easy decision to make but I was excited,” said a gleeful Kumar.
Kumar wanted to be out there to create employment. Back in 1996, during the recession in manufacturing, he was affected by seeing people losing their jobs. Setting up Intelenet was a move in that direction to create jobs. By 2007, Intelenet was employing between 8,000 and 9,000 people. “At that stage we wanted to make it a global company, HDFC and Barclays (Barclays bought out TCS’s stake in 2004) thought that this was no longer their business and wanted to move out. But the valuation they brought to the table wasn’t convincing for me. I said I would buy out their stake.”

Even though, at the time Kumar didn’t have the financial ability to back his offer, he worked hard, and in three weeks, put on the table an offer underwritten by a bank. Subsequently, there were at least five investors willing to invest. Finally, a management buyout was initiated in 2007 with Blackstone. “We created 33,000 jobs between 2007 and 2011 and Blackstone made a return of around 2.5 times; we also gave them the ability to exit in tough times.” Intelenet has since been acquired by Serco Group PLC and Kumar is their chief executive officer of global services . The division he is the head of is a $1.2 billion revenue earner for Serco. “The deals that went through created equity value not just for me but for 300 employees who were given a share in the company. Many used the funds to buy houses, get their children married and I am happy that wealth ended up with a larger group of people rather than just the top executives,” said Kumar.

Ask him if he is content now and he replies, “There is nothing like being content, I’m always thinking, what next?” Kumar set up KOOH Sports in 2010, a company focused on children getting involved in a sporting activity and indulging in a healthier lifestyle.

But while spending all this time at work and travelling across the globe, does he get time for home? Despite travelling at least 15 days a month, Kumar takes out time for his family, for playing tennis twice a week and the gym almost daily. You can see he is fit not only by the way he looks but also in his clarity of thought. “If I sleep eight hours a day at a stretch, work can’t get done. The good thing is I can sleep anywhere.” Short power naps are what gets him through the day.

He de-stresses by taking at least four holidays a year; one with family and friends, one just with his wife, 19-year-old daughter and 13-year-old son, one with just his wife and one with just his friends. His passion for photography is shared by his son and that for sports by his daughter, a keen squash player. Despite so much activity in his life, ask him how he takes time out for himself, he says, “Most of my time is spent thinking, so I have a lot of time for myself.”


Infy betters TCS, Wipro in revenue per employee

August 14th, 2014

IT services firm Infosys has been consistently improving its revenue per employee in the last few quarters. Its numbers are better than those of its top two Indian competitors, Tata Consultancy Services and Wipro, due to higher returns from consulting and systems integration (C&SI), says a company official.

Revenue per employee is a function of various things, including price points, portfolio of services, onsite-offshore mix, utilisation and client mix. However, “our proportion of revenues from C&SI is higher than leading offshore peers,” said a company spokesperson.

Reduced hiring

Reduced hiring by Infosys in comparison with TCS, especially during the last two financial years, has helped the Bangalore-headquartered firm boost its revenue per employee metric. However, attrition remains a challenge.

The recent improvement in utilisation for Infosys was mainly due to an increase in attrition, which forced other employees to bear the increasing workload, said Bozhidar Hristov, Analyst, Professional Services Practice, Technology Business Research, US.

If Infosys wants to maintain healthy (above its peers) revenue per employee and utilisation, it will need to pick up hiring of both freshers to support large-outsourcing deals and laterals to add value to C&SI opportunities. It should also invest in automation tools and IP-backed assets to sustain non-linear growth.

Infosys is leveraging its expanded foothold in Europe following the acquisition of Lodestone to boost brand awareness and drive high-value C&SI sales. In comparison, while TCS’ ability to provide operations execution remains its key lever, consulting on operations hinders its ability to expand high-value C&SI sales, said Hristov.

Automation helps

According to Moorthy K Uppaluri, CEO, Randstad India, in the IT sector, revenue per employee indicates the overall growth of the company, employee productivity and the non-linearity of the business model. Most IT majors have been winning large, multi-year project-based engagements, and they have built efficiency through automation to execute these projects. This has had a positive impact on the revenue per employee equation.

Companies are investing in development of products in core banking, IT infrastructure management and IT accelerators for emerging technologies to improve non-linear revenue. Such measures have helped improve the revenue per employee consistently, by around 15-20 per cent over the last five years.

A higher onsite ratio of employees also impacts this metric as for the same number of people, the billing is much higher, he said.

Rituparna Chakraborty, Senior VP & Co- Founder, TeamLease Services, said the top IT companies have vastly improved productivity.

Wipro this year had a flat headcount for revenue that last year would have required it to hire 10,000 people.

The role of HR for most IT companies is shifting from selecting to upskilling.


HCL Tech is IT’s stock market star

August 13th, 2014

Among the big Indian IT companies, HCL Technologies has been the undisputed star of the stock markets in recent years. It’s the smallest of the top five, and has tended to receive the least public attention – overshadowed by TCS’ and Cognizant’s strong performances.

But the $5-billion, Shiv Nadar-promoted company’s rise has been phenomenal. Over the past three years, its share price has risen by 249%. In comparison, TCS was up 139% and Infosys, the worst performer, just 34%. The gap between HCL and the rest was equally significant over the past year. HCL rose 64%, TCS and Cognizant both grew around 35%; Infosys was once again the laggard at 15%.

There’s good reason for this. Its revenue growth has been consistently high, and above the industry average growth. But what’s been remarkable has been net profit growth, which was 42%, 50.5% and 30.9% in dollar terms in each of the past three years (Infosys’ respective figures were 1.5%, 0.5% and 14.5%).

The company’s operating margin – one of the best measures of the efficiency of a company’s operation – used to be 14% three years ago, when Infosys’ was close to 30%. In the past quarter, it was 24.2%, just a shade behind Infosys’ 25.1%. In just the past year, it improved the operating margin by nearly 4.5 percentage points.

Investors use a measure called the price-earnings (PE) ratio to evaluate the relative attractiveness of a company’s stock price. It is a valuation multiple that reflects earnings/profit growth and the predictability of this growth. Infosys and Wipro have traditionally had a much superior PE ratio, but Pramod Gubbi, director of sales in brokerage firm Ambit, says he expects HCL Technologies’ PE ratio to cross that of Infosys and Wipro over the next four quarters. In other words, investors will then be willing to pay a higher price for a dollar of HCL earnings, than for a dollar of Infosys or Wipro earnings.

Varun Vijayan, IT analyst at the brokerage firm PhillipCapital, notes that HCL Technologies has outperformed its peers, expanding its margins and improving operating cash flows in the past two years. “They have been closing $5 billion worth of deals in each of the last two financial years, and a large chunk of it is coming from new clients and expanded scope of work in some of the service lines,” he says.

HCL discovered its pot of gold in an area called infrastructure management services (IMS). It recognized – much before most of its Indian peers – that this was a space ripe for large-scale outsourcing, and also one where Indian vendors could outbid global players like IBM and HP. IMS involves the management of the entire IT infrastructure of a company, including equipment, data, related policies & processes – an area that’s not core to most companies and yet an increasingly important part.

In the past few years, IMS has grown extremely rapidly for HCL, many of the contracts being those that were previously handled by global IT majors. HCL Technologies CEO Anant Gupta recently told TOI that a big reason for this was that HCL had no vested interests in the space. “Unlike some of our global competitors (read IBM, HP, Dell), we don’t have to sell servers, storage or networks to customers, so customers have confidence we will give them the best options,” he said.

The pace of growth in the space has slowed down a bit, but it is still winning big contracts. In just the past few months, it won a $500-million contract from Pepsi, a $400-million contract from DNB Bank, Norway, and a $400-million contract from Alcatel-Lucent.

Gubbi says HCL is still several steps ahead of peers with respect to selling and delivery capabilities in IMS and that IMS still has a lot of headroom for growth. Dipen Shah, head of private client group research in Kotak Securities, however notes that HCL Tech’s growth from infra services has slowed down in the last two quarters while Wipro is showing some good momentum in terms of deal wins. “We are seeing contrasting trends with regard to these two players. Though PE valuations of Wipro and HCL are somewhat similar, we will need at least 2-3 quarters to see how the action pans out,” he says.

Gubbi is also impressed by HCL’s innovative approaches towards relatively commoditized service lines such as application support and maintenance, and says it is able to cross-sell application management services to its IMS customers. HCL’s ALT ASM offering focuses on a ruthless cut down of waste in application support and maintenance, and is said to be seeing significant traction.

The division is now headed by Ajit Kumar, an Accenture veteran who came to HCL a year ago. In 2012, HCL brought Prithvi Shergill from Accenture to head HR. These are signs that the company is trying to combine international best practices with India’s outsourcing advantage. For now, the strategy looks to be working perfectly.


UK public sector starting to spread the ICT spoils

August 8th, 2014

Mid-sized companies are starting to outperform the leading IT suppliers to government, according to a report by analysts from TechMarketView.

Indian IT firms such as TCS and HCL saw their public sector revenues grow by 24 percent and 22 percent respectively last year, while mid-sized providers Computacenter and Dell reported public sector revenues up by seven and eight percent each.

Smaller software providers such as Advanced Computer Software (up 25 percent), Allocate (up 15 percent) and UNIT4 (up four percent) all reported strong growth in the public sector too.

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While revenues to the UK public sector IT market as a whole fell by 0.3 percent, the top 20 suppliers’ revenues in this sector fell by 2 percent.

TechMarketView said that these statistics prove show that “middle-ranking players just outside the top 20 are outperforming the leading suppliers”.

Despite this overall decline, the report found that Capita beat the trend with an 11 percent rise in sector revenue to £1.6 billion, making it the biggest IT provider to the UK public sector.

The firm beat HP which was ranked second due to a 10 percent decrease in public sector IT revenue to £1.5 billion.

Capgemini earned £1 billion from the UK public sector IT market followed by Fujitsu which took £889 milion last year. BT, IBM, Atos, Serco, Microsoft, CGI, Steria and Oracle were next in the rankings, in declining order by revenue.

Capita’s success is partly down to its focus on local government over Whitehall and the fact that it primarily provides business process outsourcing as opposed to ICT, which is subject to stricter Cabinet Office controls, the report said.

Notable wins for Capita in the last year include the Scottish Wide Area Network, a major contract with Transport for London and a Cabinet Office joint venture called Axelos.

It also has major local government contracts in Birmingham, Barnet and West Sussex, although Birmingham City Council recently took elements of its outsourced service back in house and the contract with Barnet was challenged in court last year.

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HP has suffered as a result of its reliance on central government for 93 percent of its public sector revenues. It is the IT supplier most impacted by the Cabinet Office’s policy of breaking major legacy IT outsourcing contracts into smaller contracts with a range of providers, the report said.

Of the top 20 companies, 12 reported declines in their revenues for the last financial year, averaging at a drop of two percent. Aside from HP, the firms that experienced the sharpest declines were RM (8 percent), CGI (7 percent), Capgemini and Steria (6 percent each).

Suppliers who have managed to increase their public sector IT revenue include Atos (4 percent), Serco (1 percent), Microsoft (1 percent), Lockheed Martin (4 percent) and Northgate (7 percent).

The list also includes a new entrant – Agilisys- which earned £136 million from the public sector last year. Notable deals include a £5.7 million contract with the Legal Aid Agency and an agreement in partnership with BT to provide ICT services to the London tri-borough authorities.


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