Posts Tagged ‘UK’

TCS CEO N Chandrasekaran sends AS Lakshminarayanan to head TCS’ Japan business

July 21st, 2014

Tata Consultancy Services’ CEO N Chandrasekaran has deputed one of his top lieutenants, AS Lakshminarayanan, to head the company’s Japan business and grow its revenue as the largest Indian IT player looks to grow in that large and largely unpenetrated market.Outsourcing28,

Japan was a very small part of TCS’ business — with just about $100 million in revenue. But in April, the company announced it was acquiring Mitsubishi Corp’s IT arm, which has about $500 million in revenue a year, and about 2,400 employees. The deal, which closed at the end of June, gives TCSBSE 0.30 % the greatest scale of any Indian IT firm in Japan.

Lakshminarayanan, who joined TCS in 1983, has a history of being sent to build businesses from the ground up at the Mumbai-based company. He built the UK-business at TCS almost from scratch and since 2011 has been leading the emerging verticals business — including hi-tech and media and entertainment — which now accounts for over 10% of TCS’ revenue.

“I am moving from one island to another. It is a personal challenge and it is hugely exciting. In the UK, we built our platform there organically. In Japan, with the acquisition, I am being given a platform that has its advantages and challenges. We have to bring our Japanese workforce onto the TCS processes and the TCS way of doing things,” Lakshminarayanan told ET.

The challenge is not just a personal one. When Chandrasekaran offered Lakshminarayanan the job, he also issued a target — to double the company’s revenue in a set period of time.

“I can’t tell you the time frame but knowing TCS, you should know we always have plans and they are ambitious,” Lakshminarayanan said. Japan is the second-largest market in terms of IT outsourcing. Its total outsourced IT spending is about $109 bn and it has been tough for non-Japanese vendors to gain a foothold. Of the total, almost 70% is serviced by Japanese players. Indian IT’s share of business is less than 1%.

But analysts expect TCS to grow quickly after its acquisition. “I expect their internal target should be to grow that business to $1-$1.5 billion in the next three to five years,” a Mumbai-based analyst said. He declined to be identified because he is not authorized to talk to the media. TCS’ Chandrasekaran has said he expects Japan to grow to a billion dollar business in the next few years.

One of the reasons that Japan has been tough for Indian IT is the insularity of the culture. TCS is already taking steps – from town halls to translating the internal magazine to Japanese – to welcome its new employees.

“We held a town hall and there were about 2,000 employees. And a lot of young people came up to me and they were very excited about working for TCS. We’ve met clients and the initial feedback is that they are also happy. Now we have to work to convert that excitement to actual results,” Lakshminarayanan said.

Talking to employees will be an on-going process, to explain the company’s long term vision for Japan and working with the middlemanagement. Lakshminarayanan is learning Japanese and is encouraging his top management to speak in English, a language they know but aren’t very comfortable with, to smooth communication.

He is relocating to Japan from the UK for the next few years. His wife will join him once his daughter, who is in her final year at school, goes to university. TCS, through Lakshminarayanan, will be spear-heading the biggest push into Japan and growth in that new market will help the company retain its lead over the rest of the industry.

“The law of large numbers would catch up with TCS if the footprint and capability were the same as other Indian IT. The reality is that growth leadership will sustain; what sets it apart is that its addressable space is the largest among Indian IT and capabilities wellspread across the entire IT spectrum,” Kawaljeet Saluja, analyst with Kotak Institutional Equities said in a note after Mitsubishi deal was announced.


UK outsourcing spend continues to grow, but contracting bodies must ensure value for money, says expert

July 11th, 2014

The figures, published by sourcing company Information Services Group (ISG), showed that the public sector spent almost twice as much under 585 contracts as the £30bn that commercial firms spent on 726 lower value contracts over the same period. The number of outsourced contracts awarded by public bodies since 2012 was almost triple the number of contracts awarded between 2006 and 2007, just before the recession, ISG said.Outsourcing15

It contracts and technology law expert David Isaac of Pinsent Masons, the law firm behind, said that the increasing outsourcing spend by both public bodies and commercial firms was unsurprising, given the economic climate in recent years and pressure on finances.

“It is not surprising that outsourcing contract spend continues to grow in the UK as there is an ever-increasing dependency on outsourcing companies to deliver both business as usual services and major change programmes,” he said.

“The challenge for customers is to ensure that these contracts deliver best value for money and are properly managed. This is especially the case in the public sector where the coalition government has delivered some improvements. However, there is still a lot to be done to ensure full value is delivered for taxpayers,” he said.
Over the past two years, commercial firms have tended to outsource smaller pieces of work. At the same time, the number of small contracts awarded by the public sector has shrunk, from 46% of the market in 2010-11 to 40% of the market in the period since 2012. Much of the increase in contractual spend by public bodies was in the ‘mid-market’ range, on contracts between £15 million and £30m. The number of large contracts at over £30m had also remained relatively steady, ISG said.

Luke Mansell at ISG said that much of the increase in the number and value of contracts awarded by the public sector was a result of “the complexity of the services required and the lack of appetite to utilise cheaper, offshore resources” to deliver public services.

“It will be interesting to see, over the next two years, whether the drive to procure services from small to medium enterprises via the G-Cloud will cause a shift to smaller contracts,” he said.

The G-Cloud programme allows public sector bodies to gain access to cloud-based IT services being offered by a selected list of pre-approved suppliers during a set period. It includes cloud infrastructure, platform, software and specialist services. The fifth version of the G-Cloud framework was made available to contractors in May. Among the stated objectives of the programme are offering a platform for public sector IT buyers to procure commoditised services more easily, while at the same time encouraging innovation and improved supplied performance.

According to ISG, central government accounts for the largest proportion of public sector outsourcing spend by value, at 42%; followed by local government at 30% and healthcare at 13%. During the pre-recession 2007 to 2008 survey period, these three segments each accounted for around 28% of the total market. The overall increase in public sector outsourcing spending meant that the total amount spent in each segment increased, despite the fall in healthcare spending as a proportion of the total, ISG said.

“The UK public sector is a significant market in its own right and is the largest public sector market outside of the United States,” Mansell said. “Looking ahead, we expect to see continuing growth in public sector outsourcing activity as initiatives like Value for Money make outsourcing a more attractive proposition, while the government’s G-Cloud initiative opens the market to a greater number of specialist service providers.”


Indian IT firms may report healthy revenue growth

July 9th, 2014

The top five Indian information technology (IT) services providers are expected to post healthy dollar revenue growth in the seasonally strong June quarter, following stable demand from the US and UK, which account for over three-quarters of overall sales of sales. Outsourcing8

Margins, however, may come under pressure because of wage increases in April, higher visa costs and a strengthening of the Indian rupee, said analysts.

India’s second largest software exporter Infosys Ltd is widely expected to post a 2-2.5% revenue growth in the three months ended 30 June over the preceding quarter, and also maintain its full-year revenue guidance of 7-9%, as it kicks off the earnings season for Indian IT firms on 11 June.

India’s largest IT services provider, Tata Consultancy Services Ltd (TCS), is estimated to post the highest revenue growth among top software exporters.

“TCS looks like the strongest of the pack, expect at least 5% sequential growth for them not just in June quarter, but also for September,” said an analyst at a foreign brokerage who did not want to be named.

“For Infosys, we expect a slower quarter and expect about 2.4% sequential growth—an improvement from their fourth quarter though. Infosys’s guidance will also be a crucial indicator of whether the recent top-level exits from the company have hurt them or whether it’s business as usual. When someone like a B.G. Srinivas leaves the company, it can have an impact on key client relationships.”

Infosys recently named former SAP board member Vishal Sikka as its first non-founder chief executive. He will join the company on 1 August.

Analysts with Kotak Institutional Equities Research expect “solid 4.6% c/c (constant currency) growth for TCS, while HCL Technologies Ltd will chug along with 3.9% US dollar growth”.

“Certain company-specific issues at Infosys and Wipro Ltd mean they will report revenue growth towards the lower end of the pack. We expect 1.8% and 1% c/c growth for Infosys and Wipro, respectively,” the analysts added in a 30 June note.

Analysts expect Infosys’s “margins to narrow 210 bps (basis points) on account of rupee appreciation, wage hikes and visa costs. Infosys is likely to retain its full-year 7-9% revenue growth guidance”.

One basis point in one hundredth of a percentage point.

TCS, according to the Kotak analysts, will report a “solid quarter with broad-based growth…sequential growth to accelerate to 5.1% (4.6% in constant-currency terms)” but its operating margins may decline by 210 bps due to wage hikes and rupee appreciation.

Hitesh Shah, director of equity research at IDFC Securities Ltd, expects 1-5% sequential growth for the top 5 IT firms due to a healthier demand environment for IT outsourcing in key markets like the US and Europe.“TCS would be at the higher end with about 5% growth and Wipro at the lower end with about 1%. Infosys, TechM (Tech Mahindra Ltd), and HCLT (HCL Technologies) would report 2-3% qoq growth. Small and mid-cap companies are estimated to report a wider gap in qoq USD (US dollar) revenue growth (-3% to +5%),” said Shah. He, however, added that wage hikes, US visa costs and rise in the rupee could affect margin in the June quarter.

Companies that have increased wages from 1 April are likely to report 220-450 bps sequential decline in margins, according to Shah. Hence, those with no wage hikes—TechM and HCL Tech—“are better placed in Q1FY15”.

According to a 30 June note by Motilal Oswal Securities Ltd, revenue growth for Tech Mahindra, Persistent and KPIT Technologies Ltd will be muted, while margins will decline.

Tech Mahindra, the note said, “will suffer from the base effect of Comviva, a single project execution and one-month impact of discontinued BT amortization—collectively upwards of $10m; KPIT is likely to suffer from a change in scope of work from its Telematics account in India; while Persistent is facing a decline in IP-led revenue on a strong 4Q base and also deferral in execution of certain projects due to delayed visa issuance”.

Ashwin Mehta and Pinku Pappan of Nomura Securities Co. Ltd, in a 1 July note, have forecast Infosys to retain its guidance of 7-9% dollar revenue growth for fiscal 2015, and expect TCS to “reiterate its bullish outlook on FY15F growth”, on the back of growth in the US and better growth in the BFSI (banking, financial services and insurance) sector.

Analysts expect Wipro to guide for 2-4% sequential dollar revenue growth in the June quarter on the back of “recent strong deal flow announcements”. They have forecast Cognizant Technology Solutions Corp. to “keep its FY14 revenue growth guidance unchanged at 16.5%+ and guide for a 5%+ growth for 3QFY14F”.

On Tuesday, Infosys shares lost 0.30% to close at Rs.3,333.80 apiece on BSE. TCS closed down 1.36% at Rs.2,449.70 per share, while Wipro fell 1.26% to close at Rs.550.65 per share, and HCL Technologies ended down 2.24% at Rs.1,474.25 per share. The BSE IT Index lost 1.05% to close at 9,455.41 points, while the benchmark Sensex ended down 1.98% at 25,582.11 points on Tuesday.


UK government pays £10bn a year to just 20 firms

June 26th, 2014

More than £10bn of taxpayers’ money a year is being paid to just 20 private companies, according to figures from the Institute for Government thinktank and the data analysts Spend Network.state spending

Their report found the biggest suppliers hired by departments and councils were IT firms, but construction and outsourcing companies also featured heavily in the top 20.

According to the data, which has taken two years to collect and over 16,000 hours to analyse, the IT company HP is the largest single supplier to government with state revenue in excess of £1.7bn in both 2012 and 2013. Capgemini, another IT company, was second, with earnings of around £1bn in both 2012 and 2013.

Four of the top 20 suppliers appear to rely heavily on one department for their central government revenue, with HP and Telereal Trillium earning most from the Department of Work and Pensions, Capgemini from HM Revenue and Customs, and Babcock from the Ministry of Defence.

Serco, the scandal-hit outsourcing company under investigation by the Serious Fraud Office for allegedly overcharging for electronic tagging, earned more than £365m in 2012 and more than £445m in 2013, the data found.

The report’s authors acknowledged the limits of the research, saying it was incomplete because not all government spending data is published and there were inconsistencies. However, it said the project was the most comprehensive effort to map public spending with private companies since the government first started publishing transparency data.

Gavin Freeguard, who led the research for the Institute for Government, said the project showed “how difficult it is to analyse who is contracted to provide our public services and what it costs”.

“Cost is also just one part of contract transparency – government needs to be equally transparent about contract terms and the performance of suppliers funded by taxpayer money,” he said. “We hope our analysis will prompt government to improve the quantity and quality of the data it shares so future analysis becomes ever-more accurate. We’re also grateful to those companies named in the report for their cooperation and for providing their own data.”


Whitehall outsourcing rises 23% while expenditure falls

June 26th, 2014

Outsourcing companies have seen UK government spending on their services rise 23 per cent to £2.3bn over the past two years, while expenditure fell in most other sectors, according to a detailed analysis of public sector transactions by the top 20 suppliers.Outsourcing30

Tom Gash, director for research at the Institute for Government (IfG) think-tank, which carried out the analysis, said government saw outsourcing as a way of reducing costs.

Capita is among the big winners in this field. The company, which works with the Ministry of Defence, the Department of Health, the Home Office and the Department for Work and Pensions, collected £1.45bn in revenue from the state between January 2012 and December 2013.

The IfG’s findings, in conjunction with Spend Network, a consultancy, come amid calls for more information to be published about government suppliers after outsourcing companies Serco and G4S were forced to repay millions to the government for overcharging on contracts for the electronic tagging of offenders.

Mr Gash said the government’s transparency on costs needed to be matched by openness about companies’ performance to reassure the public there would be no repeat of such high profile scandals. The IfG highlighted particular difficulties with private finance initiative contracts and joint ventures where it was difficult to determine which companies ultimately benefited from payments.

Serco earned more than £810m from central and local government in the period examined, according to the data. It said: “We fully recognise the need to be more transparent and we are looking at how we can improve transparency with our customers but also with the general public.”

Already 80 per cent of its contracts were “open book” – in which costing information is shared between client and contractor – it said.

According to the IfG ana­lysis, HP was among the largest suppliers to government with a substantial share of its revenue from government coming from a Department for Work and Pensions contract to supply infrastructure and systems for the DWP and its jobcentres. This contract is among the larger non-defence contracts.

Capgemini, another IT com­pany, earnt around £1bn in both 2012 and 2013. More than 82 per cent of its government revenue comes from a project to overhaul IT systems within the HM Revenue & Customs.

A drive by the Cabinet Office to loosen the grip of big IT suppliers came under the spotlight last week when the Financial Times revealed that Vince Cable, business secretary, and Ed Davey, energy secretary, had complained to David Cameron, prime minister, that new computer systems, involving smaller contractors, had failed to work properly.

The government has stated its “aspiration” to award 25 per cent of central government business by 2015, directly or indirectly through the supply chain, to small and medium enterprises.

The IfG says it claims to be on track to meet that target “however a lack of transparency over the calculations involved, and the lack of data through supply chains, means we cannot replicate or verify that research”.

The Cabinet Office said that it had “done more than any other government to open up contracts and address longstanding weaknesses in commercial skills.
“Before 2010 no one knew who government suppliers were nor how much business SMEs won.”


Luxoft Ranked Among Top 20 Global Outsourcing Companies

June 26th, 2014

Luxoft Holding, Inc , a leading provider of software development services and innovative IT solutions to a global client base, today announced its 2014 leadership rank of #18 on International Association of Outsourcing Professional’s (IAOP(R)) “Global Outsourcing 100.” Since 2012, Luxoft has substantially moved up in rank, most notably from #41 in 2013.Outsourcing29

The 2014 Global Outsourcing 100 recognizes the world’s best outsourcing companies. These rankings are based on applications received and evaluated by an independent judging panel organized by IAOP. Luxoft’s highest scoring areas were: customer references, company recognitions and employee management.

Further, Luxoft was also recognized for vertical leadership in IAOP’s “Best 20 Leaders,” in Financial Services, Technology, Industry Specific Services, Telecommunications, Information and Communication Technology Services, and Research and Development Services.

Lastly, Luxoft was also recognized for diverse geographic footprint in “Best 20 Leaders,” in the United States, United Kingdom, Western Europe, and “Best 5 Leaders” for employees in Central and Eastern Europe.

“At a time when there is a growing need to outsource, The Global Outsourcing 100 and The World’s Best Outsourcing Advisors lists have become invaluable reference tools to help companies research service providers,” said Debi Hamill, IAOP CEO. “The companies named on these lists and sub lists have demonstrated their expertise following a rigorous, independently judged process and represent the top in the industry.”

“Over the course of one year’s time, our ranking improved by over 20 positions, placing us into the Top 20 leading providers. We are confident that our value proposition is resonating well with the market, ” said Luxoft CEO and President Dmitry Loschinin. “Our industry expertise, solutions and global delivery footprint continue to challenge the status quo of traditional IT outsourcing models, and we consider this recognition to be a testament to this trend.”


UK’s Quindell soothes investor cash concerns, names new CEO

June 20th, 2014

Quindell Plc, a British IT outsourcing and consultancy services provider, assured investors that it would meet full-year cash and earnings expectations, and appointed a new chief executive.Outsourcing17

The company has been in the limelight since April when U.S.-based Gotham City Research questioned Quindell’s revenue model and profit quality.

Quindell’s AIM-listed shares jumped as much as 7 percent in early trade on Thursday. They have shed more than a quarter of their value since Gotham’s comments on April 22.

The company, which provides services mainly to the insurance and telecom industries, said cash collection was in line with expectations, with its legal services unit raking in about 500,000 pounds ($846,900) a day in the second quarter.

Quindell said it expected to post strong operating cash flow in the final quarter of this year.

“There have been some questions about the operating cash flow of the company,” Daniel Stewart analyst Sophie Blandford said, adding that Quindell saying it had collected half a million pounds a day in the second quarter was a “very positive thing”.

The company also said adjusted earnings per share would meet full-year market expectations, and that it expected to get 250 million pounds per annum from signing a number of new contracts and extending existing ones.

Quindell promoted Robert Fielding, who heads its services unit, to chief executive. It said former CEO and Chairman Robert Terry would retain his role as chairman.

Shares in Quindell were up 4.6 percent at 18.38 pence at 0813 GMT (0913 BST).

The shares plunged last week after the company could not meet the requirements for a premium listing on the London Stock Exchange. ($1 = 0.5904 British Pounds)


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