Posts Tagged ‘USA’

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.


IBM Launches IT Security Operations Center in Costa Rica

June 20th, 2014

IBM launched a security operations center (SOC) in Costa Rica on Wednesday, marking one decade of operation in the Central American country. The new center, the first in Costa Rica, adds to IBM’s existing services offered in the country including cloud, business analytics, project management, human resources and financial services.Outsourcing13
“This center not only positions Costa Rica as a regional leader in IT, it also recognizes the talented and skilled IT professionals that bring world-class services to our clients in the region,” said James Rutledge, Vice President of Strategic Outsourcing for IBM Latin America.

Delighted Costa Rican President Luis Guillermo Solís stated that the IBM center “reinforces the international image that Costa Rica is a strategic target for high-tech investments.”  Solís, who recently toured the U.S. Silicon Valley in a bid to lure high-tech investment, says he wants quality jobs for his country’s talented citizens.

The security center works round-the-clock monitoring the security events experienced by IBM clients, assessing their potential impact on the business. The U.S. tech giant stated that the SOC would help it protect ‘people, data, applications, transactions and the infrastructure for all businesses’ in the region.

“Companies like IBM clearly demonstrate the evolution that the services industry is undergoing in Costa Rica as companies here move forward to manage more complex and sophisticated processes,” said the Minister of Foreign Trade, Alexander Mora.

In Costa Rica, IBM has also introduced several educational initiatives, providing student scholarships through a program sponsored by Costa Rican Investment Promotion Agency (CINDE). Most of its university courses are focused on the cutting-edge cloud computing technologies. It is providing software to 12 educational centers helping citizens improve knowledge of the English language.

This is IBM’s 10th SOC and together they monitor 15 billion security events every day.


Obama’s New IT Project Initiative – A Step In The Right Direction

January 8th, 2014

The Wall Street Journal on Saturday had a front page article on the White House initiative to create a new agency to manage large IT projects and increase federal hiring of key IT specialists from industry.  The White House has stated this is in response to the failure of the rollout.outsourcing36

As someone who has provided IT services to the government (cybersecurity, software development, project managers) for over 12 years, I think this is a step in the right direction, but it misses some of the key reasons for the failure of the site and some of the blind spots in the current IT procurement process.

The problems noted by the White House are by no means new.  Dr. Marv Langston, former Department of Defense Chief Information Officer (CIO) noted these and other problems with the federal process for acquiring IT systems in his blog, here.

Congressman Darrell Issa (R CA-49), the Chairman of the House Oversight and Government Reform Committee, sponsored bill HR 1232, the  Federal Information Technology Acquisition Reform Act, with similar goals, reform the way in which the federal government procures information technology systems.

The problems the White House has noted in the Wall Street Journal Article without doubt exist.   These include the lack of internal expertise within some federal agencies to manage large IT projects, the extended hiring process to hire federal workers, and lack of a single concentrated government entity that manages IT projects.  In addition, the following issues compound the problem:

A contract selection process based upon the military industrial complex vs. innovation and fixed prices.  As a defense contractor, I find the term “military industrial complex” most often used by former (or current) hippies who believe that if the U.S. eliminated their military all the other world powers would follow our example and we’d join arms across the world and sing “Cumbaya”.  In this context, I use the term to describe an acquisition process which has been developed with huge influence from behemoth defense contractors with the aim of steering the huge bulk of federal money right back to…you guessed it!  To even bid on federal government work requires an infrastructure that would make most small business owners cringe, and the cost of dealing with the federal government compliance requirements drives up the price of services and goods well over what would normally be a market rate.

The prevalent use of “cost plus” contracts. Cost Plus contracts are used by the government to procure services or products that are too difficult to properly scope.  The government agrees to cover all of the contractor’s costs, and the contractor agrees to take a much lower profit (sometimes below 5%) in order to get the work.  Unfortunately, the use of these contracts has become more prevalent for several reasons.  First, is there is very little scoping requirement on the part of the government, they just pay the legitimate costs of the contractor.  Second, the idea of limiting contractors’ profit, or “fee” appeals to a large number of federal employees who chafe at the idea of contractors making “too much money.”  Unfortunately, the net effect of these contracts is apparent to any high school economics student: contractors continue to inflate their costs and the taxpayer pays far more than they should for the final product.  In addition, the contracts become viewed as a jobs program for contract employees (many of whom are retired federal or military personnel) rather than an efficient means of procuring services using taxpayer money.  I have seen hundreds and hundreds of IT contracts that are scoped not by the deliverables, but by the number of people that will be employed on the contract.  Can you imagine Microsoft outsourcing a large software project by stating that they needed “25 software developers for a five year period”?

Delegation to local officials who based awards upon local preferences vs the actual company’s capability.  “All government work is local.”  I have heard this quote many times over the years, and it is true.  Whatever state or region is assigned a specific acquisition project, the locally based federal officials are likely to give some sort of preference, overt or subtle, to local contractors or those with a strong local presence.  This is not a symptom of corruption necessarily, but it is human nature to trust those whom one knows.  Unfortunately, this can lead to skewed acquisitions that may exclude highly qualified companies that can’t afford to have an office in Littletown, Middle America.
A procurement process that is often delayed by months or years.   Many federal procurements take 18-24 months.  Even with those large timeframes procurements can often be delayed another 12-18 months beyond the due date, with an end result of a system that was scoped 3-4 years prior finally being awarded.  With technology cycles being what they are, the original procurement sometimes may not even be require any longer, or might have been supplanted by another technology.

A broken Small Business Innovation Research (SBIR) process .  This federal program started as a great idea, setting aside small (100K-$1M) research projects for small companies with easier an acquisition process to generate innovative ideas from something other than the typical huge defense behemoths.  Unfortunately, however, the program suffers from very low conversion rates from successful research projects to programs, partially because of the need for better integration with programs that it is supposed to benefit.  As stated, these programs might have been in procurement and in development for close to, or over, a decade and even if a SBIR program comes up with an innovation that could be useful, the ability to change the program to incorporate that innovation is highly limited, if not impossible without re-procuring the entire system.

Before trying to invent a new solution to something people familiar with the problem have been aware of for years, the White House should look carefully at Issa’s HR  1232 bill, it likely addresses most of the issues that cropped up with the ACA Healthcare exchanges.  It would have been good if someone from the White House had looked at it earlier, before attempting such a massive IT project without any assurances that it would simply “go” using the same old broken procurement systems.


Wipro’s Premji Says Co’s Best Days Yet To Come, Thanks To U.S.

July 26th, 2013

The executive in charge of Wipro WIT +0.86% Ltd, one of India’s biggest IT firms, said his companies best days are still ahead of it. And the U.S. economy is at least partially to thank for it.Chairman of Wipro Limited, Azim Premji l

Azim Premji, a Forbes ranked billionaire , said his company is poised for double-digit growth in the coming years thanks to the U.S. market, the Economic Times of India reported on Thursday from Bangalore.

Premji sang the U.S. economies praises in the companies annual general meeting, noting that the America market was better now than what is was at the start of the year. Outside of the U.S., the Middle East was the only other bright spot, home to rich frontier markets in the Gulf.

The double digit growth comment suggests that Premji is happy with the company’s first quarter earnings.

They will report earnings on Friday. The market also seems willing to believe Premji’s Wipro will meet its earnings target, with share prices rising by 0.7% in mid afternoon trade on the NYSE. Shares are down over 6% year-to-date, the worst performer out of India’s three largest Bangalore based IT outsourcing firms.

Insider Monkey reported today that hedgies were gobbling up Wipro shares ahead of tomorrow’s numbers. They said that seven of the hedge funds they track were long Wipro now, a change of 17% from one quarter earlier. The stock is up nearly 5% in the last five days, but nothing unusual as Tata Consultancy and Infosys are also tracking the same way.

With hedge fund positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were upping their stakes significantly, according to the guys at Insider Monkey.

Arrowstreet Capital, managed by Peter Rathjens Bruce Clarke and John Campbell, built up the largest position in Wipro by the end of the quarter. Arrowstreet had $4.1 million invested in the company, according to Insider Monkey. Steven Cohen’s beleaguered SAC Capital Advisors also initiated a $400,000 position during the quarter. Insider Monkey reported that Bruce Kovner‘s Caxton Associates LP and Israel Englander‘s Millennium Management were also building their positions in Wipro.

Wipro still looks expensive. It’s trading at 28 times trailing 12 month (ttm) earnings while Infosys is trading at 16.5 times ttm and Tata Consultancy (NSE:TCS) is trading at 24.2 times, even after beating earnings estimates this month.

Wipro’s fiscal year ended on March 31, 2013.

Premji and Premji’s foundations and trusts are the biggest shareholders in Wipro. As of the end of March, he owned 93.4 million shares worth currently $768.72 million. Premji is India’s third richest man and the 91st richest man in the world, according to our calculations here at Forbes.

World wide, IT Services spending is expected to grow 4.2% in 2013 and 4.6% in 2014, according to India IT research firm Nasscom. The growth is fueled both by use of IT to reduce cost structure as well as increased adoption of cloud, SEO analytics and social media.

India continues to be the global sourcing leader. Global sourcing accounts for only a little over 10% of global technology spending and this highlights India’s growth potential in the context of the large and untapped market opportunity, Wipro said in its recent Annual Report.


US visa bill: Senators, IT industry tussle continues

May 16th, 2013

Senate supporters of a broad US immigration bill struggled to satisfy technology companies that want greater leeway to hire high-skilled foreign workers.

Democratic Senator Charles Schumer of New York took the lead in trying to broker a compromise on a visa program for skilled workers known as H-1B that has divided business groups and organized labor. The two sides are at odds over requirements that companies first seek Americans for any job openings and a prohibition on displacing US workers.

The tech industry and labor both wield a great deal of clout in the debate over a sweeping Senate bill that would step up border enforcement, give 11 million illegal immigrants a chance for citizenship and revamp visa programs for high- and low-skilled workers. The AFL-CIO labor organization says the recruitment and displacement requirements in the bill are merely efforts to protect American workers, while the tech industry argues the provisions are burdensome and in some cases unworkable.

Pushing on behalf of the tech companies is Republican Senator Orrin Hatch of Utah, who has not yet said whether he will back the broad immigration bill but says changes to accommodate tech firms could be crucial to his decision.

Hatch has introduced several tech-related amendments to the bill written by the bipartisan “Gang of Eight” senators. The amendments are strongly supported by Silicon Valley and business groups such as the Chamber of Commerce, but opposed by the AFL-CIO. The labor organization has a powerful ally in Senator Dick Durbin, an Illinois Democrat, who strongly opposes giving companies more leeway to hire foreign workers.

Schumer is working to settle the issue before a meeting of the Senate Judiciary Committee scheduled for Thursday, according to congressional aides and lobbyists. Schumer, Durbin and Hatch all sit on the Judiciary Committee, and Schumer and Durbin are members of the Gang of Eight.

Hatch’s support seen critical

The Group of Eight senators, who have pledged to work together to preserve a consensus on the immigration bill, met on Tuesday night. The H-1B visa program was one of the issues discussed, according to congressional aides. The group has been urging both sides to reach a deal on the visa program and considers Hatch’s support to be important for the bill’s chances in the full Senate and in the House because of the message it would send to other Republicans.

“I think the rest of the group understands that Hatch’s support is critical,” one congressional aide said. “We need all the support we can get. Senator Hatch has said that if we can address the H-1B issues in the bill, that he can support the legislation.”

A system known as “E-Verify” that allows US employers to check the legal status of workers is also proving to be a divisive issue in the discussion of the immigration bill.

Under the Senate bill, use of the system would be mandatory for all employers within five years. But businesses and many civil liberties groups worry about an error rate in which roughly one out of every 400 searches turns up incorrect information. That sometimes happens because of errors in typing names into the system or because of issues such as confusion over name changes for people recently married.

In an amendment backed by a broad array of interest groups, Democratic Senator Al Franken of Minnesota has proposed delaying the full implementation of the verification mandate for companies with 14 or fewer employees unless the Department of Homeland Security, which oversees E-Verify, can certify the system meets a certain accuracy rate.

The amendment is backed by groups including the American Civil Liberties Union, several immigrant advocacy groups and some small-business organizations. But it is strongly opposed by the National Restaurant Association, which says exempting some businesses but not others would make for unfair competition.

“It’s a deal-killer. If you start creating exemptions, how are people going to see that you are serious about enforcement?” said Angelo Amador, vice president of labor and workforce policy for the National Restaurant Association, which represents some 980,000 food-service establishments.

But Chris Calabrese, legislative counsel for the ACLU, said the amendment would keep pressure on the Department of Homeland Security to try to ensure E-Verify is as accurate as possible. “I think what this does, which is so important, is it keeps the focus on accuracy, in a real and meaningful way so that there will be an actual consequence if the system is not accurate,” Calabrese said.


India on US healthcare radar for offshore services: Omega India chief

December 18th, 2012

India has been a prime beneficiary in offshore services and is now on the radar of US healthcare industry for the same, said Gopi Natrajan, co-founder, president and CEO, Omega Healthcare.offshore

There has certainly been a growing dependence by the US healthcare industry in the area of offshore services provided by Indian companies, in the last three to four years. All the apprehensions, that were around, were about India and its workforces’ ability to handle the complex US healthcare processes along with the confidentiality requirements. “Now these problems are viewed as issues of the past. What we are witnessing is the offshore healthcare Knowledge Process Outsourcing (KPO) / Business Process Outsourcing (BPO) segment growth anywhere between 30 to 35 per cent a year,” said the Omega Healthcare India chief in an email interaction with Pharmabiz.

The entire healthcare KPO/BPO market today in India is valued over $300 million and probably the sector employs anywhere between 20,000 to 25,000 people.

In the US, the healthcare industry is the single largest industry of the US GDP and is about $2 trillion in size.

The outsourced market in the healthcare segment is estimated to be around $8 billion. A good portion of this will always remain in the US, but it is quite  safe to state that the market is severely under penetrated and offers great potential and growth for the right companies in India. Some of the other notable companies in this space are Dell/Perot, e4e, GeBBs Healthcare, and Ajuba Healthcare, he pointed out.

“Despite the growth potential, the biggest challenge in my opinion is getting qualified resources to do the complex work that is coming our way.  Educational institutions continue to churn out a lot of graduates but the quality of the students graduating and their knowledge level seems a lot to be desired. Therefore, in India English speaking skills must improve a lot but colleges do not seem to focus on this aspect of human resources development,” he said.

The other big challenge is the Government’s unfriendly business policies and tax changes which will inhibit the growth of the companies and ability to scale. While in the case of other countries, with tax friendly policies and laws, could over the years be more attractive and will start attracting businesses which will pose a serious problem for India, stated Natrajan.


India needs to lobby better on outsourcing: Jagdish Bhagwati

November 22nd, 2012

Noted economist Jagdish Bhagwati on Wednesday said the country should take the anti-offshoring bogey in the US seriously and lobby hard to counter its effects.

“We would be foolish to continue pretending that `this (anti-outsourcing tirade) does not matter’, and it is simply a ‘political patter’. With jobs a continuing issue, any time politicians in the US condemn outsourcing, we lose brownie points,” he said. india-needs-to-lobby-better-on-outsourcing-jagdish-bhagwati

“There is little doubt that Obama and the Democrats in general have never ceased their refrain against outsourcing from the outset of the first Obama term. Of course, outsourcing means not China, but India,” the professor of economics and law at the Columbia University said, delivering the Exim Bank’s annual day lecture here this evening.

There has been a lot of posturing on outsourcing by President Obama during his re-election campaign, but now India must tell the US administration that post-victory, they should stop the rhetoric and work for the benefit of the sector, Bhagwati said. “There does not have to be confrontation…there is no excuse for him to keep spreading this poison,” Bhagwati added.

Stating that the US political system functions through articulation and lobbying, he said New Delhi and the Indian industry must do better lobbying. “We have to convey what we want and why because one of the things which I notice in America is that unless you say you want something, they don’t pay attention. “It’s a lobbying-led system.”

Bhagwati cited a conversation with a New York mayor, who complained that Indians were not vocal about their demands, unlike other communities. Indian policy efforts in US have met with some successes like the nuclear deal. But on many other issues including the outsourcing, they have not elicited results.

Bhagwati was unscathing in blaming the Indian diaspora, saying the community needed to go beyond their interest in mere “photo opportunities” and “darshan mentality” to achieve success in US.


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