Posts Tagged ‘Wipro’

Infosys, Wipro on the prowl, light up M&A Street

September 2nd, 2014

Vishal Sikka at the helm of Infosys and Rishad Premji as head of strategy at Wipro scouting to pick up stake in startups focused on disruptive technologies have made investment bankers optimistic that country’s moribund outsourcing sector could see more deals in the coming months. outsourcing29

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 who help companies merge and raise capital could raise a toast.

“The mood certainly has changed,” said the head of a Mumbai-based investment bank, adding “and changed for the better”. “We have seen Wipro picking stakes in small companies. Infosys too has decided to follow a similar approach. So it’s just a matter of time before one of these make a big buyout.”

Infosys, which last acquired Swiss management consultant Lodestone for $350 million in 2012, has strutted when it comes to buyout during this time, making many believe that change in leadership could help the company shun its conservative approach.

“Certainly, the outlook has changed and we have started getting calls,” said a senior executive from Infosys merger and acquisition team. “We won’t go for making a big ticket deal unless there is absolutely a compelling rationale. (For now) our sweet spot remains $100-250 million.”

Wipro too is adopting a similar approach, with chief executive TK Kurien telling ET last month that the way ahead for the company is having a more “asset light approach”, with a senior executive adding that the company will look to have more buy-outs in $100-200 million space.

For now, both Wipro and Infosys maintain that they will look at partnerships and buyouts in disruptive technologies, including artificial intelligence and big data as they do not want to be saddled with a heavy workforce. Both these companies are looking to scale up their presence in healthcare and retail space and partnership or a buyout with start-focused on these newer technologies could be done in the coming months, according to bankers and company executives.


Wipro scouts opportunities in Canada to offset US blues

August 20th, 2014

WiproBSE 1.22 % is betting on two of its largest verticals serving the financial services and oil and gas sectors as India’s third largest software exporter scouts for opportunities in Canada to offset lackluster performance in the US. Outsourcing49

According to industry lobby Nasscom, Canada offers a $2.5 billion market for home-grown IT firms as more Canadian companies, especially in financial services and oil and gas, outsource work. Wipro’s renewed thrust in Canada is because it expects to outrival completion in Canada, boosting North American revenue at a time when the company is barely able to keep up with competition in the US.

“Canada is a hugely important geography for us because we have our goal to regain our glory in the North American market,” Wipro Chief Executive TK Kurien told ET last month. “We can try like hell (but) can only catch up in the US. But Canada is a virgin market. And so that is the strategy for us.”

Kurien’s plans to increase his company’s footprint in Canada got a boost after Wipro won its biggest outsourcing contract, worth $1.2 billion from Albertabased utilities firm ATCO, last month. Bangalore-based Wipro, which posted $6.6 billion revenue in the fiscal year ended in March, has tasked senior executive Brian Allatt to reach out to more utilities and oil and gas companies in Canada. Allatt, previously vice president of strategic accounts, will now be managing director of the division dealing with Canada’s energy, natural resources and utilities businesses and will report to Arun Krishnamurthi, head of the global utilities vertical.

“Both Canada and US are important geographies because of the way energy dynamics are changing,” Anand Padmanabhan, CEO of energy, natural resources and utilities segment at Wipro, told ET in an interview.

“Canada is resource-rich and through the ATCO deal we will like to show what we can offer to the rest of the geography.” Wipro leads the pack in the oil and gas segment, generating a little over $1 billion or about 16 per cent of total revenue. However, in the banking, financial services and insurance segment (BFSI), the company lags rivals including Tata Consultancy ServicesBSE -0.09 % and Infosys. It is working on improving the contribution of financial services to total revenue from the current 27 per cent.

“The Canadian BFSI vertical is another key growth area for us,” said Shaji Farooq, head of the BFSI division at Wipro. Some experts, however, say Wipro could face challenges from that country’s stringent immigration regulations as well as tough competition from bigger rivals. Although companies don’t provide revenue breakups for US and Canada, analysts estimate the local leaders, TCS and InfosysBSE 0.08 %, have a large share of the Canadian IT market than Wipro.


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.


Wipro wins ten year outsourcing engagement with ATCO

July 31st, 2014

Wipro Ltd., a leading global Information Technology, Consulting and Business Process Services company announces that it will provide total outsourcing solutions to ATCO Ltd. in Canada and Australia.Outsourcing39

Wipro’s strategic alliance with the Alberta-based ATCO, one of Canada’s premier corporations is expected to earn Wipro revenues of over CAD 120 million (USD 112 million) annually, for the next ten years up to December 2024. Under the agreement, Wipro will provide a complete suite of IT services to ATCO.

According to Brian Bale, Senior Vice-President & Chief Financial Officer, ATCO, the alliance will ensure ATCO can focus on growing their core businesses of structures and logistics, utilities, and energy with the Wipro partnership providing strategic, innovative IT solutions required to support their global operations.

Anand Padmanabhan, Chief Executive – Energy, Natural Resources and Utilities, Wipro commented that they will focus on enabling ATCO to enhance their competitiveness through the deployment of strategic solutions and efficient delivery of IT services. He is confident Wipro’s domain expertise combined with the enhanced talent pool will help them support ATCO’s growth.

Wipro’s IT services delivery model will be further strengthened in North America and Australia through the acquisition of ATCO I-Tek, a subsidiary of ATCO with a presence in both these geographies. Now a part of Wipro, ATCO I-Tek has been providing IT services to ATCO for the past 15 years.


Now, leading IT firms like TCS and Wipro pay upfront to win big contracts

July 30th, 2014

The battle for winning information technology contracts is getting fiercer as leading software exporters are either paying money upfront or buying assets to swing the deal in their favour, a trend some industry executives and experts believe will gain traction in a year that has $55 billion (Rs 3.3 lakh crore) of contracts up for renewal. Outsourcing38

At least four large deals bagged by the country’s largest IT firms, including TCSBSE 0.18 % and WiproBSE -0.85 % this year, have seen the homegrown firms edge past competition from global outsourcing firms after innovative structuring of contracts.

“Any deal you do, there will be a certain level of structuring that goes in,” said TK Kurien, chief executive officer, Wipro, after the country’s third-largest software exporter paid about $200 million to buy the IT subsidiary of Canadian utility Atco as part of its single-largest outsourcing deal worth $1.2-billion.

In April, TCS signed an agreement with Mitsubishi under which the country’s largest software company merged its Japanese subsidiary with IT Frontier Corp (ITF), a unit of Mitsubishi. The deal was structured in such a way that gives TCS 51% holding in the new entity.

“It’s very much a trend,” said Sid Pai, who heads the Indian arm of outsourcing advisory TPI. “As deal economics move inexorably toward usagebased models to include the adoption of cloud technology, service providers will have to absorb an ever increasing portfolio of client hardware and software and human resource assets,” said Pai.

The strategy of paying cash upfront is not an entirely new trend. Back in 2007, when ABN Amro signed an over $1 billion contract with InfosysBSE 0.05 % and TCS, the deal involved transfer of people and assets, and some upfront payment. Then, in 2012, IBM beat both Infosys and Wipro to win a billion-dollar contract from Mexico’s biggest cement firm Cemex.

As leading IT firms now bid against global outsourcing firms, homegrown IT majors have started structuring deals to stay competitive. In May, the country’s fourth-largest software services firm, HCL TechnologiesBSE -0.95 %, bagged a $500 milion contract from PepsiCo for infrastructure management services, thereby pipping IBM. Experts said the Gurgaon-based company’s decision to sweeten the deal by putting in money upfront helped the company seal the seven-year deal. The money paid upfront to a client is a part of the sum which the IT outsourcer expects to spend over the total deal.

“It is not a standard kind of payment term,” said Suresh Senapaty, chief financial officer at Wipro, adding that buying the captive IT centre brings its own benefits. “Depending upon how the customer is looking at, it varies. I won’t say across the board but there are quite a few deals where you are able to protect your downside and able to structure the deal to take it forward by putting something upfront,” Senapaty told ET. However, some experts doubt if the structuring done by companies can be dubbed as a secular trend and said that taking “over assets and people is the DNA of outsourcing.”

“Given the maturity of the outsourcing market, most providers apply a portfolio management approach to sourcing large deals based on their penetration of specific verticals,” said Tom Reuner, an analyst at Ovum, a Londonbased IT research firm.


Wipro likely to beat Nasscom’s growth estimates this fiscal, say analysts

July 23rd, 2014

Despite a tepid guidance for the first quarter of this year, fuelled by multi-million dollar deals in the past few months, Wipro is expected to beat Nasscom’s 13-15 per cent growth estimates for the 2015 fiscal.Outsourcing36

Analysts believe that on the back of a strong deal momentum, the company which has been growing at a lower rate than peers like TCS, Cognizant and HCL Tech is expected to bounce back this fiscal year.

In a research note, Espirito Santo Securities said that the strong deal wins in the recent quarters should drive 3-5 per cent quarterly growth guidance for the second quarter of 2015 fiscal. In the last couple of quarters, Wipro has bagged three multi-million dollar deals from companies like Citigroup for $500 million, a $400 million from Takeda Pharmaceuticals and $1.1-billion deal from ATCO.

In 2013-14, Wipro’s revenues grew 16 per cent over the previous fiscal at ₹43,755 crore, while net profit rose 17.5 per cent to ₹7,797 crore. However, this lags behind peers like TCS, which posted a 29.9 per cent growth, followed by Cognizant, which posted a 17 per cent growth in the last fiscal.

Wipro is expected to announce its first quarter results on July 24 and is in the silent period. However, in the last quarter, CEO TK Kurien had told Business Line that the way Wipro is exiting the 2014 fiscal and coupled with its strong deal pipeline, points to growth ahead.

This momentum also indicates that the turnaround strategy pursued by Kurien is on track.

Others agree. “Initiatives taken to improve internal process and an increased focus on automation, instead of depending on people additions have been successful,” said AK Prabhakar, an IT analyst.

Espirito Santo Securities also believed that win rates for large deals have improved by 50 per cent over the past two years and this is visible in higher large deal wins and improving revenues growth.

Further, these deal wins come in geographies such as US and Europe, which contributed about 79 per cent of Wipro’s overall revenues in the last fiscal year.

Sanchit Vir Gogia of Greyhound Research believes that large contracts helps Wipro get access to more high-profile deals at a time when outsourcing demand looks stronger when compared to previous years.


Wipro Bags IT Outsourcing Contract and Acquires ATCO’s IT Services Arm

July 23rd, 2014

Indian outsourcing firm Wipro has announced that it has acquired the IT service arm of Canada’s business conglomerate ATCO and, in addition, bagged a 10-year IT outsourcing services contract.Outsourcing30

Alberta-based ATCO I-Tek, the subsidiary that Wirpo bought for $195 million, has been providing IT Services to the parent company for the past 15 years.
Under the terms of the deal, ATCO will transfer to Wipro its 500 employees in Canada and 50 in Australia. The arrangement will add $112 million annually to Wipro’s kitty for the next ten years.

This is a major outsourcing contract for Wipro, following the acquisition of the IT services arm of Science Applications International Corporation for $150 million. The energy and natural resources verticals has been Wipro’s fastest growing division in the past few years, with the sector accounting for 16% of the company’s revenue in the previous fiscal year.

ATCO said it had to sell its IT arm to ease the regulatory “challenges” in Canada’s utility sector. Outsourcing the IT services would help the company address the concerns expressed by the Alberta Utilities Commission, ATCO stated.

“This alliance ensures ATCO can focus on growing our core businesses of structures and logistics, utilities, and energy while partnering with Wipro for strategic, innovative IT solutions required to support our global operations,” said Brian Bale, Senior Vice-President & Chief Financial Officer, ATCO.
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For Wipro, the deal gives a foothold in the energy and utility sectors of Canada and Australia. The Indian firm has several clients in this vertical in Europe.
ATCO I-Tek offers systems integration and also operates a SAP practice, along with mobility, voice, data, security, disaster recovery and managed infrastructure from its data centers across the world.

“The alliance with ATCO enhances our capability to create, nurture and tap local talent to power our growth journey in Canada,” said Anand Padmanabhan, Wipro’s chief executive, energy, natural resources and utilities.


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