Tag Archives: BFSI

IT takes an optimistic curve #Press #Media #TheFinancialExpress

Despite wage hikes and currency fluctuations, top tier Indian IT firms managed to keep their profits in fine kettle on a year-on-year basis thanks to better utlilisation rates and a slow uptick in the demand environment. The near term looks promising with pricing remaining stable and operating margins being largely under control

India’s largest IT services exporter, Tata Consultancy Services (TCS), is now worth more than R5 lakh crore. It is bigger than the next four biggest Indian IT companies put together. Even with its huge base, TCS continues to generate healthy revenue growth sequentially. In fact among the top three companies—the other two being Infosys and Wipro—TCS was the only one which grew revenues sequentially (2.6%) during the June quarter of the current fiscal and also had the highest growth rate on an annual basis (23%). Infosys reported a decline of 0.8% in revenue growth sequentially while Wipro saw a steeper fall of 10.2% as compared to the preceding quarter.

TCS also has over three lakh employees now, which is almost equal to the number of employees Infosys and Wipro together have on their rolls. Though TCS always enjoyed a higher revenue base but it was Infosys which reported superior operating profit margins (OPM) setting a benchmark for the Indian IT industry. Even this index has undergone a change from the second quarter of FY13 as TCS started to report higher margins. During the quarter, TCS reported an OPM of 26.3% while it was 25.1% for Infosys. Wipro saw a drop in operating margins to 22.8% for the quarter against 24.5% in the previous quarter.

TCS has already stated that it would beat the industry growth guidance of 13-15% in US dollar for the fiscal as projected by Nasscom, while Infosys has retained its revenue guidance at 7-9%. TCS has started FY15 also on a very strong note by recording a 5.5% sequential revenue growth in US dollar terms for the first quarter with volumes growing at 5.7%. Infosys on the other hand grew its revenues only by 2% in the first quarter, with volumes growing by 2.9%. Wipro’s IT services revenue grew by 1.2% and the company does not give full year guidance.

TCS, Infosys, Wipro and HCL Technologies together account for close to 40% of India’s IT services revenues, but the degree of separation between the four have started to tell a story of its own. TCS ended FY14 with a revenue growth of 16.2% in US dollar terms while it was 11.5% for Infosys and 6.4% for Wipro.

Infosys

India’s second largest IT exporter recorded a 1% sequential decline in net profit for the June quarter in dollar terms surprising the markets which had projected a steeper fall in profitability. The company rode on the back of higher volumes and employee utilisation rates to register a net profit of $482 million during the period, sustaining profit margins while delivering a 2% sequential revenue growth in dollar terms. Volumes grew 2.9% for Infosys, which said that an increase in onsite volume, coming after nearly two quarters, pointed to more projects starting onsite, the company said.

Infosys’ consolidated net profit for the quarter grew 15.3% to $482 million from $418 million in the year-ago period, while it had reported profit of $487 million in the January-March stretch. Revenue for the quarter was at $2.1 billion, a growth of 7.1% year-on-year from $1.9 billion and a 2% increase sequentially from $2.09 billion.

In rupee terms, Infosys’ net profit grew 21.6% year-on-year to R2,886 crore compared with R2,374 crore, while it declined 3.5% sequentially from R2,992 crore. Revenues grew 13.3% to R12,770 crore versus R11,267 crore in the corresponding period a year ago. Revenue declined 0.8% from R12,875 crore in the January-March period.

Outgoing CEO SD Shibulal said he was handing over a stronger Infosys to new CEO Vishal Sikka. “When I took over in August 2011, we were faced with a number of external and internal challenges. The 3.0 transition is now complete and only the execution is waiting to happen. FY14 growth has been double that of FY13 and margins are moving in the right direction.”

Operating profit margin, lower by 40 basis points at 25.1%, came in as a positive surprise against analysts’ expectations of a drop of 200-250 basis points from wage hikes and higher visa costs. The IT major attributed this to utilisation level climbing to 80.1% from 76.7% in January-March, and cost optimisation measures kicking in. The margin would have been closer to the 25.5% reported in the previous quarter if not for an $8-million payment to Infosys Foundation, the company said.

Rajiv Bansal, chief financial officer, said that the company has put in place a robust cost structure to keep the margins under check. While margins might vary, it will be roughly around the 25% mark. “We are not worried about the margins. Growth will help us maintain the margin,” he said.

Infosys added 61 new clients during the quarter with a total deal size of $700 million. North America, which contributes 60% in revenues for the company, grew by 3.7% sequentially while Europe declined by 1.1% during the same time period. The India market continued to decline by a substantial margin of 6.9% even as the rest of the world market grew by 1.9% sequentially. The financial services and insurance segment grew 1.8% sequentially whereas manufacturing posted a robust growth of 2.6%. Retail and life sciences grew 2.1%, while energy, utilities, communication and services grew by 1.6% quarter-on-quarter.

TCS

TCS beat Street estimates reporting a profit of R5,058 crore in the first quarter of the current fiscal, a sequential decline of 4.5%. The company’s revenue stood at R22,111 crore, a 2.6% sequential rise while operating income increased 7.4% to R5,815 crore. Despite taking a one-time charge for depreciation, giving employees a wage hike and the appreciation in the currency, the company reported operating margins of 26.3%.

CEO and managing director N Chandrasekaran was confident the current year would be better than FY14, pointing out that the company had reported the second-highest incremental dollar revenues ever in Q1, FY15. “We have seen good growth across geographies and all verticals except BFSI (banking, financial services and insurance) where the growth was somewhat muted,” he said.

TCS won seven large deals during the quarter, spread across verticals including retail, banking, life sciences and high tech. “There are eight large deals in the pipeline,” said Chandrasekaran. He observed that thus far client spends had been in line with the company’s expectations and stressed that the opportunities were essentially around three initiatives—governance, digital and simplification. The company said that pricing remained stable with the industry segments led by media and information services, life sciences, retail and telecom had done well and that non-BFSI verticals grew in excess of 5%.

Wipro

India’s third-largest IT services exporter Wipro saw a 5.4% sequential drop in net profit for the June quarter in dollar terms, meeting Street expectations, impacted by wage hikes and employee stock compensation during the quarter. The IT major, however, remained confident of the overall business momentum, guiding for a revenue growth of 1.7-4% for the second quarter. Net profit for the first quarter stood at $351 million against $371 million in the previous quarter. IT services revenue grew by 1.2% to $1740.2 million during the quarter, falling within its guidance of -0.2-2%. On a year-on-year basis, its IT services revenue grew by 9.6% and net profit rose by 30%.

Wipro CEO TK Kurien said, “The demand environment continues to hold steady. In North America, we see a return of discretionary spending. Continental Europe continues to have significant potential for outsourcing IT services.” It hopes to achieve a revenue forecast of $1,770-1810 million in the second quarter. In rupee terms, the IT services revenue for the quarter stood at R10,508 crore growing annually by 18% while the net profit rose by 30% to touch R2,103 crore. “There is plenty of opportunities in the market for us. It is important for us to win large deals otherwise we cannot match industry growth rate,” said Kurien.

Wipro saw a drop in operating margins to 22.8% for the quarter against 24.5% in the previous quarter. Wipro CFO Suresh Senapaty said, “We continue to drive operational efficiency and invest in our strategy. Operating margins for the quarter was on expected lines, impacted largely due to wage hikes.” Wipro added 35 new customers during the quarter but the revenue growth from the top five and top 10 segment dropped marginally. The IT major also has not made any major addition in the customers’ category of $100 million, $75 million and $50 million. On the future prospects for Wipro, Kurien said, “There is plenty of opportunities in the market for us. It is important for us to win large deals otherwise we cannot match industry growth rate.”

During the quarter, Wipro received a big boost from its infrastructure line business which witnessed a 5% sequential rise. Among the verticals, media & telecom recorded the highest sequential growth of 4.3% followed by healthcare, lifesciences & services at 2.5%. The BFSI segment, which is the largest revenue generator for Wipro showed flattish growth for the quarter. In terms of geographic growth, Wipro’s largest market, Americas, remained flat sequentially at 0.8% and Europe dropped marginally to 0.3%. However, the India & middle-east business grew by 5.3% while for APAC & other emerging markets it was 3.5%.

Human Resources

TCS’ attrition level rose to 12% during the June quarter from 11.3% during the March quarter, which it attributed to the aspirations of the professionals leaving the company to pursue further studies. During Q1 FY15, the employee strength at TCS stood at 3,05,431 on a consolidated basis with people representing 118 nationalities. While gross additions stood at 15,817, net additions stood at 4,967 employees and the utilisation rate was at 85.3% (excluding trainees).

Sanchit Vir Gogia, chief analyst & CEO, Greyhound Research, said, “Employee retention and their happiness is very important to an IT company as it has a direct bearing on customer satisfaction.”

Infosys continues to be challenged by high attrition levels. At the end of the June quarter, attrition stood at 19.5% against 18.7% in the previous quarter and 16.9% a year earlier. The company added 11,506 people in the three-month period, but 10,627 left the organisation, resulting in a net addition of 879 people as against 2001 employees during the preceding quarter. Infosys had 1.61 lakh employees on its roll as on June 30.Infosys said that employee attrition rates are worrisome and it is implementing various initiatives to retain good talent.

Infosys CEO SD Shibulal said, “We tried hard to listen to our employees. The concern was not about compensation but other things like predictability, career growth and variable compensation.” Infosys gave around 7,500 promotions in the quarter and implemented other measures to stem the attrition rate. It has brought down the variable component in the salary, implemented a fast-track career progression cycle and enabled growth opportunities for employees in newer areas of technologies.

For Wipro, the attrition went up marginally by one per cent for the quarter to touch 16.1% driven by seasonality while the company said that it was a sign that the demand coming back to the industry. On the headcount front, the company showed positive signs by adding 1,399 people on a net basis after a year of declining numbers to its overall employee strength. The total headcount at the end of quarter was 147,452 as against 146,053 in the comparable sequential quarter.

Source: The Financial Express

Business Intelligence and Analytics in 2013 #Media #Press #ChannelWorld

Enterprise solution providers are keen to explore the colossal business opportunities in business intelligence and analytics this year. Channelworld’s State of the MArt 2013 survey findings are a clear indicator. More than 78 percent of respondents (channel partners) expect IT spend to grow in areas of BI and analytics in 2013. This statistic is similar to mobility and only second to security among the most preferred technologies in terms of IT spends by Indian organizations.

According to IDC, worldwide revenues for business analytics market in 2011 grew 14.1 percent year-on-year. Of the three primary segments, data warehousing platform software segment grew the fastest in 2011 at 15.2 percent year-on-year, followed by the analytic applications segment at 13.3 percent. BI and analytic tools segment grew 13.2 percent.

“There’s a lot of unstructured data in terms of volume and velocity. The variety directly impacts businesses. The need to sort data has become vital as the pressure on businesses mount amidst diminishing margins in such a competitive world,” says Sanchit Vir Gogia. Hence the need for BI and analytics becomes imperative, he adds.

What’s new for Partners?

Mumbai-based AGS Sundyne Technologies has been deploying customized BI solutions across retail and telecom for the past couple of years. “The installation of POS software included an entire managed services project with POS infrastructure at a leading retail conglomerate. Hence the BI solution was developed by our team as an interface over existing OEM softwares to help the customer stay ahead of competition,” says Sandeep Gandhi, MD, AGS Sundyne Technologies.

BI and analytics contributes between five and ten percent of overall revenues, AGS Sundyne will target IT/ITeS and Government in 2013 for these technologies. “The contribution is not much as of now but it is a good margin domain,” says Gandhi.

VDA Infosolutions, an EMC partner, is engaged in putting a business plan in place to explore data analytics with Greenplum (now EMC) portfolio. “We expect tier-1 organizations to look seriously at data analytics solutions apart from cloud,” says Ashutosh Deuskar, Director, VDA Infosolutions.

Coimbatore-based eCAPS Computers too has identified BI and analytics as a new focus technology for the new year. The saturation of hardware/software services market and dwindling margins is the key reason, says Partheeban, Director, eCAPS Computers, to look at BI as a new area. The lower end of the market has become highly competitive as there will be no or minimal buying of entry level solutions for next three to five years,
he adds.

“As we are focused on datacenter deployments around servers and storage, analytics makes perfect business sense as the data growth needs to be stored effectively and intelligently at the enterprise end,” says Deuskar.

Beyond traditional analytics and warehouse tools, businesses are feeling the impact of social analytics, which does not mean the twitters and facebooks of the world. “The fork in the road is happening. Many traditional systems integrators already deploy BI and enterprise data warehousing tools. Social analytics using traditional toolset of BI to understand newer data types at customer end is a great opportunity to look forward for partners.” says Gogia.

eCAPS is in talks with potential BI vendors. “The plan is to deep sell BI and analytics to the existing customers and then educate the new customers,” says Partheeban.

“We will be upgrading existing technical manpower for our foray into analytics and also recruit few resources,” adds Deuskar of VDA.

The Early Adopters

“Analytics is aggressively for any customer facing industry which demands customer loyalty. Retail is an important segment as large format players are positioning their footprint in India,” says Gogia.

“IT governance is becoming a crucial issue for organizations which involves IT asset management, IT accounting, and extends tofunctions like procurement details. These IT-enabled services need to be effectively enhanced by proper use of BI tools,” says Gandhi.

BFSI and IT/ITeS are the early adopters of analytics for VDA Infosolutions. “We are in talks with at least four customers in the western region,” says Deuskar.

Customer segment analysis and network analysis across telecom is picking up as price becomes important as a value added service offering. Use of analytics is popular across BFSI and especially network analysis for insurance sector.

BI and analytics are moving to mobile devices but at a slow pace says Gogia. “In terms of priority for enterprises to introduce cross platforms, BI is not first as volume for its usage is not very huge. CRM and ERP are the first ones,” he reasons.

“This will be a huge market in the coming years. But the earlier we explore this trend the better it is for us,” says Deuskar.

Source: Channel World