Showing posts with label NASSCOM. Show all posts
Showing posts with label NASSCOM. Show all posts

Saturday, May 4, 2013

Better off 'building tomorrow's enterprise’?

Infosys has disappointed the street with its financials over the last few quarters, and even lost its bellwether status. However, an unperturbed management is banking on much better numbers in the medium to long term with its strategic transformation. Can they pull it off?

As I entered Gate No. 2 of the Infosys headquarters at Electronic City, Bengaluru, I could detect a heightened buzz in the environment, which I am otherwise very familiar with. A number of additional security personnel were combing the area, and no vehicles were being allowed to stop anywhere near the gate; in fact, even visitors were not allowed to stand and wait in the vicinity. Later, I realised that all this was happening because the President of Tajikistan Emomali Rahmon was visiting the campus on that particular day. Visits by heads of state & renowned foreign dignitaries to the Infosys campus is not uncommon, and there is a special area within the campus that has trees planted by these people. Respect was the foremost criteria on which Infosys Chairman N. R. Narayana Murthy built the company and indeed, it continues to be respected for much more than the manner in which it has grown from scratch to a $6.99 billion company in 30 years, and led the industry in absolute profitability for most of them. However, the past few quarters have seen the company miss some of its sheen on the bourses. Investors are particularly peeved with the company’s muted guidance that compares unfavourably to TCS and Cognizant (and to NASSCOM!), while being quite in line with the guidance of Wipro. When you look at the results of the quarter ending June 2012, Infosys posted a revenue of Rs.89.09 billion, a growth by 29.02% yoy and a profit figure of Rs.22.04 billion, a growth by 20.9% yoy. In comparison, TCS posted a revenue of Rs.114.11 billion, a growth by 32.47% yoy and profits of Rs.27.97 billion, a growth by 35.64% yoy. In dollar terms, Cognizant, which overtook Wipro in terms of revenues last year, has even overtaken Infosys with revenue of $1.795 billion as compared to $1.75 billion for the latter. Due to these reasons, TCS has now become the bellwether of the stock market, a position that Infosys held earlier. Moreover, the company’s guidance of around 5% revenue growth for FY 2012-13 has disappointed investors, since NASSCOM has provided a guidance of 10-14% in terms of industry growth.

Infosys maintains that the environment is volatile enough, and there is nothing materially positive to justify a higher guidance for them. Some critics say that the company’s single-minded focus on margins is the reason (making it lose some lucrative deals in a scenario where players are getting too aggressive on price), while some say that the company’s succession plan hasn’t gone well. It’s reluctance to latch on to M&A targets is a debate that certainly wasn’t born yesterday, though the company did manage one acquisition of late (the $350 million acquisition of consulting firm Lodestone) to show that it really is serious about inorganic growth now. To make matters worse, Infosys has delayed increments for its employees, which is all the more disconcerting for company watchers, who feel that this will only lead to an increased attrition of quality manpower.

In an exclusive with B&E, S. D. Shibulal, CEO & MD, Infosys, defends, “People link price and margin directly. Margin is a reflection of the company’s aspirations, philosophy, efficiency in operations, how do you manage, et al.” He asserts that there are as many as ten levers on margins that he can identify, which include things like onsite-offshore ratio, utilisation, pyramid structure and client choices apart from price. Moreover, he asserts that client deals today are strategic, and Infosys doesn’t really walk away from deals just because it has to bring its price points down. However, he also admits that having industry leading margins has remained a long term strategic focus area for Infosys.


Source : IIPM Editorial, 2013.
An Initiative of IIPM, Malay Chaudhuri
 
For More IIPM Info, Visit below mentioned IIPM articles

Monday, April 8, 2013

Will they keep getting it right?

Post the recovery in the global economy, Indian IT firms have the opportunity to chart a new growth story. An analysis of their results provides valuable insights on the way forward

Even though he has got himself out of Infosys, it will remain hard for Infosys founder and former Chairman N. R. Narayana Murthy to stay out of public attention. And he makes it even harder due to some of the statements he makes, which may not win popularity awards, but bring us face to face with valid truths that we often try to sneak away from. In a seminar organised by the Project Management Institute a few days back, Murthy lamented on the laid back attitude of Indians, low focus on merit in society and how this affected our work. And around the same week, he was busy drafting a letter to FM Pranab Mukherjee on how delays at immigration were discouraging foreign clients from coming to India, and that IT firms should sponsor world class VIP lounges at airports.

Without a shadow of doubt, the Indian IT sector has been a study in contrast as compared to the economy in general. The sector has registered blistering growth (revenues of Rs.4.38 trillion in FY 2010-11 and growth of 19% yoy as per NASSCOM), generated high employment, developed a powerful export model and also delivered on creating benchmarks in terms of best business practices.

Normally, we describe India’s IT story as TCS, Infosys, Wipro & Cognizant (followed by Mahindra Satyam, HCL Technologies and the rest of them). These four have been often used as the barometers for experts to judge the entire sector and where it is headed.

By that yardstick, there have been a number of mixed signals in the results of these companies for the quarter ended June 2011. And not surprisingly, the ‘basics’ that the Indian IT sector swore by at one point in time are also losing some of their relevance over time and CEOs are often seen talking about inflection points. B&E analyses the broad picture that emerges from these results and also strategic implications for IT companies.

It is known how the results showed a surprising contrast between the performances of Wipro and Infosys on one hand and TCS and Cognizant on the other. Infosys revenues grew by 23% yoy to reach $1.67 billion for the quarter, but net income after tax grew by only 17.8% yoy and declined by 4.5% qoq to reach $384 million. Wipro, on the other hand, posted IT services revenues of $1.41 billion, an increase by 16.9% yoy while net income just increased by 1% yoy to touch $295 million. In the case of TCS, revenues increased by 34.4% yoy to reach $2.4 billion and net income increased by 30.6% yoy to touch $532 million. Cognizant, which beat Wipro in terms of revenues to reach the number 3 position in the quarter, saw revenue rise by 34.4% yoy to reach $1.48 billion and net income reach $208 million, a growth of 20.78% yoy.


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
For More IIPM Info, Visit below mentioned IIPM articles