Tuesday, October 16, 2012

Transitioning to a New World – An Analytical Perspective

Recently, I had the opportunity to speak at the Silicon India Business Intelligence Conference. The topic I chose for the discussion was focused on providing the BI & Analytics perspective for companies transitioning to a new world. 

The gist of my presentation is given below:

1)      First, established the fact that the world indeed is changing by showing some statistics:

  • Data Deluge: Amount of digital data created in the world right now stands at 7 Zettabytes per annum (1 Zettabyte = 1 Trillion Terabytes)
  • Social Media: Facebook has touched 1 Billion users which makes it the 3rd largest country in the world
  • Cloud: Tremendous amount of cloud infrastructure is being created
  • Mobility: There are 4.7 billion mobile subscribers which covers 65% of world population

2)      Enterprises face a very different marketplace due to the profound changes taking place in the way people buy, sell, interact with one another, spend their leisure time etc.

3)      To ensure that BI can help business navigate the new normal, there are 3 key focus areas.

  • Remove Bottlenecks – Give business what they want
  • Enhance Intelligence
  • End to End Visibility by strengthening the fundamentals

For each of the 3 areas mentioned above, I gave some specific examples of the trends in the BI space.

1)      For Removing Bottlenecks, the impact of in-memory and columnar databases were elaborated.

2)      For enhancing intelligence, working with unstructured data and using big data techniques were discussed.

3)      For the 3rd point, the focus was on strengthening the fundamentals in the BI landscape.

Please do check out my complete presentation at http://bit.ly/VLDDfF and let me know your views.

Thanks for reading.

Monday, August 13, 2012



Tuesday, August 7, 2012

Cognizant Technology Q2: IT stocks gain up to 3 per cent

IT stocks gain on Cognizant Q2 earnings

Information technology (IT) stocks on Tuesday gained up to 3 per cent a day after Cognizant Technology posted 21 per cent jump in net profit for the quarter ended June 30, and gave a bullish annual revenue outlook.

Cognizant has pipped Infosys Technologies to become the second-largest software company in India with a revenue of $1.79 billion (about Rs 9,938 crore) for the April-June quarter this year.

Shares of Tata Consultancy Services moved up by 2.86 per cent to settle at Rs 1,264.60 on the Bombay Stock Exchange, while Infosys gained 1.9 per cent to close at Rs 2,255.70.

Among others, Wipro was up by 0.83 per cent, HCL Tech gained 1.46 per cent, Oracle Financial Services rose 0.75 per cent, Tech Mahindra moved up by 0.67 per cent and the stock of Hexaware Technologies closed 0.44 per cent up.

Following the gains in these stocks, the BSE IT index settled 1.95 per cent up at 5,449.97.

"Shares of IT companies performed well today on the back of strong set of numbers posted by Cognizant for the June quarter," Milan Bavishi Head Research Inventure Growth & Securities said.

For the September quarter, Cognizant anticipates its revenues to be at least $1.875 billion, while for the 2012, it maintained outlook for revenue to be at least $7.34 billion (at least 20 per cent growth compared to 2011).

With a bullish annual revenue outlook, Cognizant may remain at the number two spot as Infosys has given a muted guidance of 5 per cent growth for the year, given the uncertainty in the global environment. Infosys expects revenues to be $7.343 billion in FY13.

Though Cognizant is not listed in India, 75 per cent of its over 1.45 lakh employees are based in India and is often referred to as an Indian entity.

Hexaware Technologies - Good show continues - Edelweiss

Hexaware Technologies - Good show continues - Edelweiss

The Q2CY12 results of Hexaware Technologies (Hexaware) were in line with estimates as revenues stood at USD91.2mn, up 3.6% QoQ (4.2% volume growth) vs our and Street estimate of USD92mn. EBITDA margin expanded 50bps to 22.9%, ahead of our estimate of 22.5%. The company seems to be reaping benefits of investments made over the past two years as the decent guidance for Q3CY12 (1.4%-3.0%) in an uncertain environment bears testimony to the same. We believe its continuous investments in strengthening front-end sales team and focus on improvement in operational parameters would drive growth from hereon. Maintain 'BUY' with target price of INR140.

Inline quarter on revenue, margin front

Hexaware's Q2CY12 revenues at USD91.2mn were marginally lower than our and Street estimate of USD92mn. The sequential growth of 3.6% (4.4% in CC) was driven by a volume growth of 4.2%. The beat on PAT (INR890mn versus estimate of INR834mn) was due to lower forex losses. It has won a large deal of USD100mn spread over four years; revenues from this deal are expected to accrue from early CY13. Further, it is actively chasing four more large deals.

Growth to be driven by investments, operational focus

The company has reiterated that it will continue to make investments, particularly in new technology areas in order to drive growth. Further, Hexaware plans to continue to invest in S&M for gaining higher wallet share within clients, particularly beyond its top 20 clients (thus strengthened sales team by 11 in H1CY12). We believe this, coupled with its continued focus on improving operational parameters, will enable it to drive growth and maintain operating margin.

Outlook and valuations: Momentum continues; maintain 'BUY'

While the Q2CY12 results were in line with estimates but lacked any positive surprise, we believe the momentum remains intact for the company, led by a strong order book build up, besides its continuous investments in the front-end. We forecast 20% USD revenue growth with EBITDA margin of 21%. Higher tax rate of 22% (20% earlier) leads to 4% cut in our CY13 EPS to INR12.7. We maintain 'BUY /SO' with TP of INR140 (11x CY13E earnings).

Mid-tier IT cos like Hexaware, Zensar outperform biggies Infosys, TCS, Wipro in last 5 quarters

MUMBAI: India's mid-tier information technology firms have reported better sales and operating profit growth compared to the biggies in the business at the aggregate level in each of the past five quarters, riding on their intrinsic strengths of operating in niche segments and strong demand in select verticals and bucking the trend of smaller companies taking a beating during a downturn.

At a time when industry leaders such as Infosys and Wipro have provided a sluggish future growth guidance, a clutch of mid-tier IT companies sound far more confident about growth in the next few quarters of FY13. Both analysts and industry officials reckon that this trend is likely to be maintained for at least the next couple of years, which could lead to an improved valuation of these companies.

An ETIG analysis of 17 tier-2 IT firms, which announced their financials for the quarter to June 2012, shows a growth of 38.4 per cent in revenue and an impressive rise of 78 per cent in net profit at the aggregate level from a year ago. For the top four IT companies - TCS, Infosys, Wipro and HCL Technologies - sales rose 33.5 per cent, while profit grew 43.4 per cent. Besides, half of the companies among the 14 tier-2 players that reported double-digit topline growth surpassed revenue growth reported by each of the top four firms, the analysis shows.

Mid-tier companies such as Geometric, KPIT Cummins, Hexaware TechnologiesMastekNIIT Technologiesand Zensar Technologies reported a strong performance for the June 2012 quarter. In contrast, top tier players such as Infosys and Wipro reported deceleration in sales and profit growth. Though their relatively smaller scale of operations has indeed helped, the changing trend in vendor allocation by global clients, a favourable currency movement, and strong demand in select verticals, which are niche areas for medium and small IT vendors helped them record a stellar performance.

Industry officials also say that long-term management stability in these firms has been critical to their success. "The large players that are not doing well have seen management churn. If you look at mid-size companies that are doing well, they have all had consistent management," says Pradeep Udhas, who is partner and head of IT-BPO consulting firm KPMG. According to him, a stable leadership has helped the smaller companies to specialise and compete with large companies. What counts in the final analysis, he says, are leadership and the ability to be agile.

Select tier-two or mid-rung companies were also able to expand their operating margins against the backdrop of tight IT budget spending. "Compared with top-tier companies, small and medium firms have more levers to improve performance - be it tweaking of employee matrix to include more freshers or reduction in selling and administrative costs," says Angel Broking's IT analyst Ankita Somani.

She draws attention to the fact that historically, smaller IT companies had just over 10 per cent freshers in the employee pyramid compared to over 30 per cent for the top IT companies. A higher proportion of employees with less than three years of experience helps in bringing down operating costs.

The robust show of these companies has not gone unnoticed by the big daddies in the industry. Rajeev Gupta, president of Fujitsu Consulting India (FCI), the Indian arm of global IT solutions firm Fujitsu says that the smaller firms are more agile when it comes to projects worth less than $10 million. "The robust show of tier-2 firms is not only because of a depreciating home currency, it is also about the way clients have started allocating a chunk of their projects to smaller companies."

Global clients are now more than willing to open their doors to second-rung Indian IT companies that are more than willing to take up smaller assignments. "The large IT firms don't go after $5-10 million deals, which we are quite happy to accept," says Zensar Technologies' Ganesh Natarajan. Deals worth $50-100 million are fewer as companies are cutting back on spending or postponing investments, he says.

Their upbeat performance has also helped such companies control employee attrition rates. Most mid-tier firms, which announced results for the quarter to June, showed lower attrition rates. Hexaware, headquartered in Mumbai, reported 9.6 per cent rate of attrition, the lowest compared with 12-16 per cent reported by the top four IT firms. "We declared a salary increase of 10.5 per cent this year, but it is not only about money. Employees are excited about the kind of projects we are handling," says Hexaware's chairman Atul Nishar.

Hexaware bets on UK, new verticals to lead mid-tier IT growth



After nine quarters of positive growth, the mid-tier leader is confident of a 20% year-on-year (yoy) growth in dollar revenues for fiscal 2013.




Hexaware Q2 net rises 48% on higher revenues

Software service provider hexaware technologies has reported a 48 per cent increase in net profit at Rs 89.03 crore for the second-quarter ended june 2012 against the same period last year.

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