Sam's Blog

Accenture won multi-million deal with DLA

samstephen29 — Thu, 09 Sep 2010 21:15:29 +0000

Technology services and outsourcing company Accenture Inc. disclosed that it has won a four-year $73.0 million contract from the U.S. Defense Logistics Agency As per the contract, the company will restructure DLA’s energy supply chain into the enterprise business system (EBS).

Under this agreement, DLA’s energy supply chain business will be incorporated into Accenture’s enterprise resource planning (ERP) architecture, which the company introduced in 2000. Accenture will develop the SAP-based ERP architecture of DLA, and has already replaced two of DLA’s major legacy systems.

Accenture is evidently winning good business deals at regular intervals. Recently, the company secured a 3-year contract from Norwegian aluminum producer Norsk Hydro ASA. Financial details were not disclosed. Accenture will provide technical support and maintenance services globally to two of Norsk Hydro’s SAP systems. With these outsourced services, Norsk Hydro expects to maximize efficiency and cost effectiveness of its SAP systems, which will help the company serve its customers innovatively. The service will be provided to Norsk’s customers worldwide with the help of Accenture’s Global Delivery Network, through its operating centers in Germany and India. The services will be offered by October 2010.

Recent analyst opinion indicates that pricing in the IT services sector, including services such as IT infrastructure outsourcing, back-office outsourcing and offshore application development were hit hard in 2009, but remains stable in 2010. Many of the tech companies, including big players like Cognizant, expect the pricing environment to be stable during the second half of the fiscal 2010. This apart, the cost rationalization initiatives adopted by services firms such as Accenture also influenced the analysts to increase their margin expectations.

On the flip side, Accenture witnessed mediocre business flow during the first half, but enjoyed increased demand for offshore application work from its Indian clients.

We remain cautiously optimistic on Accenture, despite its poor top-line growth in the recent past. We think that the stable pricing environment is encouraging, particularly because of the stiff competition it faces. Further, although management expects revenue growth of 5% to 9% in the upcoming quarter, we believe this could be overly optimistic.

Cognizant as a Leader in Global Testing Services

samstephen29 — Thu, 09 Sep 2010 21:10:25 +0000

Cognizant a leading provider of consulting, technology, and business process outsourcing services, has been ranked a leader in enterprise application testing services in an IDC MarketScape analysis of 13 global third-party testing firms.

“IDC views Cognizant as one of the leading players with major market momentum that is helping drive efficient process and workflow into its global testing services practice,” according to “IDC MarketScape: Global Testing Services, 2010 Vendor Analysis” by Rona Shuchat, Mukesh Dialani, and Melinda-Carol Ballou.

“Cognizant has been growing at an accelerated pace in testing services as well as across its ADM service lines,” the report says. “A key part of Cognizant’s approach is to adapt to the QA maturity level of its clients, engaging systematically to find ways to reduce inefficiencies and waste, in turn supporting redirection of investment toward business priorities. To this end, Cognizant works at creating client communities, sharing best practices in how to overcome internal customer challenges.”

“Its testing practice is aligned with industries of specialization – such as financial services, healthcare, manufacturing/retail, telecommunications, and media and entertainment. This vertical alignment parallels its broader vertical sales strategy, enabling it to leverage its domain expertise and domain-aligned testing model,” says the report. “As a result of its deep and focused solution content, Cognizant 2.0 process orchestration framework, and go-to-market strategy, Cognizant ranks in the leadership quadrant in our IDC enterprise application services assessment, for both discrete and embedded views.”

“We are delighted to be recognized as a leader in IDC MarketScape’s comprehensive global survey,” said Sumithra Gomatam, Senior Vice President and Global Head of Cognizant’s Testing Practice. “At a time when our clients are facing increasing economic, industry, and technology shifts, we have focused our global testing team on helping our clients champion software quality and, in the process, build more effective businesses.

“Our highly experienced testers, consulting expertise, and robust testing processes, methodologies, tools, and frameworks help us enhance testing efficiency and precision, reduce costs, decrease cycle times, and provide our clients with superior software quality,” Sumithra added. “Thanks to our expertise on both the business and technical sides of testing, we have been able to create enterprise-wide managed test centers and expand our service portfolios to related areas such as test environment management and cloud-based testing.”

Capgemini buys CPM Braxis

samstephen29 — Thu, 09 Sep 2010 21:02:23 +0000

Capgemini will acquire a 55% interest for 233 million euros (USD 299 million) in Brazilian firm CPM Braxis, strengthening its position in the fast-growing Latin American IT services market, which is difficult to penetrate without local expertise and presence.

Under the terms of the transaction, French firm Capgemini which has a significant presence in India, will acquire 55 per cent of the share of CPM Braxis, representing a total amount of 233 million euros, it said in a statement.

Besides, Capgemini has the option on certain dates each year to buy the remaining stake of CPM Braxis and the existing shareholders have an option to sell rest of their stake, it added.

“The acquisition of CPM Braxis – a step in line with the Group’s growth strategy – allows us to fulfill three objectives: to extend our presence in a fast-growing country, to support our global clients in the regions where they focus their investment, and to strengthen our Group with the addition of a experienced management team,” Capgemini CEO Paul Hermelin said.

The deal, which is expected to close by October, will be funded through the the company’s net cash position.

CMP Braxis has an enterprise value of 437 million euros and it forecasts 450 million euros revenue in the full year.

The Brazilian firm will benefit from Capgemini’s assets – notably its global reach, methodologies and network of alliances, to serve its own clients, both in Brazil and around the world.

CPM Braxis has about 5,500 employees, while Capgemini employs over 95,000 people worldwide in more than 30 countries. Its’ Indian employee strength represents 27 per cent of the global headcount.

Cognizant on high performance : “two-in-a-box” structure model is a hit

samstephen29 — Tue, 17 Aug 2010 17:59:00 +0000

Numbers tell the story better. At the end of June 2008, the gap between the quarterly revenue of Wipro and Cognizant was a striking $383 million. Wipro was way ahead in the technology business and Cognizant was just another emerging company.

In the three months ended June 2010, that gap has narrowed to a mere $99 million. Till now, Infosys, India’s software bellwether, had only TCS to beat when it came to the size of the banking and financial services business.

Last week, however, Infosys executives watched in amazement as Cognizant notched up revenues of $470 million, perilously close to its own figure of $490 million. There is a reason why India’s Big Three software firms are keeping a wary eye on the rear-view mirror. A new competitor is emerging. In the past few years, Cognizant has outpaced the country’s top three tech firms — Tata Consultancy Services (TCS), Infosys Technologies and Wipro, quarter after quarter, forcing the companies to rethink their strategy and tweak their sales models.

In the quarter ended June, Cognizant grew its revenue sequentially by 15.2%. The Big Three struggled to get into double-digits with only TCS growing the fastest, by 6.4%. “We are definitely amazed and concerned,” said a senior executive at one of the top three Indian tech firms. “Cognizant is doing what we did to IBM and Accenture many years ago — we need to watch our back more carefully,” he added, requesting anonymity as he did not want to be quoted on Cognizant’s strengths. For Wipro, the threat is real.

Not only has Cognizant narrowed the gap with the third-largest software exporter, but its earnings guidance of 36% for 2010/11 indicates a mindset determined to snatch market share. “Cognizant is increasingly becoming the talk point during every assessment we do — they seem to have tweaked our offshore model with much stronger front end and done some things better than us,” admitted the sales head at one of the top five companies.

So, what’s really behind Cognizant’s growth? After the company decided to invest back any margin in excess of 20% into the business way back in 1998, Francisco D’- Souza who was Cognizant’s CEO then, established what was called “two-in-a-box” structure.

For every customer account, Cognizant has a senior account manager onsite and a dedicated delivery head. Some 800 client facing professionals today form the company’s “two-in-a-box” team, helped by the same number of staff in delivery locations such as India. This helps Cognizant focus on fewer customers such as JPMorgan Chase and UBS, and increase share of their outsourcing spend.

At any point in time, we focus our investments on a small set of opportunities that represent the highest priorities for Cognizant; based on the strong conviction that our resources are more productive when they aren’t stretched thin,” said R Chandrasekaran, president and MD, global delivery, Cognizant. Rivals and industry experts say Cognizant’s image of an American company, coupled with its reinvestment strategy is helping it not only avoid the political ‘chop shop’ rhetoric, but also narrow gap with the Indian firms.

“Most of us were thinking it could take another three years for Cognizant to really unsettle the Big Three equation — it now can happen within two years,” said an analyst at a multinational brokerage firm based in Mumbai.

Cognizant’s revenues from the US geography are 26% higher than Wipro and just 5% short of Infosys’. The gap in revenues from the banking and financial services (BFSI) vertical has reduced to $19 million a quarter when compared with Infosys.

By investing more in sales efforts, and living with lower operating margin than peers as a trade off for faster growth, Cognizant is able to gain business even during tough economic times. “We have been suddenly woken up — while still using our offshore model, they have blended it with higher focus on sales and marketing,” said another executive at one of the top five Indian tech firms, which is exploring more business from Cognizant customers such as JPMorgan Chase.

Cognizant’s share of incremental revenues or new business increased from 28.3% in June 2009 to 35.9% during June this year when the company added $145 million — more than twice what Wipro and Infosys managed during the same period.

“In return for that privilege, we have told our investors that we would deliver higher organic growth than our comparable peers. The only thing in our minds is, ‘are we growing our top-line materially faster than our tier I industry peers?,” said Mr Chandrasekaran.

Compared with rivals, Cognizant spends nearly 22% of its revenues on SG&A, compared with TCS’ 19.6% and Infosys’ 12-13% SG&A spends. “We presume that no company likes to lose revenue market share; Wipro is on the verge of losing out to Cognizant on revenue size. The response of the Big 3 (with largely similar business approach) will be worth watching out for, noting the success of different approaches of both these companies,” said Kawaljeet Saluja, equity analyst at Kotak Research. It will be easy to conclude that the solution for Infosys and Wipro lies in replicating the Cognizant model.

But that is easier said than done. Higher investments in sales and marketing could erode their margins and a price war could affect the industry’s equilibrium. “Additional investments in sales and marketing may not lead to desired results and entails margin risks. On the other hand, a pricing-based response will throw the market out of equilibrium, an area where tier 1 players had behaved with remarkable restraint during the downturn,” the Kotak analyst added.

With its CEO, Francisco D’Souza and other top leaders based in the US, Cognizant is able to position itself as an American company with large delivery centres across the globe, something Indian rivals have only recently started exploring. “I do think that positioning helps, putting the leadership does help since clients can access the top leadership onshore,” said Rodney Nelsestuen, senior research director at the US-based TowerGroup. But this is also a tough act to follow. Are Indian tech firms ready to shift their top leadership to markets such as the US?

In an interview with ET earlier this year in March, Azim Premji, the chairman of Wipro said having one of the CEOs based in the US could be an advantage. “It has an advantage. What we are doing now is that we are putting SBU heads there. So the healthcare head is based in Boston, energy and utilities head is based in London, and the manufacturing head is based now in California — these are all roughly a little under billion dollars,” Mr Premji had said.

“It’s not a bad idea (having one CEO based overseas). We are trying to surrogate with a very senior global sales head based in New Jersey,” Mr Premji added. Some experts believe that such a shift may also not be feasible. “This helps in perception but I don’t see India based companies doing this since transferring corporate headquarters from India will require significant investment in time and energy and leaving India without these corporate groups is something I don’t believe the companies wish to do,” said Mr Nelsestuen.

Though Cognizant also faces challenges (high employee attrition and overdependence on the US market which contributes 79% of business), the company has clearly emerged as a big player in the software industry sweepstakes. “Cognizant appears to be gaining share momentum as it grows (the proverbial ‘snowball rolling downhill’) — the larger it gets, the more formidable a competitor it becomes,” said Glenn Greene of New York-based equity firm Oppenheimer.

Source: ET

IBM to acquire Unica for $480 million

samstephen29 — Tue, 17 Aug 2010 17:19:24 +0000

IBM Corp. continues to push into the marketing automation and consulting arena, announcing today it will acquire marketing management software company Unica Corp. for $480 million.

Unica, based in Waltham, Mass., offers such marketing solutions as NetInsight Web analytics, the Unica 8 Enterprise Marketing suite and Social Media Analytics. It has has more than 1,500 customers, including Bank of Montreal, Best Buy, Cisco Systems, Citrix Systems and Dow Jones & Co.

IBM’s acquisition of Unica follows its purchase in June of marketing optimization company Coremetrics Inc. for an undisclosed sum, and its May acquisition of b2b e-commerce company Sterling Commerce from AT&T.

Last fall, IBM bought predictive analytics company SPSS Inc. for $1.2 billion, acquiring in the process software that helps companies analyze and forecast marketing and product trends.

Unica’s 500 employees will be integrated into IBM’s Software Solutions Group, with its software solutions offered via IBM’s Business Analytics and Optimization Consulting organization, comprised of some 5,000 consultants and analysts.

The deal is expected to close in the fourth quarter.

Source: BtoB

TCS Wins PwC’s Contract

samstephen29 — Sun, 08 Aug 2010 06:17:04 +0000

The US and UK arms of PricewaterhouseCoopers (PwC) have awarded a contract for back-office information technology (IT) support to Tata Consultancy Services Ltd (TCS), India’s biggest IT company, after the professional services firm announced laying off at least 500 IT employees at its Tampa Bay, Florida office, according to two PwC executives who didn’t want to be identified.

TCS declined comment. Its spokesperson Pradipta Bagchi said the firm does not comment on individual clients.

Those being laid off can carry on till 31 December and apply for other “open positions” within the firm, Jonathan Stoner, spokesperson for PwC US, said in a phone interview. If they cannot get another job by then, they would be paid a generous severance package, he added.

Before the layoffs were announced, there were some 1,100 IT professionals at its Tampa Bay office, which employs over 1,800 people in all. The layoffs are part of a restructuring exercise aimed at aligning the internal IT needs of PwC’s US and UK firms, according to Stoner.

These two firms would outsource IT services to an “India-based vendor”, he added. He refused to name the vendor, citing company policy.

A few of those being laid off are Indians. One of them said the move has triggered “quite a stir” in Florida, more so because earlier this year, the firm cut back its tax practice in Orlando. “PwC is one of the bigger employers in Tampa,” he added, requesting anonymity. “So many people laid off in one stroke is big news here.”

The deal signals that large firms in the US and Europe don’t want in-house IT professionals on their payrolls for back-office support, said an analyst at the Indian arm of a global consulting firm.

“Indian outsource managers typically charge two-three times the employee cost of the company closing its back office,” added this person, who asked that neither he nor his firm be identified.

This is because such outsourcing includes all costs of delivery: travel, communication, establishment, etc. The company outsourcing its work saves on establishment cost.

So, if PwC was paying those being laid off at Tampa $30 million a year collectively, TCS would charge at least $50-60 million annually, he added.

Outsourcing firms such as TCS offer back-office support to so many firms that their cost of delivery is very small compared with large firms managing their own back-offices, said another analyst who, too, did not want to be identified.

“Companies such as TCS have well-evolved systems and practices, which make back-office management extremely cost-efficient,” he added.

Source: Sourcingfocus

Wipro Signs Outsourcing Services Agreement with Citibank

samstephen29 — Sun, 08 Aug 2010 06:15:24 +0000

The Following transaction Establishes Wipro’s First Data Center in Europe, Strengthens IT Infrastructure Management Portfolio

Wipro Technologies, the global IT services business of Wipro Limited and Citibank N.A. announced that the companies have signed an agreement for Wipro to take over the operation and management of Citi’s data center in Meerbusch Germany, a suburb of Dusseldorf. In conjunction with the transaction, Wipro has taken the data center from Citi and intends to use the site to support other outsourcing clients. Citi will lease back office and data center space from Wipro for at least 30 months, and Wipro will provide Citi with facilities management and physical infrastructure management services during the period.

The Meerbusch, Germany center will be Wipro’s first data center facility in Europe and will enable the Company to offer a full portfolio of infrastructure management solutions to its global clients. Wipro expects the data center to support the delivery of its mainframe, Windows, Unix, Linux and AS/400 outsourcing services. In addition, the Company plans to extend its Dynamically Adaptive Infrastructure (DAI) cloud platform to the German data center. The expanded capabilities will enable Wipro to deliver comprehensive outsourcing solutions in Europe that can be managed remotely, delivered in the Company’s data center or installed on the Company’s cloud infrastructure.

“The addition of a data center in Europe represents an important milestone in the Company’s growth strategy,” stated Sameer Kishore, President of Wipro Infocrossing, the data center outsourcing practice of Wipro. “In 2007, Wipro acquired Infocrossing, a US-based provider of data center outsourcing solutions. The addition of the data center delivery capability enabled Wipro to compete more aggressively for large, total outsourcing engagements in the US. The Meerbusch facility will enable Wipro to extend its capabilities to the European market and strengthen the Company’s ability to compete for global outsourcing opportunities.”

The facility is comprised of approximately 9,000 square meters of total space, including approximately 1,700 square meters of raised floor. The facility meets the standards for a Tier III data center and has been owned and operated by Citi for more than 20 years. The agreement transfers ownership of the data center and operations to Wipro, and provides a period of up to 30 months for Citi to migrate its computing infrastructure out of the data center. As Citi vacates the facility, Wipro plans to make improvements to the data center and begin migrating new clients to the site.

“Wipro’s data center capabilities have become a key component when competing for large outsourcing engagements,” added Ralf Reich, General Manager & Country Head, Germany. “With the addition of the Meerbusch site, we will be able to deliver a full portfolio of mainframe, Windows and AS/400 outsourcing services from a Wipro data center in Europe, and extend our cloud computing platform to the region. This demonstrates our commitment to building localized and global delivery capabilities, and provides an important point of differentiation from our competitors,” Mr. Reich concluded.

Source: Sourcingfocus

IBM and Aetna tie up to offer clinical support service

samstephen29 — Sun, 08 Aug 2010 06:10:53 +0000

IBM and Aetna Inc on Thursday jointly launched a service aimed at helping hospitals improve patient care by making better use of electronic medical records and other digital data.

International Business Machines Corp said the service, developed with Aetna subsidiary ActiveHealth Management, would help physicians access patients’ health data like previous medical records, claims, and lab data from multiple sources and quickly analyze what the best treatment might be.

The service, which will incorporate IBM’s analytical software, is also designed to flag overdue check-ups and alert doctors to which patients in their wards require the most immediate attention.

These services could help hospitals reduce medical mistakes and unnecessary tests and treatments, IBM said.

Robert Merkel, vice president and healthcare industry leader of IBM Global Business Services, said: “With the adoption of electronic medical records, there’s a huge increase in digital information that’s available on patients. We’re leveraging that information and providing deep analytical insight to support doctors and patient care, and providing the most advanced analytics.”

The service will also help physicians and hospitals measure their performance against national standards. Doctors who show higher quality, lower-cost care could win higher reimbursement rates from insurance companies.

IBM has over the past decade shifted its focus from hardware to software and services, and is investing heavily on developing more analytical and predictive technologies that can be used to, for example, prevent fraud or help ease traffic congestion.

The company also sees the healthcare market as a key business opportunity, with the overall health IT market estimated at around $20 billion.

In addition to that, Merkel said, IBM was hoping to win access to $30 billion of federal funds for the adoption of electronic healthcare records. The Obama administration has created incentives to encourage doctors and hospitals to move to electronic record-keeping, with subsidies available from 2011.

Source: reuters

Hike in US visa fee to impact Indian IT firms: Nasscom

samstephen29 — Sun, 08 Aug 2010 05:25:39 +0000

The proposed sharp increase in the US visa fee to raise funds for its border security needs would significantly impact the Indian IT sector, National Association of Software and Services Companies (Nasscom) said Friday.

The proposed hike is expected to be about $4,500 per visa from $2,500 currently.

“The Border Security Bill, passed by the US senate late Thursday, aims to raise about $600 million by increasing fee for H-1B and L-1 visas. This has significant impact on the Indian IT sector,” Nasscom said in a statement here.

Several Indian software firms avail H-1B and L-1 visas in thousands every year to fly their employees to the US for working at their clients’ locations as on-site engineers.

Echoing Nasscom’s concern, IT bellwether Infosys Technologies Ltd termed the US Border Security Bill unfortunate and discriminatory at a time when companies have to be more competitive in an open market scenario.

“It is unfortunate that this tax (fee) is being levied on a discriminatory basis when the need is to open markets to make companies more competitive in the global market place,” Infosys said in a statement.

As a global software major, Infosys has been recruiting in the US at all levels, including for its global internship programme InStep.

“We have to study the details to ascertain the actual impact of the hike in fee for H-1B and L-1 visas currently,” Infosys board member T V Mohandas Pai said.

Though Tata Consulting Services (TCS) declined to comment, a senior Wipro official said the company would endorse the concerns expressed by the IT industry representative body (Nasscom).

“We are running a program to hire about 1,000 people in the US for the past few quarters in the areas of engagement management, consulting, systems analysis, programme management and architects,” Pai, who also heads Infosys human resources, education and research departments, noted.

Source: ET

IBM, HCL finalist for $600-mn outsourcing deal w/ Irish bank

samstephen29 — Fri, 04 Jun 2010 08:58:04 +0000

Bank of Ireland has shortlisted HCL Technologies and IBM for an outsourcing contract potentially worth over $600 million, replacing incumbent vendor HP, which had signed a seven-year deal with the bank in 2004.

The outsourcing contract will involve management of the bank’s IT infrastructure including desktops, servers, printers and other communication networks.

When contacted by ET on Tuesday, a spokesperson for the Bank of Ireland confirmed that both HCL and IBM have been shortlisted.

“After a detailed evaluation and assessment process over the past nine months, a decision has now been taken to proceed with a shortlist of two suppliers, HCL and IBM, to the next stage of the competitive process which is expected to be completed in the coming weeks,” said Cora Whyte, the bank’s spokesperson.

While IBM is known for bundling its hardware products with services and offering more lucrative rates to customers for a larger share of the business, Indian firms including HCL have started winning larger deals too. Recently, HCL won a $500 million contract from US-based Merck Sharp and Dohme.

Incumbent HP is set to lose the contract to either HCL or IBM. The seven-year long contract due to expire next year was worth $600 million when signed in 2004.

“The Bank is some months into a competitive tender process, assisted by third parties, with HP and a number of other external suppliers, focusing on service enhancements, improved customer experience, cost savings and efficiencies. As a result, Bank of Ireland will not be progressing further with HP as part of this process,” Whyte said.

Meanwhile, the outsourcing contract will have to pass the hurdles posed by trade unions pushing for a severance package and employment guarantees after the transaction is done.

In 2004, when the bank decided to outsource its IT work to HP, it had to agree to a one-off payment of 5,500 and job security for two years for the 500 employees.

And since the Bank of Ireland is over 30% owned by the government, any vendor will have to address the local employment issues. Last year, Ireland injected around $8.6 billion into Bank of Ireland and Allied Irish Banks to cope with the financial crisis.
However, the cost benefits of outsourcing far outweigh these issues. Several private sector organisations have been leveraging offshoring of non-core IT management.

By outsourcing the management of their desktops, computer servers, storage and communication infrastructure, customers such as Nokia, Xerox and Citigroup plan to have leaner balance sheets, reduce their operational expenses by up to 40% and focus better on their core business.

The global market for IT infrastructure outsourcing has been growing. For instance, the top 15 vendors analysed by research firm Forrester in a recent report provided remote and onsite services for about 16.7 million desktops, 1.7 million servers and 23.4 million users globally. These vendors, including IBM, HP-EDS, CSC and some Indian tech firms such as HCL delivered $83.9 billion worth of infrastructure services last year.

Source: ET