Global-O&O

Infosys Dec 2011 earnings set a somber tone for outsourcing in time of continuing global uncertainty.

 Infosys released their earning today and listening in to the earning calls made me realize the conservative approach Infosys leadership used to be famous for has actually turned more cautious and somber.  The company which would always ‘under promise and over deliver’ seems to be facing headwinds now in a global slowdown environment on how to continue to outshine it’s competitors and continue it’s growth story.  Too early to show where the outsourcing industry is going based on one set of earnings, but there seems to be a cautious note in Infosys earning estimates. Maybe they are following the mantra of under estimating and over delivering.

 Granted that the overall market are down and with a number of factors affecting growth of outsourcing companies this is not an easy environment to be talking about growth strategies in. With the overall cautious mood around the world, European crisis continuing to stand up, Election year in the US and the slowdown of the emerging markets, nothing points to good times coming soon for the outsourcing firms.   What this has done is to create a delay in the system when it comes to taking decisions and spending large dollars for transformation, outsourcing engagements.  With many CxO’s also realizing that the new normal allows them to do more with less, decision making to make any incremental changes or transformational changes , specially that involving large dollars is going to undergo deeper scrutiny and also  require a solid business case.

The numbers

Revenue -Q3:  $1.806 billion (QoQ: 3.4% YoY: 13.9%)
Net Income: $458 Million  (QoQ: 11.4% YOY: 15.4%)
Gross 49 client added ( 6 fortune 500)
Gross 9,655 employees  added , Net 3,266
Total Employee Strength: 145,088 Employees
BPO Employee Strength: 19,425
Revenue BY Geography:North America – 63.7% , Europe – 22.6%, India – 2.1% Rest of the World – 11.6%
Estimated revenues for year ending March 2012: Between $7.029 and $7.033 billion YOY 16.4% growth
Cash and Cash equivalent available – $3.7 billion
Geography (Revenues) – N. America ( 63.7%), Europe ( 22.6%), India (2.1%), Rest of World ( 11.6%)
BFSI still the biggest revenue percentage ( 27.9%) lower than last quarter of 28.2%

What the numbers say

1. Infosys is lowering guidance for estimated revenues for the year ending March 2012 due to the headwinds and decrease in decision velocity they see in the markets.
2. Australian BPO has contributed fractional revenues to the earnings ( 4 to 5 million dollar range).
3. Infosys is not seeing any cancellations but slowing of ramp ups on existing contracts and longer decision making process
4. Percentage of revenue from non linear programs outside of Finacle is very small ( 30 to 40 million dollar range) although they see a total contract value of around $300 million dollars to be realized over the next 4 to 5 years. This includes the most talked about services like mobility, cloud etc..
5. Limited number of transformation deals closed by Infosys. Infosys has folded their consulting organization within the larger Infosys IT is still seeing slow traction in their transformation initiatives.
6. Higher revenue growth in Europe this quarter is not a norm.
7. Client budgets are marginally flat to marginally down
8. Given the slow down in decision making consulting engagements are slow to ramp up and lower utilization based on that for consulting staff.

Infosys which has started re organizing their client services staff has their work cut out for them as they have to work harder to get the traction in a tough environment.

Other outsourcing companies will be posting their earnings soon and I believe they may have better numbers than Infosys but will not have the shine on.

Q2,2011 Earnings: Quarter Ending September 30 2010

FACTS
• 27 new clients added.
• # of active clients – 592
• 337 million dollar clients, 27 50+ million dollar clients
• Top 10 client contribute 26.7% of revenue
• Larger deals coming back to the markets. Not at the level pre financial crisis but coming back. Infosys did 9 deals in this quarter and some of them were $200 million plus.
• Total Contract Value of deals closed first half was $865 million.
• 137 Global Fortune 500 as clients and 124 US Fortune 500 are clients
• Projected to hire 40,000 this year vs earlier forecast of 36,000. Added 14,000 this quarter, will add another 11,000 next quarter.
• Vertical growth in financial services, retail. Energy and Utilities & Manufacturing in Europe.
• 12,000 promotions this year
• Financial Services M&A related projects tapering down and move to run the bank model gaining traction.
METRICS
• Revenues – $1.496 billion QoQ – (+10.2), YoY – (+29.6%)
• Net Income – $374 million QoQ – (+14.7%), YoY – (+18.0%)
• Earnings forecast for next quarter – between $1.413 to $1.427 billion, YoY growth between 22.4% and 23.7%
• Earnings forecast for next quarter – between $1.547 billion and $ 1.562 billion. YoY growth forecast of 25.6 to 26.8%
• Earning forecast for fiscal year 2011 – Revenue between $5.95 billion to $ 6.00 billion. YoY growth of 24.0% to 25.0%
• Cash – $ 5.211 billion
• 14,264 gross addition of employees, net addition of 7,646
• 122,468 employee strength end of September 2010
• 115,972 software employees ( 99,667 – billable, 5,178 Banking Product Group, 11,127 trainees)
• 6,4,96 – Sales & Support
• Attrition Rate – 17.1% ( compared to 13.6% last quarter, 11.6% 2 quarter prior) BPO had larger number of people leaving 5,411 compared to 3,589 last quarter.
• Majority of the people leaving are those between 2 to 6 years of experience
• Pay raises of 14% offshore ( India) and 2-3% onshore
• Infosys BPO employee strength – 18,560, Australia – 443, China – 2,729, Consulting – 654, Mexico – 454, Sweden – 17, Brazil – 133
• Revenue break up – North America – 65.8%, Europe – 21.8%, India – 2.1%
• Application Development – 39.1%, BPM – 5.6%, Consulting Services and Package Implementation – 25.8%, Infrastructure Service – 6.2%, Product Engineering Services – 2.5%, SI – 5.7%, Testing Services – 7.6%
• Insurance,Banking – 35.4%, Manufacturing – 18.9%,Retail -14.4%, Telecom- 13.3 %, Energy & Utilities – 6.3%
• Subsidary Revenue (millions USD) BPO– 79.72, Consulting – 46.81, China – 19.28
• Net Income (millions USD) BPO– 10.33, Consulting – 5.27, China – 2.03

LEARNINGS
• Deals coming in from Operations as well as transformation deals started to come back.
• Regulatory changes in the US , specially around financial services is something which the offshore vendors will continue to be cautious on. A number of them are also leveraging this opportunity by building risk management, compliance, data reporting capabilities as part of the service offering.
• Retails Sectors continue to invest in reaching out to the digital consumer and that is an opportunity which a number of firms are leveraging with the global delivery model.

Q1, 2011
FACTS
• 38 new clients added.
• # of active clients – 590
• 341 million dollar clients, 26 50+ million dollar clients
• Top 10 client contribute 26.1% of revenue
• 137 Global Fortune 500 as clients and 124 US Fortune 500 are clients
• Projected to hire 36,000 this year vs earlier forecast of 30,000. Increased numbers are due to projected demand and also to mitigate attrition risks ( 2,000 for growth and 4,000 for attrition)
• Pricing stable but overall pricing came down by 1.6 to 1.7% this quarter
• $ 15 – $16 million dollars in visa expenses per quarter
• Retail Spending and Energy & Utilities spending growth is because of discretionary spending
METRICS
• Revenues – $1.358 billion QoQ – (+4.8), YoY – (+21%)
• Net Income – $336 million QoQ – (-6.6%), YoY – (+4.2%)
• Earnings forecast for next quarter – between $1.413 to $1.427 billion, YoY growth between 22.4% and 23.7%
• Earnings forecast for next year – between $5.72 billion and $ 5.81 billion. YoY growth forecast of 19% to 21%
• Cash – $ 4.658 billion
• 8,859 addition of gross employees, net addition of 1,026 this quarter
• 114,822 employee strength end of June 2010
• 108.495 software employees ( 95,863 – billable, 5,029 Banking Product Group, 7,603 trainees)
• 6,327 – Sales & Support
• Attrition Rate – 15.8% ( compared to 13.6% last quarter, 11.6% 2 quarter prior) BPO had larger number of people leaving 5,411 compared to 3,589 last quarter.
• Majority of the people leaving are those between 2 to 6 years of experience
• Pay raises of 14% offshore ( India) and 2-3% onshore
• Infosys BPO employee strength – 18,609, Australia – 394, China – 1,765, Consulting – 605, Mexico – 414, Sweden – 17, Brazil – 116
• Revenue break up – North America – 67.3%, Europe – 20.3%, India – 1.7%
• Application Development – 40.8%, BPM – 5.7%, Consulting Services and Package Implementation – 24.9%, Infrastructure Service – 6.9%, Product Engineering Services – 2.1%, SI – 4.2%, Testing Services – 7.3%
• Insurance,Banking – 36.1%, Manufacturing – 19.5%,Retail -13.2%, Telecom -14.1%, Energy & Utilities – 6.0%
• Subsidary Revenue (millions USD) BPO– 78.14, Consulting – 38.55, China – 15.81
• Net Income (millions USD) BPO– 6.42, Consulting – 3.25, China – 1.69

LEARNINGS
• Europe markets are slower in recovery and growth in these markets will continue to lag and be slow to come back. A number of outsourcing vendors are cautious about the European market growth
• Budgets for firms are closed and the firms will spend the budget this year compared to last year when the budget were reopened during the year..

Q1,2011 Earnings: Quarter Ending June 2010

FACTS

• 38 new clients added.
• # of active clients – 590
• 341 million dollar clients, 26 50+ million dollar clients
• Top 10 client contribute 26.1% of revenue
• 137 Global Fortune 500 as clients and 124 US Fortune 500 are clients
• Projected to hire 36,000 this year vs earlier forecast of 30,000. Increased numbers are due to projected demand and also to mitigate attrition risks ( 2,000 for growth and 4,000 for attrition)
• Pricing stable but overall pricing came down by 1.6 to 1.7% this quarter
• $ 15 – $16 million dollars in visa expenses per quarter
• Retail Spending and Energy & Utilities spending growth is because of discretionary spending increase.

METRICS

• Revenues – $1.358 billion QoQ – (+4.8), YoY – (+21%)
• Net Income – $336 million QoQ – (-6.6%), YoY – (+4.2%)
•  Earnings forecast for next quarter – between $1.413 to $1.427 billion, YoY growth between 22.4% and 23.7%
• Earnings forecast for next year – between $5.72 billion and $ 5.81 billion. YoY growth forecast of 19% to 21%
• Cash – $ 4.658 billion
• 8,859 addition of gross employees, net addition of 1,026 this quarter
• 114,822 employee strength end of June 2010
• 108.495 software employees ( 95,863 – billable, 5,029 Banking Product Group, 7,603 trainees)
• 6,327 – Sales & Support
• Attrition Rate – 15.8% ( compared to 13.6% last quarter, 11.6% 2 quarter prior) BPO had larger number of people leaving 5,411 compared to 3,589 last quarter.
• Majority of the people leaving are those between 2 to 6 years of experience
• Infosys BPO employee strength – 18,609, Australia – 394, China – 1,765, Consulting – 605, Mexico – 414, Sweden – 17, Brazil – 116
• Revenue break up – North America – 67.3%, Europe – 20.3%, India – 1.7%
• Application Development – 40.8%, BPM – 5.7%, Consulting Services and Package Implementation – 24.9%, Infrastructure Service – 6.9%, Product Engineering Services – 2.1%, SI – 4.2%, Testing Services – 7.3%
• Insurance,Banking – 36.1%, Manufacturing – 19.5%,Retail -13.2%, Telecom -14.1%, Energy & Utilities – 6.0%
• Subsidary Revenue (millions USD)  BPO– 78.14, Consulting – 38.55,  China – 15.81
• Net Income (millions USD)  BPO– 6.42, Consulting – 3.25, China – 1.69

LEARNINGS

• Europe markets are slower in recovery and growth in these markets will continue to lag and be slow to come back. A number of outsourcing vendors are cautious about the European market growth
• Budgets for firms are closed and the firms will spend the budget this year compared to last year when the budget were reopened during the year.
• Larger firms continue to do well and grow and the gap between smaller and larger firms continues.
• Offshoring is becoming more commoditized and risk factors associated with offshoring are part of standard operating procedures for firms doing global business.

FACTS

• Europe remains unstable and currency risks for Europe continue to be a factor for decline in WNS revenues. High dependency on Europe for auto claims business and the currency risk with Pound has high impact on WNS earnings.
• WNS changing their go to market model and hiring selective but new talent to help them manage client relationships and get into newer accounts.
• Weakness in travel business and insurance business – two of the key verticals for WNS.

METRICS

• Revenues  ( less repair)–  $157.6 million ($96.7 million)  QoQ – (Flat) , YoY – (1.8%)
• Net Income – $13.3 million QoQ – (19.8%), YoY – (-2.6%)
• Attrition – 43%  ( Last year  same quarter – 21%, Last quarter – 31%)
• Full Year Attrition – 32%
• Headcount  – 21,958  (1,250 FTE count in Philippines)
• Net Addition – 566
• Full year Revenue (less repair)  - $582.5 million ($390.5 million) ( YoY +1.4%)
• Full year Net Income – $50.7 million ( YoY +8.6%)
•  

LEARNINGS

• Currency risks in existing contracts are primarily borne by the vendor. E.g. in the Aviva contract with WNS, there are no currency risks and given the volatility of the currency, customers like Aviva are reluctant to add any currency risks as part of the contract.
• Mid size firms like WNS continue to struggle with distinguishing themselves in a crowded marketplace and commoditized service offerings. Being vertically focused helps to win business but also has the challenge when those verticals are down e.g. Travel, Insurance for WNS.
• Firms like WNS have to also look beyond BPO offerings to grow their organizations and partnership model might be one of the potential scenarios which works for WNS.
• Outsourcing in BPO is a buyers market and companies looking to offshore should leverage this opportunity to be selective about the vendor or partner they would like to work with.
• Mid size firms will continue to struggle for next few quarters as they fight hard to position themselves in the changing marketplace.

FACTS

• 27 new clients this quarter
• 121 clients for the fiscal year FY10
• Wipro signed up  major deals in
  • Insurance Space – Main Street America ( IT Services),
  • Retail – Best Buy ( IT & offer lab for innovation services),
  • Consumer product firms ( infrastructure deal)
  • Pharma (IT support)
• Wipro launched two platforms in retail domain around – Loss Prevention & Customer Experience.
• Launched an IT Cloud Advisory & Assessment service
• Total of 16 clients with revenue > $50 million per year
• Total # of active customers – 845, Top 10 provide 19.7% of the revenue
• Strong growth in telecom, health, Energy & Utilities & BFSI

METRICS

• Revenues (IT Services) – $1.166 billion QoQ (+3.5%) YoY (+11.5%)
• Total Revenues for quarter – $1.55 billion ( IT Services 75% of total revenues, IT Products 14%, Consumer Lighting – 8%)
• Net Income – $269 million, YoY (+21%)
• Total Revenues for the year – $6.03 billion ( 6% YoY), $4.390 billion ( IT Services revenues – growth of 1.8% YoY)
• Total Net income for the year – $1.02 billion ( 18% YoY)
• IT Product revenue grew 11%
• Net addition for quarter of 5,325 employees
• Total employee strength  (a/o March 31^st, 2010) – 108,071
• Revenue Guidance for Quarter ending June – $1.190 to $1.215 billion
• Attrition Rate – 12.1% ( IT Services – Voluntary), 1.5% (IT Services – involuntary)
• BPO Attrition rate – 15%,
• Utilization Rate – 71.5%
• Revenue break up – North America – 57.9%, Europe – 26.2%, Japan- 1.6%, India & Middle East – 8.5%
• BFSI- 26.0%, Technology,Media & Telecom  – 26.2%, Retail & Transportation -15.0%, Manufacturing – 15.2%, Hi-Tech – 5.1%, Energy & Utilities – 9.1%, Healthcare & Services – 8.5%
• Application Development & Maintenance – 39.3%, Infrastructure Services – 21.1%, Packaged Implemention – 13%, Testing Services – 11.8%, BPO – 10.6%,  Product Engineering – 4.2%, Consulting – 2.3%

LEARNINGS

• Budgets to be up this year and budgets will be spend this year.
• Wipro is making a strategic decision to hire local and build delivery centers ( although significantly smaller in size) across US, Australia and other locations. 56% of sales team are local.
• Wipro is one of the largest outsourcing vendor with reducing dependence on Application Development & Maintenance as the core revenue engine. Wipro has been able to diversify more effectively in other areas of business compared to other outsourcing vendors including areas such as Eco-Energy, Defense, Product Engineering, Infrastructure management.
• Large organization starting talking about clouds as companies still looking to understand cloud solutions as vendors jostle to position themselves as cloud service providers. So everyone is learning on the job and positioning in anticipation of growth of cloud solutions. Emerging markets seem to be good test bed for some of the outsourcing firms as they offer services to mid size firms in developing markets.
• Fixed price has higher margins for firms than T&M contracts. The ratio of fixed price to T&M contracts though remains constant within outsourcing firms.
• Pricing will continue to be flat to marginal increase.
• Vendor consolidation, when markets were slow was a major exercise although it seems to have subsided now.

DATE: APRIL 19th, 2010

FACTS

• 39 new clients
• Signed a deal work more than 500 million dollars (TCS wins the UK Government 10 year, £600 million deal), a number of 100+ million dollars. Healthy pipeline of deals between 50 to 500 million.
  • 100 million dollar deal with global electronic conglomerate for infrastructure management
  • European headquartered financial services firm selected TCS to provide IT,BPO,KPO, infrastructure services.
• 25% of revenues coming from non application development(non-IT) services including infrastructure management, products, BPO & assurance
• Pricing is flat with a marginal up-tick
• Healthy pipeline of deals in the 50 to 500 million dollar range. Signed 10 deals above 50 million dollar multi year deals.
• Sees recovery in the business as all the verticals are flat or have an up-tick
• Will spend around 193 million dollars in raises and promotion related expenses.
• Took a hit of 1.1% due to currency fluctuation
• Financial Services & Insurances leading the recovery, Telecom showing an upward trend.
• Europe recovery is still lagging behind US and TCS has a cautious approach around European recovery

METRICS

• Revenues – $ 1.686 billion QoQ (+3.07%) YoY (+17.61%)
• Net Income – $420 million QoQ(9.69%), YoY (+59.69%)
• FY10 Total revenues – $6.34 billion (YoY +5.38%)
• FY10 Total Net profit – $1.45 billion (YoY +29.01%)
• Yearly volume growth 17%

• 16,851 gross, 10,775 net additions of employees this quarter (Highest gross addition)
• 160,429 employee strength end of March 2010
• Attrition Rate – 11.8% ( compared to 11.6% last quarter)
• BPO Attrition rate – 18.8%, IT attrition rate – 11.0%
• Utilization Rate – 81.8%
• Pay raises of 10% offshore ( India) and 3-4% onshore
• Yearly addition of employees – Gross -38,063, Net – 16,668
• 30% workforce is women, 10,700 non Indian employees, 57% of workforce has more than 3 years of experience.
• Large number of trainee recruiters last two quarters and the ratio will continue to be around 70:30. 70% freshers and 30% lateral hires. Cost of labor remained same from Q3 to Q4.
• 20,000 campus offers for FY11 (entry level)

• Revenue break up – North America – 54%, UK – 15.2%, Continental Europe – 10.0%, India – 8.9%
• BFSI- 44.4%, Retail & Distribution – 12.3%, Telecom -12.1%, Manufacturing – 8.3%, Hi-Tech – 5.1%, Life Sciences & Healthcare – 6.1%
• Time & Material – 51.3%, Fixed Price – 48.7%
• BPO Services – 11.5% , Infrastructure Services – 8.3%, Consulting – 2.5%, Application Development & Maintenance – 47.6%

LEARNINGS

• US markets are and will continue to be key drivers for growth for outsourcing vendors and recovery in US markets directly impact the growth of offshoring vendors. Emerging markets are growing and will contribute to growth of outsourcing although the total impact on revenues will still be minimal.
• Market seems to be settling in the pattern of larger deals for cost management initiatives and smaller, phased deals for transformation initiatives.
• India based firms like TCS are working hard to create a global brand although their largest composition of employee base still remains India centric (93.3%).
• Larger outsourcing firms are looking at diversifying their portfolio of services. Infrastructure services, product engineering, BPO, life science analytics are a few of the areas where firms see a growth outside of pure application development and maintenance activities.
• Marketplace is still evenly divided in fixed price and time & material deals. There are new innovative deal structured being put in contracts but reality of the marketplace is that very few processes or relationships have matured to a stage to really leverage those new structures.

Additional links:

Infosys Q4 2010 earnings – Facts,Metrics & Learnings
iGate Q1 2010 (March 2010) earnings – Facts,Metrics & Learnings
Accenture Q2 2010 results – facts, metrics & learnings

FACTS

• 7 new clients.
• Number of new key hires
  • David Kruzner to lead Consulting and Solutions Development. 
  • Patrick Burke to lead strategic account pursuits.   
  • Ari Aaltonen to head Europe Sales. 
  • Elizabeth Koshy to lead new account pursuits in Media and Entertainment vertical.
  • Tim Relke joins to lead new account development in Canada.
• Growth in Financial services segment.
• Expecting 5-8% topline growth next couple of quarters. Higher if the economy recovers stronger than expected
• Margins will continue to under pressure due to currency fluctuation, wage inflation and increased hiring.
• RBC and GE continued to remain the top customers contributing to 50% of the revenues. Largest customer ( GE) accounted for 33% of their revenues. Top 10 customers accounted for 83% of their revenues.
• 70% of iGate revenue not T&M based.
• Building Platform BPO solutions for Policy Administration in Life Insurance and Mortgage Loan Modification solution. Will contribute to BPO revenues in 2011.
• Looking for acquisitions in healthcare and financial services BPO.
• BFSI accounts for around 58% of iGate Revenues.
• North America accounts for around 50% of their revenues and Canada around 29% ( RBS)

.

METRICS

• Revenues – $57.9 million QoQ – (+29.2%)
• Net Income – $11.6 million QoQ – (+132%)
• Cash – $ 100.3 million
• Gross Profit margins -40.1%, Net Profit Margin – 20.1%
• 7,357 employees end of March, 2010
• 447 net addition this quarter
• Increased estimate of new employee additions from 500 to 700-750 for rest of the year.
• BPO – 15% of the revenues.
• Igate does not provide attrition numbers.

LEARNINGS

• US and BFSI continues to be the driver for growth of outsourcing activities. With job growth in the US and Europe still very muted , a number of companies have started ramping up on outsourcing.
• Interesting comment from the CEO around first time outsourcers and how those are more reluctant to do offshoring during bad economic conditions. The companies which have done some offshoring in the past have a longer engagement model.
• Attrition and the currency fluctuation are two of the biggest challenges  for offshore providers. A number of the vendors have tried to work the currency risk into their contracts but have not bee successful in sharing the risk with clients.
• Phaneesh Murthy was open in accepting that Tier 2 vendors like iGate don’t have any unique competitive advantage over Tier 1 players but building strong relationship, offering  integrated solution for IT/BPO, building domain expertise are some things mid size firms need to work on.

DATE: APRIL 13th, 2010  

LEARNINGS

• US markets are and will continue to be key drivers for growth for outsourcing vendors and recovery in US markets directly impact the growth of offshoring vendors.
• Discretionary spending is ticking back up and budgets for offshoring will continue to increase.
• Firms are looking past cost cutting and figuring out how they grow their business and the changes required to technology to meet those demands are growing the offshoring demand.
• Large offshore initiatives still slow to kick off. Companies looking at smaller short term initiatives with tangible results vs longer multi year transformation deals.
• In BFSI space, looks like the charge of transformation projects has moved out from IT to businesses. So IT budgets earlier allocated for IT transformation are now run as programs by businesses.
• Attrition will be a challenge and firms like Infosys are  changing HR career tracks, giving higher raises  to hold on to employees as the market picks up.

FACTS

• 47 new clients ( highest over the last many quarters)
• 126 Fortune 500 clients
• 338 million dollar clients, 26 50+ million dollar clients
• Top client contribution of 4.6% of revenue
• 4 transformation project wins this quarter  – 2 of them are 50 million dollars+. Discretionary spending is ticking back
• Building new service offerings and growing niche services – IP based solutions, Learning Services, Engineering Services,
• Last year pricing declined by 1.5% blended rate.
• Margin decreased by 100 bps to 30.1%. 
• Most clients closed their budgets – budget are flat or marginally up. Clear signals that offshoring spend of IT budgets will go up.
• Global economy still remains challenging. Clients starting to invest in growth when the downturn is over, discretionary revenues – SI, consulting revenues gone up  23% to 26%
• Sold 60% in OnMobile Inc, still holds 40% of the firm
• Growth in Europe – Manufacturing, Banking from UK, Energy and Utilities , Retail and Consumer Products.
• Budget processes within client organization closing on time though the controls in place for money disbursement are more stringent.
• Building new career architecture – moving from delivery only focus to domain expertise, solutions, sales model. Performance has become more sharply defined. Infosys HR strategy over next couple of years to build a model to equate higher performance to billing rate
• Domestic delivery capability expansion in SEZ zones and not in STPI.
• January/February targeted poaching from competitors, employees leaving for higher studies has had an impact on attrition this quarter.

METRICS

• Revenues – $1.296 billion QoQ – (+5.2%), YoY – (+15.6%)
• Net Income – $349 million QoQ – (+4.5%), YoY – (+8.7%)
• Earnings forecast for next quarter – between 1.33 to 1.34 billion YoY growth between 18.5% to 19.5%
• Fiscal 2011 revenues forecast to grow 16-18%
• Cash – $ 4.66 billion
• FY10 Total revenues – $4.8 billion (YoY +3.0%)
• FY10 Total Net profit – $1.3 billion (YoY +2.5%)

• 9,300 people gross, 3,914 net addition of employees this quarter
• 113,796 employee strength end of March 2010
• Attrition Rate – 13.4% ( compared to 11.6% last quarter)
• Adding 30,000 people next year
• Pay raises of 14% offshore ( India) and 2-3% onshore
• Infosys BPO employee strength – 17,932, Australia – 362, China – 1,765, Consulting – 594, Mexico – 346

• Revenue break up – North America – 66.1%, Europe – 22.5%, India – 1.4%
• Application Development – 39.6%, BPM – 6.2%, Consulting Services and Package Implementation – 26%, Infrastructure Service – 7.2%, Product Engineering Services – 1.8%, SI – 4.5%, Testing Services – 6.6%
• Insurance,Banking – 34.8%, Manufacturing – 20.2%,Retail -13.%, Telecom -5.3%, Energy & Utilities – 5.8%
• BPO Revenue (millions USD) – 80.67, Consulting – 35.90,  China – 14.05
• BPO Net Income (millions USD) – 12.67, Consulting – 23.74, China – 1.78

 EARNINGS FOR LAST QUARTER TO COMPARE (Q3, 2010 – DEC 2009 earnings):

FACTS

• 32 new clients
• Growth of 12.2% in their Top 10 clients which contribute to 27.5% of total revenues – Going deeper within existing clients
• Stabilization in pricing. Pricing up 1.1%
• Growth in BFSI, Energy,
• Manufacturing,Telecom, flat
• Retail lagging
• Growth in US geographies, Europe still lagging
• Net addition of 4,429 people this Quarter
• Total employee strength 109,882
• Attrition at 11.6%
• Plans to hire 6000 people in Q4 FY10, total hire for FY10 24,000. This is higher than 20,000 projected last quarter
• Infosys BPO total strength 16,874, net addition 841
• Setup Infosys Public Services Ltd in the US with a capital base of $ 5 million to pursue Federal/State Government deals in the US
• 119 of the Fortune 500 companies are clients of infosys
• McCamish Acquisition added 1.9 million in revenue for BPO this quarter,Q4 expected to be $7 million contribution
• Introduced Flypp – platform for app store for small to medium sized telecom service provider
• Infosys Consulting and China subsidiaries profitable. China operations servicing non-domestic market primarily.
• 1,600 people in China

METRICS

• Revenues – $1.232 billion QoQ – (+6.8%), YoY – (+5.8%)
• Net Income – $334 million QoQ – (+5.4%), YoY – (+.6%)
• Fiscal Year 2010 ( ending March 2010) Guidance – $4.75 – $4.76 billion, YoY growth 1.8% to 2.0%
• 3.1 billion dollars in cash
• Revenue break up – North America – 66.6%, Europe – 21.9%, India – 1.2%
• Application Development – 42.3%, BPM – 5.9%, Consulting Services and Package Implementation – 23.3%, Infrastructure Service – 7.1%
• Insurance,Banking – 34.6%, Manufacturing – 19.3%,Retail -13.1%, Telecom -16.2%, Energy & Utilities – 6.1%

LEARNINGS

• US markets are and will continue to be key drivers for growth for outsourcing vendors.
• Some of the large vendors like Infosys are leveraging their innovation and the market changes to offer services and products which fit the new paradigm. New pricing models, building platforms like Flypp are some of the product innovations coming from Indian vendors.
• Financial services firms continue to be the drivers for growth for outsourcing vendors. With the industry maturing and a number of financial firms busy with risk management, regulatory, M&A activities are leveraging outsourcing providers to manage cost and create services.
• Cost reduction and cost management continues to be the number one reason driving offshoring activities.
• Cloud competing still lagging in the developed countries. Infosys sees emerging countries leapfrogging and adopting cloud computing earlier.

DATE: March 30th, 2010

Accenture Earnings – Quarter ending 2/28/2010
Release Date : March 25^th, 2010
FACTS

1. Management Consulting – Demand continues primarily in strategic sourcing and customer relationship management in addition to risk management and post merger integration.
2. In Technology Consulting demand driven by infrastructure consolidation and virtualization, security, and IT governance.
3. Decline in Health & Public Services revenues for Accenture due to issues with an existing contract. Continues to see uncertainty in Public Services around the world. 
4. Decline in Communications and Hi Tech verticals.
5. Financial Services increase in revenues primarily due to risk & regulatory work, post merger integration.
6. Pricing stable in higher value management consulting, IT consulting. Outsourcing has seen a down tick in pricing.
7. North America still the  lion share for consulting, outsourcing.

 METRICS

Quarterly Revenues – $5.2 billion a 2% decrease YoY

Net Income – $462 million a decline of 8% YoY

Operating Margin – 12.6%

Cash Balance – $ 4 billion
Consulting revenues – $2.93 billion, a decrease of 3% in US dollars

Outsourcing revenues – $2.24 billion, flat in US dollars
Global Headcount of 181,000

Global Delivery count – 88,0000

Attrition rate – 15%  (including involuntary attrition)
Hiring plans for the year – 50,000 globally.

Utilization Rate – 88%

New bookings for this quarter – $6.52 billion

Consulting – $3.39 billion
Outsourcing – $3.13 billion

LEARNINGS

1. Financial Services continue to be the leader in driving outsourcing/offshoring revenues
2. Transformation projects no longer long term initiatives. Clients looking for quick hit projects and using a bottom up approach to build on transformation rather than a top down approach.
3. Projects being broken down across multiple suppliers
4. Europe will continue to be challenged from on outsourcing perspective as the economies and politics of public sector offshoring create uncertainty in the marketplace for vendors.
5. Deal size will continue to remain small as companies bite into smaller chunks of outsourcing deals and grow from there. Larger deals , the ones before the crisis will not be the norm anymore.
6. Vendor consolidation activities which were fairly high in the last 18 months seem to have tapered off and clients are now focusing more on multiple vendor strategies vs trying to consolidate vendors.
7. Companies starting to cautiously get into new initiatives this budgeting cycle.
8. Demand for ERP, SAP projects is higher although the size of the initiatives is smaller

Mohit Sharma is the CEO of Corrystone Global Partners. Corrystone is a specialized globalization  firm providing advisory, training and staffing services to firms in  US and India. We work with  firms in the US  which are exploring low cost options for IT, Business Process work and  looking at ways to further optimize cost and manage operational risk. For firms based in India  we help with marketing presence , M&A & client management services in the US. Contact us at info@corrystone.com  to learn more about how we could help you.

DATE: Feb 9th, 2010

FACTS

• Broad based growth in all verticals 
•  North America continues to be the leader in percentage of revenues for the year and quarter
• Added 57 new clients and strategic clients increased by 5 to total of 144. Total number of active clients 589.
• Incremental and smaller discretionary projects coming back but clients not willing to commit to large discretionary projects
• Inorganic focused growth strategy and alliances continues to strengthen service offerings , vertical expertise and new geographies
• Does not plan to do large scale asset transfers for IT infrastructure services.

METRICS

• Gross Revenues – $902.7 million  YoY – (+20%), QoQ – (+6%)
• Net Income – $144 million YoY – (+28%)
• Fiscal Year 2009 revenues – $3.279 billion YoY (+16%)
• Fiscal Year 2009 income – - $535 million YoY(+24.2%)
• First Quarter 2010 revenue guidance – $935 million
• Fiscal 2010 revenue guidance – $ 3.935 billion
• $1.55 billion cash , no debt
• Revenue breakup by quarter
  • Banking and Financial Services – 41.9%
  • Healthcare and Life Sciences – 26.6%
  • Communications, High tech and Media – 13.4%
• Revenue breakup by geographies
  • North America -  78.8%
  • Europe – 18.6%
  • Others – 2.6%
• Revenue breakup by services
  • Application Management – 56%
  • Application Development – 44%
• People added this quarter – 10,300 (including UBS acquisition)
• Total employee strength – 73,400
• Offshore/Onshore employee ratio – 77/23
• Attrition 4^th quarter – 11.2%
• Salary increase in June quarter – market rate

LEARNINGS

• Cognizant is building a strong talent base and investing in client facing talent and integrated services offering which will continue to benefit Cognizant and maintain leadership position.
• Market business environment is stable and outsourcing could be a larger spend of the IT budgets.
• IT infrastructure Services, BPO will show growth and positive contribution to Cognizant as they tap into their existing clients to offer these services.
• Changing Industry trends will drive how companies use outsourcing. The trends could be digitization, disintermediation and other industry secular industry trends which are driven across different verticals.
• Cloud computing is still in discussion but has not affected and will not affect short term how outsourcing relationship are currently being drawn out.