Global-O&O

Quarterly Revenues: $1.32 Billion (YoY: 42.9%, QoQ: 4.6%)
Net Income: $208.3 million ($151.5 million last quarter)
Net headcount addition for quarter: 7,200. Net addition of 1,400 people in the US, building the Phoenix development center.
Total Headcount: 111,200 (YoY: 25,700)
Annualized Turnover: 15.1%
Guidance:
Second Quarter revenue: $1.45 billion
Fiscal 2011 revenues: $5.925 billion ( up 29%)
Cognizant Ranked 484 in the Fortune 500 firm with $4.59 billion in revenue for 2010.
714 Clients compared to 597 last year.
173 Strategic Clients : Revenues of $ 5 million to $ 50 million per year in steady state.

Top 5 Customers generate: 17.0%
Top 10 Customers generate: 28.8%. Top Ten Clients accounted for $100 million dollar in revenue.
Operating Margin: 19.4% compared to 19.1% last year.
Increase in Operating Margins: Increase in pricing, operating efficiency and offset by increase in salaries.
Using the extra profitability above the margin for:
1. Hiring Client Partners and Relationship Managers with specific domain expertise
2. Training technical staff in broader range of capabilities
3. Strengthening Business Analytics Capabilities
4. Continue to broaden geographic reach
5. Rewarding high performers
New construction of 8.0 million sq. ft of new development. Expenditure of $ 500.0 Million between 2011 and 2014.
Short term cash and cash equivalent of $2.18 billion

Continues to build their Cognizant Business Consulting Practice. Currently 2,500 consultants with higher utilization and bill rate. Cognizant sees growth in areas outside of it’s traditional application development and maintenance areas such as business analytics, IT infrastructure and BPO outsourcing.
By Segment:
Financial Services: $569.9 Million ( $398.7 last Q)
Healthcare: $349.0 Million ( $252.4 last Q)
Manufacturing/Retail/Logistics: $274.3 Million ( $173.1 last Q)
Others: $178.0 Million ($135.5 last Q)

Financial Services Area: 41.6 % of the Revenue
2.8% Sequential Growth, 43% Year on Year Growth. Earlier activities were supporting M&A activities within the financial services. Continue drive to manage cost, grow operational effectiveness plus invest in new areas such as mobile and social CRM platforms and technology refresh of legacy platforms.
Healthcare: 25.4% of the Revenue
2.9% Sequential Growth, 38% Year on Year Growth. Cognizant saw a growth in consulting revenues in this segment as companies look to transform clinical and commercial processes, medical claims analytics, expansion of BPO capabilities including clinical operations, claims, benefits coding and enrollment, code set 5010 testing work and ICD-10 assessment and remediation work and platform modernization initiatives.
Manufacturing, Retail & Logistics: 20% of Revenue
12.7% Sequential Growth, 58.7% Year over Year growth. Demand within this segment was driven by continued demand for large-scale transformational and systems integration projects among our major Manufacturing clients. Increased demand from our Retail clients for both development projects and core Retail systems, as well as Business Transformation projects, focused on multichannel e-commerce integration, and Consulting work and global distribution in Logistics, as well as development of enterprise, architecture strategies and intelligent store concepts.
During the Quarter Cognizant continued the program of eliminating smaller clients.

Planned wage increases in 12 to 14% range for employees.

Businesses still prefer to keep their finance and accounting operations in-house despite outsourced processes proving more efficient.

Research from Ovum reveals many CFOs have no appetite for offshoring finance and accounting. This is despite the testimony of CFOs who have outsourced, claiming efficiency has improved.

Ovum found CFOs at US and UK companies with turnover greater than $500m are less certain of the benefits of offshore finance and accounting than they are of cloud computing strategies.

The biggest barrier to offshoring finance and accounting is loyalty to in-house workers, with 44% of companies revealing this as an obstacle.

Peter Ryan, Ovum lead analyst, said: “We don’t know if this is due to a sense of responsibility for their staff or a desire to keep their skills, but it is likely to be a combination of the two.”

Concerns over losing control and over whether savings targets would be hit were seen as obstacles to 31% of respondents.

Cognizant recently got added at 484 to the fortune 500 firms list. A company started 14 years back and prides itself as a start up has managed to overtake a # of larger Indian firms and will over take Wipro next quarter. It declared strong results and better guidance than it’s rivals.
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After registering strong results over the past several quarters, IT Company Cognizant Technologies has now entered the list of Fortune 500 companies.

The Fortune Magazine’s ranking of America’s largest companies, lists Cognizant at number 484, with $4.59 billion in annual revenue for 2010.

Cognizant has managed to enter the list in just three years after it made it to the Fortune 1000 list. The NASDAQ listed company has over 80 per cent of its operations and over 90 per cent of its workforce out of India.

Cognizant has continuously managed to deliver double digit sales and revenue figure for nine straight quarters. The company has also guided to go beyond revenues of Wipro in the next quarter to become the third largest IT exporter out of India. As of March 31, 2011, Cognizant employed approximately 111,000 people worldwide serving over 700 clients.

Cognizant is set to overtake Wipro as the third largest Indian IT exporter in June.

“Since our inception just 17 years ago, we have built a new business model for consulting, IT and business process outsourcing services—combining our high-touch approach to client engagement and a depth of industry expertise with high-quality solutions and global footprint—to deliver a distinctly superior experience to our clients,” said Francisco D’Souza, president and CEO of Cognizant.

Cognizant Technology Solutions posted better-than-expected first quarter earnings and forecast strong second quarter revenues of $1.45 billion, which will help the multinational overtake India’s third biggest software exporter Wipro in quarterly revenues later this year.

Nasdaq-listed Cognizant said its January to March revenues grew by 43% from the year ago quarter and by 4.6% sequentially on strong demand from its top market US. Cognizant’s net profit for the quarter ending March were $208.3 million up 37.5% from last year.

The company, which counts JP Morgan and several top healthcare firms as its customers, grew revenues and profit in contrast to the disappointing fourth quarter earnings growth reported by Indian rivals Infosys and Wipro. While Infosys, the country’s second biggest software exporter reported 1.1% sequential revenue growth for March quarter, Wipro provided negative forecast for the April quarter
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Twenty Years till date, the Software Technology Parks of India (STPI) scheme started June 5^th, 1991 (Sun Sign: Gemini) was established by the Indian Government is finally no more. This budget season, early March, the Indian government finally sunsets the STPI plan which many believe played an important and crucial part in helping Indian firms be the outsourcers of the world. Back in 1991 when Apple was still a fruit, blackberry was also a fruit which few people around the world knew about,  Microsoft was ‘The King’, there were no “I” centered gadgets like Ipod, Ipad, Itouch, the STPI scheme was established by the Indian Government to promote Software Export, Training and Development from India to rest of the world.  

In those as some would argue ‘ the good old days’ when connectivity was expensive or not available, the idea was to provide reliable facilities to companies engaged in software export to be able to support report functions such as software development, maintenance and for firms to be able to execute projects in India at lower cost and leveraging the talent base in India. The STPI’s actual IT parks established around the country in places like NOIDA, Mohali, Bangalore, Pune to name a few were located with excellent infrastructure ( relatively speaking) so software exporters could use those facilities for data connectivity.  In exchange for using these parks the software exporters had to guarantee a minimum export obligation for  a whopping $250,000 dollars for five years or 3 times the cost of capital goods imported. (FACTS: India IT/ITES export for 2010 at $59 billion) The process to obtain an STPI license (yes it was still the license raj) was to be streamlined and a ‘single window clearance’ was established.

Over the next twenty years , the software export markets from India exploded and then niche firms turned into global offshoring giants, firms such as TCS, Infosys, HCL, Wipro which did not exist in their current form or shape twenty years back. STPI also helped firms which were niche players and smaller players to leverage the tax holiday to grow their exports.

The biggest hit with the export firms would be the increase in the effective tax rate as the STPI tax holiday comes to an end.  For the last couple of years during the budget season, the IT industry continued to hope that the STPI tax holiday was extended and it did happen last year when the STPI scheme was extended by a year.

A number of larger firms over the last few years have also been taking advantage of the Special Economic Zones (SEZ)  and moving their operations and delivery centers to these locations with the anticipation that the STPI will be sunset some time.

For a number of mid size firms this journey has been less effective as the cost of entry into SEZ is higher and capital intensive and some of the mid size and smaller firms are not able to take advantage of these zones.
The smaller and mid size firms will be the ones’ which will see their effective tax rates go higher due to the STPI sunset.  

The industry has overall reacted with disappointment to the news abut STPI but it has to now look at ways to innovate and figure out ways to continue to grow despite the set back.  The overall positive in the marketplace seems to be that the demand has come back for outsourcing and although not at the highs pre financial crisis ( and may never be that level), the overall sentiment in the market seems to be positive.   With the fast pace of change in consumer and enterprise technologies, the talk about the cloud, acceptance of outsourcing as standard business practice and globalization, not just India centric growth should create new models for growth for the industry.

For someone looking to see where was 1991:

a)      Internet made available for commercial use – number of users top 1 million

b)      First Version of Linux released

c)      Microsoft release MS DOS 5.0

d)     The web browser is introduced.

e)      Steve Jobs using Chalk Talk to introduce NEXT computers

Syntel headcount:  17,383 up 30% from 2009.
Annual revenue for 2010: $532.1 million ( compared to $419 million 2009).
Earnings: $113.6 million ( compared to $118.5 million)
4th quarter net income down 17% – $29.8 million. Companies spending on smaller technology projects..
Top 3 clients represent 50% of revenue.

Wipro Technologies has launched a Mobile Computing Lab at its Atlanta Strategic Delivery Center to fuel a mobile IT ecosystem.

The lab will bring together leading mobile technologies to enable US carriers to plan and manage new mobile applications and devices that enhance the user experience and help enterprises be more competitive, according to Wipro officials.

“The launch of the Wipro mobile computing lab represents a milestone in our effort to build a mobile ecosystem to drive the development and launch of mobile applications and next-generation devices,” said Sid Nair, Chief Sales and Operations Office, North America, Wipro Technologies, in a statement.

“There is a huge growth in terms of the number of devices. There is a growth in terms of the number of operating systems out there, and there is huge growth in terms of opportunities to develop [mobile] applications,” Nair said during the lab’s ribbon cutting ceremony.

With the addition of the Mobile Computing Lab, Wipro will offer subject matter expertise and end-to-end mobile application lifecycle management—from development, validation and testing to deployment, on new and next generation devices, according to officials.

From its Atlanta Delivery Center, Wipro provides enterprise applications services, enterprise security solutions. business process outsourcing, business intelligence and information management, technology infrastructure services, and testing services for a range of clients in IT telecom, banking, financial services, manufacturing, healthcare and retail.

Wipro provides enterprise mobile solutions for Business to Business (B2B) and Business to Consumer (B2C) environments, including consulting, system integration, development, GPS solutions and application design and development support services.

Wipro has done key implementations across industries on the industry standard B2B mobile devices such as Motorola, Intermec, PSION, etc., and B2C mobile devices such as iPhone, Blackberry, Windows mobile and other handheld devices.

SOURCE: CallCenter Services
DATE: Feb 22nd, 2011

Officials with Wipro Technologies said that the office will serve as the company’s Canadian headquarters as it plans to intensify its focus on Canada as one of the strategic geographies supporting Wipro’s growth.”The opening of our office in Mississauga, Ontario not only extends our local presence in Canada, but also demonstrates our commitment to our customers and partners in the region. This move also strongly reflects the strategic importance of the Canadian market in Wipro’s growth strategy,” said Chris Lord, vice president and country head, Canada for Wipro Technologies, in a statement.

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SOURCE: EconomicTimes
DATE: Feb 23rd, 2011

Back office firm EXL Service are in talks with mid-sized L&T Infotech to sell their stake in the Nasdaq-listed company, at least three people familiar with the discussions said.

Institutional shareholders such as Aviva Investors Global Services, Blackcock Advisors LLC, TimesSquare Capital Management, Wellington Management, with at least 12 other investors hold around 53% in the company. About 24% in the BPO firm is held by Mutual Funds.

“L&T Infotech board has been in talks with EXL Service top management for a possible stake buyout in the BPO, but the talks have still not concluded,” one of the officials familiar with the discussions said on conditions of anonymity.

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A # of smaller and mid size firms continue to hope that the Indian government in their budget will extend the tax holiday for STPI but looks like the chances of that happening are very bleak. The direct impact will be to firms, mostly small and mid size for whom entry into SEZ is expensive , the margins of such firm will be directly hit.

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