Monthly News International
Indian Outsourcers Still Growing
Cognizant Technology Solutions Corp. announced very strong third quarter financials while Tata Consulting Services (TCS) was not far behind in its second quarter results. Additionally, Infosys Ltd. reported strong second quarter earnings.
- Cognizant reported third-quarter revenues of $1.6 billion, up 32 percent from a year ago when it had revenues of $1.2 billion. On a GAAP basis, net income was $227.1 million, an increase of 11 percent from $203.7 million in the same quarter in 2010. Its two largest sectors are financial services and healthcare. Healthcare revenues grew almost 42 percent year over year. The quarterly attrition rate was 13.4 percent, mostly in India.
- TCS announced it had second quarter 2012 revenues of $2.5 billion, an increase of 26 percent from the same period last year. On an IFRS basis, net earnings were $528 million, a 15 percent growth from the $459 million it earned in the previous year's quarter. The company derived 45.3 percent of its revenues from the banking, financial services, and insurance (BFSI) sector, which grew 24.4 percent year over year. The company has increased its headcount to 214,770 employees and is experiencing an attrition rate of 13.7 percent.
- Infosys reported second quarter 2012 revenues of $1.7 billion, a jump of 17 percent from the same quarter in 2011 when it had revenues of $1.5 billion. On an IFRS basis, net earnings were $411 million, an increase of 10 percent from the previous year's quarter when it earned $374 million. The company derived 35 percent of its revenues from the BFSI sector, with manufacturing its next largest segment. The sectors grew 16 percent and 24 percent, respectively. Total employees have grown to 141,822 even as the company is experiencing an attrition rate of 15.6 percent.
Experton Group believes the Indian IT services and outsourcing firms are weathering the global financial crises well as they continue to expand their share of overall services revenues. As companies seek to contain costs, the Indian companies are able to garner more business, especially by expanding within their existing customer base. The better performing firms have been able to convert their customers to higher-value consulting efforts and/or fixed price contracts, which give higher margins. Because they have done so well, discounting is not as deep as before. IT executives can expect the larger Indian IT services and outsourcing companies to push into new markets – i.e., new geographic regions, industry sectors and/or service offerings – as well as pursue higher value consulting. Cloud computing should not dampen their outlook but will be another area where they will attempt to garner market share. Even though fixed price contracts may have a higher run rate, IT executives should consider them a good bargain if they can lock in the right skilled staff, gain additional controls and commitments, and thereby reduce turnover.
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