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8/2/2019 IT-BPO Industry Insights Nov2011
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Research & Intelligence
QUARTERLY INDUSTRY REVIEWNOVEMBER 2011
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Copyright 2011
NASSCOM
International Youth Center, Teen Murti Marg, Chanakyapuri,
New Delhi 110 021, India
Phone: 91-11-23010199, Fax: 91-11-23015452
E-mail: [email protected]
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Report Coverage
SECTIONS COVERAGE
Analysis of key economic indicators - GDP, Inflation, Stock Market,Employment Growth and Technology indicators
Analysis of Indian IT-BPO industry performance during the quarter.The analysis is based on the results declared by the top 151 India-centric IT-BPO companies which comprise about 40-45% of the
industry
Analysis of results of key MNC IT-BPO industry players. Policy changes, industry news and happenings, analyst speak
Key developments among the top companies covering transactionactivity, M&A announced, Alliances and partnerships signed, Changes indelivery footprint
ECONOMY WATCH
INTERNATIONALSECTION
SUPPLIEROVERVIEW
1: Includes TCS, Infosys, Wipro, HCL, Cognizant, Hexaware, Patni, Polaris, Tech Mahindra, Mindtree, Hinduja Global, WNS,
Genpact, EXL & Firstsource2: Includes IBM, Accenture, Capgemini, Atos Origin, Steria
INDUSTRYPERFORMANCE
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SECTION IMPACT COMMENTS
EconomyWatch Global macro-economic environment continues to remain uncertain.IndiaTechnologyIndicators
Mobile subscriptions, Internet Users, PC install base, and Broadband subscribersin India continue to grow substantially indicating the growing influence oftechnology
IndustryPerformance For the sample set, strong revenue growth of 4.9% in Q2FY12; Y-o-Y growth20.4%
Margins take a hit during the quarter mainly due to currency fluctuations and forexlosses
Q2FY12 employee base up by 20% YoY, 5.7% QoQ growth, FY2012 hiring targetsimilar to FY2011
Strong hiring momentum-while declining trend in attrition continues Net client addition regain lost momentum Revenue Drivers-
Geography- Emerging Markets ,RoW increasing steadily while Europemarket recovering gradually
Verticals-Manufacturing, Retail and Utilities, Serviceline-ER&D, RIM, Testing
GlobalLandscape Companies continued to grow despite stagnant macro-economic scenario Employee hiring remains steadySupplierOverview Global TCV market recorded remarkable steady growth and is expected to beback in line with pre-recession levels by the year end
Companies expanding their footprint by setting up centers in Tier-2 /tier-3 andonshore locations
SUMMARY
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Global macro-economic environment continuesto remain uncertain
GDP growthper cent
EmploymentGrowth
per cent
Inflationper cent
World GDP growth for 2011 and 2012estimated at 4.0%. Emerging / developingeconomies growing but outlook cautious
Employment growth in advanced economiesincreased marginally, unemployment still major
concern.
Inflation in USA projected to reduce in FY2012though the current levels substantially high inemerging economies fuelled by risingcommodity prices
-2.4%
0.6% 0.8%
2009 2010 2011
0.21.8
2.51.2
2009 2010 2011 2012
USA Inflation
0.7%
5.1% 4.0%
4.0%
2009 2010 2011 2012
Equity Markets
Equity markets have retreated specifically inthe European markets as a result of theimpending turmoil
63.4 63.652.2
70.7 76.0 79.5
Jan-09 Jan-10 Jan-11
DJ Euro Stoxx S&P 500
Source: IMF Global Economic Outlook, September 2011
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6
INDIA TECHNOLOGY INDICATORS
42.149.3
53.2
2009(Mar)
2010(Mar)
2010(Oct)
584.3811.6
865.7
2010(Mar) 2011(Mar) 2011(Aug)
8.8
11.9 12.7
2010(Mar)
2011(Mar)
2011(Aug)
13.5
16.219.7
2009(Mar)
2010(Mar)
2011(Mar)
PC INSTALL BASE MOBILE SUBSCRIBERS
BROADBANDSUBSCRIBERS INTERNET SUBSCRIBERS
Source: TRAI
million million
million million
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Q2FY12 revenue growth at 20.4% Y-o-Y, while Q-o-Q grows at 4.9%, Industry on track for FY2012 growth
of 16-18%
Margins take a hit as SG&A levels and forex losses continue to increase
Growth in Emerging Markets ,RoW increasing steadily, while Europe recovering gradually
Emerging verticals key growth driver with major verticals like Retail and Utilities growing their share
remarkably. Manufacturing reported a steady growth. ER&D, RIM and Testing main revenue drivers, BPO
covering lost ground
INDUSTRY PERFORMANCE
IT-BPO REVENUE GROWTH IT-BPO NET PROFIT MARGINS
10.3%
5.3%
3.9%
4.9% 4.9%
Sep-10 Dec-10 Mar-11 Jun-11 Sep-11
Strong positive quarter for IT-BPO companies,QoQ revenue growth of 4.9%
INDUSTRY PERFORMANCE
46.5
44.845.3
44.7
45.8
19.6%21.3%
20.3%
19.6%19.1%
Sep-10 Dec-10 Mar-11 Jun-11 Sep-11
INR/USD Rate NPM
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Q2FY12 employee base up by 20% YoY, 5.7% QoQ growth, FY2012 hiring target similar to FY2011
Larger companies hiring almost double compared to last quarter with freshers accounting for most of
the additions- points to strong demand scenario going forward
The attrition challenge seems to be cooling off- this quarter records the lowest during the last 6
quarters
IT-BPO NET HIRING ATTRITION
INDUSTRY PERFORMANCE
Strong hiring momentum-while declining trend inattrition continues
19.9% 20.0% 20.1% 19.5%17.1%
38.0%40.9%
42.6%40.7%
37.5%
Sep-10 Dec-10 Mar-11 Jun-11 Sep-11
IT Services BPO
34 32 29 26
40
5.8%
5.0%4.3%
3.6%
5.4%
Sep-10 Dec-10 Mar-11 Jun-11 Sep-11
Net Hiring Change in Total Employee Base
000 Numbers
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9
Fixed price contracts continue to fall as customers restructure contracts
Client addition increases this quarter after witnessing a lull, as customers look at renewing contracts
INDUSTRY PERFORMANCE
REVENUES FROM FIXED PRICE CONTRACTS
42.1%
43.5%
43.2%
42.9%
42.3%
Sep-10 Dec-10 Mar-11 Jun-11 Sep-11
NET CLIENT ADDITIONS
Note: The set includes only IT Service companies
Indian companies regain lost momentum withnew client additions while fixed priced contractsfall further
Numbers
32723328
34033464
3531
69
56
75
61
67
15
35
55
75
3100
3200
3300
3400
3500
3600
Sep-10 Dec-10 Mar-11 Jun-11 Sep-11
Number of Active clients
Net Client addition
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With companies focusing on increasing operational efficiencies and investing for future growth, there is a
steady increase in SG&A expenses
SG&A levels highest in last two years, growth in this quarter the fastest QoQ growth in last two years
INDUSTRY PERFORMANCE
SG&A Growth SG&A as per cent of Total Revenue
Note: The set includes only IT Service companiesSG&A: Sales. General & Administration
Increase in SG&A as companies start investingfor growth
14.3%
16.1%15.9%
16.1%16.4%
Sep-10 Dec-10 Mar-11 Jun-11 Sep-11
11.5%12.3%
3.7%4.5%
9.0%
Sep-10 Dec-10 Mar-11 Jun-11 Sep-11
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INTERNATIONAL SECTION
Despite the turmoil in the global economy, IT-BPO companies maintain growth momentum
REVENUES TOTAL EMPLOYEES
Includes IBM, Accenture, Capgemini, Atos Origin & Steria* Employees exclude IBM
Companies continued to grow despite a looming global economic crisis
With the buyers remaining aggressive about reducing and keeping down operating costs, there is a
continued overhaul of service delivery models and pricing cuts
Improved operational expense a key factor for broad-based growth in revenues
Employee additions improve during the quarter
333
378
447
Sep-09 Sep-10 Sep-11
000 Numbers
26.1
27.6
31.1
Sep-09 Sep-10 Sep-11
USD billion
12.5%
18.2%
5.7%14%
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SUPPLIER OVERVIEW
INDUSTRYWISE ITO CONTRACTS AWARDED INDUSTRYWISE BPO CONTRACTS AWARDED
Global TCV market recorded remarkable steady growth and is expected to be back in line with pre-recession levels by the year end
ITO and BPO contracts impacted by low restructurings and new scoping of contracts
Financial Services , the largest sectors grew marginally this quarter while Telecom and Manufacturing
recorded a slight dip
The Americas region contract improved but will need to exceed the average of the prior 5 years to
reach the 2010 TCV levels Source: TPI Index
TCV USD billion
Global TCV market steady while ITO and BPOcontracts decline marginally
13.9
23.3
20.3
14.112.3
19.9
14.012.3
11.3
3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11
6.0
7.9
4.0
6.05.6
3.1
7.26.8 6.6
3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11
TCV USD billion
-8%
-3%
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Mergers & Acquisitions
SUPPLIER OVERVIEW
Buyer Seller Value Services/Vertical
Genpact, India High PerformancePartners, USA
Not disclosed Software Platformsfor Mortgage
Industry
Chakkilam Infotech, India Cigniti Inc., USA Not disclosed Software Testing
GlobalLogic , India Method, USA Not disclosed Design and
Innovation
Aditi Technologies, India Cumulux, USA Not disclosed Cloud Computing
IBS Software, India Moveo Systems, India Not disclosed Solutions for Airports
IMI Mobile, India Skinkers, UK Not disclosed Digital Solutions for
Mobiles
Illustrative
Source: Compiled from news articles
Buyer Seller Value Services
Red Hat, USA Gluster, India USD 136 Mn Cloud Computing
EXL Services, USA Trumbull Services, USA Not disclosed Insurance
Serco, USA Excelior, Australia AUD 13.2 Mn BPO
Walt Disney, USA Indiagames, India Not Disclosed Gaming
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Aegis plans to open a 300-seatercentre at Chhindwada, MP at an
investment of USD 2 million by
2012 which will be its sixth centre
in a tier-III town
Ciber, Inc, opened its new SEZ
centre in Bangalore with a seating
capacity of 750
New Delivery Centers established/announced
SUPPLIER OVERVIEW
INDIA
Illustrative
Source: Compiled from news articles
InterGlobe Technologies,
plans to open its second
centre in Manila, the
Philippines which will have
a 1,000-seat capacity.IRELAND
PHILIPPINES
HCL Technologies plans to
establish a software delivery centre
in Dublin, Ireland, that will create
80 jobs for IT graduates over three
years.
SOUTH AFRICA
Wipro Technologies plans to set up a 1,000
seater delivery centre in South Africa
DUBAI Genpact opened a facility in Dubai to provide
services such as claims processing,
customer service, etc
Intelenet opened a 200-seat facility in Dubai
which will service clients in different
languages
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List of Outsourcing Deals During the Quarter
Buyer Supplier DealValue
ContractDuration
Services Remarks
UK Based
Client
Hexaware
Technologies
USD 250
Mn
5 years IT Services Offer services across verticals, including
enterprise solutions,, application
management and remote infrastructure
Friends Life,
UK
Diligenta,
TCS
subsidiary
USD 2200
Mn
15 years BPO Provide administrative responsibility for
insurance and pension services
Maharashtra
Govt., India
Accenture Not
disclosed
Not
disclosed
E-Governance Build an online portal and create a
database for financial inclusion of
unorganised workers
MSEDC Ltd,
India
Zensar
Technologies
, India
Not
disclosed
Not
disclosed
IT Services Implement SAP's ERP software across
all activities of the corporation such as
finance, metering, human resources
Karnataka
Government
TCS, India Not
disclosed
Not
disclosed
E-Governance Provide a solution facilitating integrated
financial management of all spending
and resource mobilisation of state
treasury funds
Department of
Posts, India
Infosys Ltd. Rs 700-
750
crores
Not
disclosed
IT Services Provide postal banking and insurance
solutions
SUPPLIER OVERVIEW
Illustrative
Source: Compiled from news articles
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How to buy:
Log on to http://www.nasscom.in/publicationsor send us an e-mail at [email protected]
Upcoming Reports
Report on Transformation initiatives by IT-BPO companies and
successful case studies Analysis of Key Risks Impacting the Industry and Mitigation plans The IT-BPO Sector in India: Strategic Review 2012
UPCOMING REPORTS
Reports Released in the Last Quarter
CasualGaming
Indias Domestic
IT-BPO Market:Winds of Change
Role of IT inIndianHealthcare
Building a Careerin the BPOIndustry: BPOCareer Guide
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