IT services

What Does the Recent TCS Lawsuit Mean for the Company and IT Sector | In the News

By | In The News

India’s largest IT firm TCS was recently in the news for a trade secret theft case filed by US-based tech firm CSC.

Yugal Joshi, Vice President, Everest Group, a consulting firm, agrees that IP charges are not uncommon. However, Joshi pointed out that most service providers do deliver platform-based services and therefore need to further enhance their governance mechanism. In addition, they need to further educate their workforce on enforcing such a mechanism.

Read more in Money Control

‘IT Firms’ Margin Stress To Continue | In the News

By | In The News

The Indian IT business is getting more commoditised, resulting in stiff competition and lower margins in legacy business, according to industry experts.

Peter Bendor-Samuel, CEO and founder of Dallas-based research and management consulting firm Everest Group, says, “We expect margins of big Indian (IT) service providers to continue to erode. We believe that digital is less profitable than the traditional labour arbitrage model.”

Read more in The Hindu

Indian IT Services Firms Are Strengthening Consulting Practice | In the News

By | In The News

As new technology services emerge as the area of focus for global IT (information technology) industry, with clients increasingly demanding customized solutions, Indian IT services firms are strengthening their consulting practice.

“The recent acquisitions that Infosys has made in this (consulting) area are proof of the commitment that the IT firm is making to build a successful consulting business,” said Peter Bendor-Samuel, founder and CEO of global research firm, Everest Group.

Read more in Communications Today

How Tech Mahindra Missed the Growth Bus After Satyam Acquisition | In the News

By | In The News

In 2009, before things fell apart, Satyam Computer Services was more than twice the size of Tech Mahindra. Then among India’s top five IT firms, its strength lay in the enterprise segment. Tech Mahindra, being a niche player, derived its revenues almost entirely from the telecom sector. There was almost no overlap and no synergies. An important development, however, would pitchfork Tech Mahindra into the limelight.

Other technology firms, though, scaled up faster during this period (see box), with analysts saying Tech Mahindra had the potential to overtake HCL to the fourth spot if revenue growth had not slowed. In 2011, HCL bought Axon, a British consulting company, aggressively pursuing clients and focusing on growth at the cost of margins. The results paid off, with FY18 revenues of about $8 billion. “They (Tech Mahindra) could have scaled the enterprise business better,” says Pareekh Jain, founder, Pareekh Consulting. Even in its traditional telecom business, loss making contracts in its unit Lightbridge Communications Corp (LCC) hit Tech Mahindra, while the company also rejigged its legacy contracts in other verticals. The firm had to also face public wrath when an audio recording of a person who was being sacked went viral, forcing chairman Anand Mahindra to intervene. “Tech Mahindra was a little late to investing in and building digital capabilities, but they are trying to move faster now,” says Chirajeet Sengupta, partner, Everest Group. “Most companies are moving to a mix of a services plus IP-led business model. The company is experimenting with this approach…”

Read more in Economic Times

Long-drawn battle with L&T may hurt Mindtree: Analysts | In the News

By | In The News

The major risk in L&T’s battle to take control of Mindtree is the process dragging on and hurting the Bengaluru-headquartered IT firm’s business, analysts said, even as they opined that cultural issues could be managed.

“In this case, it will be important that this process does not drag on but is brought to conclusion quickly. If the process drags on and generates substantial bad press, it can affect future growth,” Peter Bendor-Samuel, CEO of IT consultancy Everest Research, told ET. “Having said that, we have found that clients are quite sticky and will normally give new management time to prove itself.”

Read more in The Economic Times

TCS Steps up SaaS Play with its Home-Grown Jile | In the News

By | In The News

Tata Consultancy Services has created a second standalone software brand, Jile, for its agile software development platform, on the heels of its first AI-product Ignio, as the India’s largest IT services company bets on home-grown products to diversify its portfolio.

“As we look into the future, TCS is likely to both have a software line sold independently from its services as well as coming to market with integrated platform and service models,” Peter Bendor-Samuel, CEO of IT consultancy Everest Research, told ET. “The significant challenge for TCS lies in its aspiration to become a major software house as this will require a different business model, which will likely conflict with its services models”.

Read more in The Economic Times

Higher Digital Spends likely to Boost IT Budgets in 2019, Say Experts | In the News

By | In The News

Clients of big information technology (IT) services companies are likely to increase their budgets this year, after not doing so for the past few years, claims experts and analysts tracking the sector. Discretionary expenditure in new technologies, needed to stay relevant, is going to be the source of the budgetary expansion.

According to experts and analysts, most outsourcing deals in 2019 will be led by new technologies, which will be bundled with traditional services. This will lead to a bigger size of outsourcing contracts.

“At this time, we are seeing a continuation of last year’s robust spending on IT-related investment in the first two quarters of this year. Most of the demand will come from verticals such as energy and engineering apart from insurance, consumer-packaged goods, and retail,” said Peter Bendor-Samuel, founder and chief executive officer of global research firm Everest Group.

Read more in Business Standard

How to Get More Innovation from Your IT Outsourcer | In the News

By | In The News

While cost containment and performance improvements have long been primary drivers for IT services decisions, the desire for disruptive solutions is eclipsing those traditional rationales. IT leaders are seeking innovation — not only internally but from outsourcing partners — as they look to help the business become more agile and adaptive, create new products and services, and enter new markets.

Jimit Arora shares his thoughts with CIO.

7 Keys to Transformational Outsourcing Success | In the News

By | In The News

With digital transformation all but mandatory across industries today, that innovation imperative is impacting every part of IT, including its outsourcing engagements. However, many CIOs are struggling to integrate third-party IT services deals into their long-term business strategies. Indeed, a recent Everest Group survey found that 61 percent of enterprises pursuing digital transformation were dissatisfied with their service providers.

More than a quarter of revenues for the top 20 outsourcing providers are generated by digital services, according to Jimit Arora, partner in Everest Group’s IT Services practice, with those markets growing as the traditional services market is shrinking.

Read more in CIO

Big Increase in IT Services Spending in Financial Services | Sherpas in Blue Shirts

By | Banking, Financial Services & Insurance, Blog

At the beginning of 2018, we forecasted a bump in discretionary IT services spending in Financial Services. And we predicted banks would spend heavily on technology. But we didn’t forecast as big a bump as is occurring, and the banks are spending more heavily than we anticipated. Why is it important to understand what’s happening here?

Who would be the beneficiaries of that spend? That’s why this spending trend is important.

At the beginning of the year, we said the beneficiaries would be primarily Fintech companies, in-house services, and non-incumbent service providers. However, given the amount of spending we see coming down through the pipeline, we don’t think the fintechs, in-house services and challenger service providers will be able to absorb the spend.

IT Services: Growth Trends in the Financial Services Vertical

Deep Dive Equity Research and Everest Group’s July 31 report, “IT Services: Growth Trends in the Financial Services Vertical,” reveals that the BFSI spend – particularly in banking – is poised to increase dramatically. In fact, we see a 15% increase planned for 2018 at just the top four US banks:

  • JP Morgan indicates it will increase its IT spending by $1.4 billion in 2018.
  • Citigroup plans to spend around $8.0 billion on IT in 2018, or about 20% of the bank’s expense budget, which is an increase over its 2017 spend.
  • Wells Fargo plans a significant spending uptick in technology transformation and data management in 2018.
  • Bank of America plans an incremental $500 million technology investment due to tax-reform benefits.

Initially, we believed that the incumbent technology service providers would not be the beneficiaries of the increased spend. But we now believe there will be a shortage in supply that the fintechs and new-age service providers will not be able to satisfy. We believe the only way to satisfy this shortage is if the incumbent legacy technology service providers of technology – which have been largely left on the sidelines to date – participate.

Yes, the underlying secular forces that we noted at the beginning of the year as growth obstacles for the legacy service providers (revenue compression, a strong DIY movement or insourcing and suboptimal sales model for digital projects) still hinder legacy providers’ growth. But we believe that the enormity of the spend that is coming through the pipeline will create a rising tide that the fintechs and new-age technology service providers will not be able to absorb.

Consequently, we’re upping our forecast for banking spend in 2018 and strongly believe the legacy service providers will be meaningful beneficiaries of this spend.