Capgemini in focus

Paul Hermelin, global CEO, Capgemini, says he is known as the Indian guy in France. That’s not surprising considering that the €8.4 billion IT consulting and services firm employs around 33% of its entire workforce in India. Having recently promoted three Indian executives to global roles and into the group executive committee, Hermelin spoke about the road ahead for Capgemini in India and what these changes at the top mean for the Paris based IT company. Excerpts:

What is the reason for the recent reorganization at Capgemini and what is its significance? 

We have decided to split the application services business into two—each of the size of €2.6 billion. Salil Parekh, who was earlier the CEO of global financial services, Asia Pacific, and India offshore, will now additionally handle the US and the UK markets, where you can’t grow if you do not implement the Indian delivery model. He is at the helm of about 30% of the group’s revenue. Aruna Jayanthi will replace him as the new CEO of India and will also be a part of the global executive committee along with Salil. Along with this, Baru Rao has been inducted as the COO, application services, Europe. These changes clearly signal that India is at the centre of the group in terms of energy. But what I am really proud of is the number of people we employ here—its 31,000 with a 34% revenue growth. This is quite an achievement for a company which is quite European. 

You are still struggling on the operating margin front. Are you able to successfully drive up offshoring to improve margins? 
There are too many overheads in Europe and that is the reason for our below average 8% margin. But we must move to double digit through streamlining the business. From the group’s perspective , we are still trying to push offshoring in France. Currently, the offshore business accounts for 13% of overall revenue but it should certainly account for as much as 25% by the time we have 50% of our workforce in our offshore markets, which is currently 35%. There are some politically sensitive sectors but there is still room for offshoring. We will hire another 15,000 in India. But the key challenge for India is that if we go massively for infrastructure (cloud computing ), it’s less people-intensive and more capital-intensive . So the competitive advantage of India is far less there. Also, the big question for India is when will Bangalore match up to Palo Alto in terms of generating new ideas.

 

What is your view on the growth versus margin issue which the big Indian IT firms are facing at this point? 

My view is that Indian firms may have to choose between growth and margin. We will see these players step away from the world of services into the product space to protect their margins. When I see an Infosys coming out with Finacle , these are products which are good in terms of margins and I am very impressed. It’s clearly a move to retain the healthy margins and go into platforms and products. 

You said you will look to grow the company to 2,00,000-strong . What challenges are you facing today on the people front? 
The 1,00,000- mark was symbolic , we can scale up to 2,00,000. But how do you become a 4-5,00,000- strong company? I don’t think my mental skill allows for that. May be my successor will know how to run a company that size. We can live with an attrition rate of 15-20 %. But what we are doing actively is sprucing up our alumni communities, as it’s truly an open world, in the interest of our clients and our best people.

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Newsletter - IT Sector

19 Feb 2011: Accenture will increase India market focus, says new MD 

Accenture sees a big opportunity in India with the aspiration of local companies to go global at an all-time high. 

Accenture India's new managing director Avinash Vashistha said that clients globally had matured and their expectations too had changed. "They are looking for better insights and specific business outcomes of high value. Indian customers are no different and they too want to grow quickly and become global. This means a huge opportunity for us across multiple businesses," he said. 

Sudin Apte, CEO of offshore advisory firm Offshore Insights, says Accenture has been ramping up its country market focus, “though the company has remained selective and picky on customer acquisition, mostly preferring bulky orders”. He expects a great deal of MNC focus in the times to come on verticals like telecom, healthcare, oil and gas, insurance, education and government. 

18 Feb 2011: New segments to bring 80% fresh opportunities in IT 

Apex software industry body Nasscom said that 80 per cent of the fresh opportunities for India’s  IT and ITeS sector this decade (2011-2020) are going to come from new geographies, verticals and customer segments. 

Nasscom President Som Mittal said the US would continue to be a large market for India's IT companies, noting that revenues from here grew faster than the industry average last year.

Mittal said Nasscom is working with automotive and textile clusters to encourage adoption of IT by small and medium enterprises. "With cloud (computing services) coming in, it's possible to offer IT at a very reasonable cost".

17 Feb 2011: Infosys accounts for 18% of Kerala's IT exports 

Infosys' operations in the Technopark campus accounted for exports worth Rs.427.79 crore, contributing to 18 per cent of the state's IT exports for the fiscal year ended 2010. The new block that was opened has the capacity to seat 1,600 employees and has seen an investment of Rs.180 crore till date. 

17 Feb 2011: Google feels 'sorry' for Nokia-Microsoft 

Google chief Eric Schmidt has said that he felt "sorry" for Nokia striking a partnership with rival Microsoft, that would see the Finnish handset maker adopting Windows platform for its smartphones. 

However, Schmidt said that Google would like Nokia to adopt its Android operating system at some point in the future. 

16 Feb 2011: Everonn ties up with Microsoft for IT Academy Learning solutions provider Everonn Education Ltd said it has tied up with Microsoft Corp for the latter's IT Academy programme, aimed at training educators and students on Microsoft technologies. 

Through this partnership, the combined objective is to train and certify 300,000 students in three years, Everonn said.

16 Feb 2011: Hexaware says close to sealing 5-6 deals of $25-30-mn each 

IT major, Hexaware Technologies, is pursuing about half-a-dozen deals in the range of $25-30-million and hopes to seal at least a few in the next three-months. These are in the company's core business segments of travel and transportation and capital markets, and the customers are US and Europe-based.

16 Feb 2011: CMS Info Systems bags Rs 300-cr order from BSNL 

CMS Info Systems, an IT services vendor, has landed a 300 crore contract from Bharat Sanchar Nigam Ltd (BSNL) to centralize the state-owned telecom company's billing system.

15 Feb 2011: Aptech enters into tie-up with Microsoft for learning material 

Computer education firm, Aptech, on Tuesday entered into a tie-up with world's top IT firm Microsoft to launch embedded courses and certification to its students. 

15 Feb 2011: IBM plans to have 47 offices in India by 2013 

With focus on the small and medium business (SMB) segment, IT giant IBM today said it plans to have 47 branch offices in India by 2013. About 15-17 branches shall be added every year. The company aims to accelerate sales by opening more branch offices in Tier-II and Tier-III cities and leverage from the local market eco-system.

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Newsletter - ITES / BFSI Sector

21 Feb 2011: Tata Capital hires a former Temasek hand to push its Group PE Fund Plans 

Tata Capital, a financial services unit of the salt-to-software group, has hired a former Temasek executive to push its billion-dollar private equity fund plans that will mostly invest in the group’s 90 companies, including the unlisted ones, that sell products in 80 countries. 

The Tata group, which is getting back into financial services slowly after nearly a decade of hibernation, has hired Padmanabh Sinha of Singapore state’s Temasek Holdings. Mr Sinha will work with Mukund Rajan, formerly Tata Teleservices, in building the portfolio. 

20 Feb 2011: IT, BPO complex project in Kerala's Infopark kicks off  

The foundation stone for the first IT/BPO complex, intended to create cost-effective infrastructure for the industry in Kerala's Infopark Phase-II, was laid. "Like past projects, Infopark will act as a single point developer of basic infrastructure facilities. On completion, the park will be able to provide employment to up to 85,000 professionals," said Infopark CEO Binu A.Pazhoor. 

20 Feb 2011: KPO offers good opportunities for Indian entities: Gartner 

Knowledge Process Outsourcing (KPO) offers good business opportunities for Indian entities, and will help them in providing high value services, according to Gartner. 

As per the various estimates, the global KPO market is likely to be valued at more than USD 15 billion in the coming years. 

KPO services would help domestic players in developing relationships with clients at higher levels, which "could then be leveraged to upsell and cross-sell". 

Many IT players including Infosys, TCS, Wipro and Cognizant offer various KPO services. 

According to a recent Gartner research paper, KPO services would likely offer a combination of better processing methodology and an intellectually skilled workforce based predominantly in an offshore location. 

20 Feb 2011: Fitch affirms top rating on IBM India Credit rating agency Fitch has affirmed top rating on technology major IBM India's on the back of its strong business performance and close ties with its parent company. 
"Fitch Ratings has affirmed IBM India Pvt Ltd's national long-term rating at 'AAA (ind)'. The outlook is stable," Fitch said in a statement. 

AAA rating symbolises the best quality companies, which are reliable and stable. It added that the rating has taken into account IBM India's strong strategic linkage to its parent entity. 

The rating agency has also affirmed both AAA and F1+ rating on IBM India's USD 6 billion fund. 
AAA and F1+ are the top ratings for long-term and short-term funds, respectively. 

IBM India's has four broad areas of operations -- global business services, systems and technology, software, and global technology services.

19 Feb 2011: Accenture will increase India market focus, says new MD 

Accenture sees a big opportunity in India with the aspiration of local companies to go global at an all-time high. 

Accenture India's new managing director Avinash Vashistha said that clients globally had matured and their expectations too had changed. "They are looking for better insights and specific business outcomes of high value. Indian customers are no different and they too want to grow quickly and become global. This means a huge opportunity for us across multiple businesses," he said. 

Sudin Apte, CEO of offshore advisory firm Offshore Insights, says Accenture has been ramping up its country market focus, “though the company has remained selective and picky on customer acquisition, mostly preferring bulky orders”. He expects a great deal of MNC focus in the times to come on verticals like telecom, healthcare, oil and gas, insurance, education and government. 

18 Feb 2011: Satyam to pay $125 million to settle US suit Close on the heels of a settlement of a class action law suit in the US for $125 million, Mahindra Satyam is planning to sue the former Satyam management and the company's erstwhile auditor PriceWaterhouse for a possible monetary damages claim. The company is looking at moving the courts both in India and the US. This will help Mahindra Satyam bring down its financial liability arising out of the settlement.

18 Feb 2011: Convergys may spark buyout interest: Sources Convergys, which provides outsourced customer care and billing in places like India and the Philippines, reviewed strategic alternatives last summer, including the possible sale of the company or of certain assets.

No deal happened because prospective bidders offered prices that fell short of the board's expectations amid concern about the dynamics of the industry, which has been in flux over the last few years due to declining demand for outsourcing services.

Convergys has all the ingredients to become a target for a takeover of all or pieces of the company: an activist 

shareholder, a new CEO, and an improving business model within a consolidating industry.

17 Feb 2011: Acropetal appoints consultancy firm for acquisition Bangalore-based IT and BPO firm Acropetal Technologies said it has roped in a top consultancy firm for its proposed acquisition plans. 

The company is hopeful of closing the acquisition deal within three months of the closure of IPO. The key focus areas for Acropetal have been healthcare services, energy and environment services. 

17 Feb 2011: Race hots up for U K Sinha's successor 

UTI Asset Management Company, has set in motion the process to select a new chief executive officer or CEO to succeed UK Sinha, who has been appointed as the chairman of the Securities and Exchange Board of India, or SEBI.

17 Feb 2011: Captive centres to grow sharply this year 

The captive landscape in India will see a strong revival this year as IT services are being seen as differentiators and growth drivers by large global players rather than mere enablers. While in 2008-09, only five new ones were set up, this calendar the number of captives could shoot up to 30, consultancy Zinnov says. 

Firms are looking at roping in captive centres for new ventures and more innovative work. For one, Wal-Mart has set up a captive in Bangalore to push its new e-commerce business, Walmart.com. This is despite the fact that the retail major had in 2009 outsourced IT work to Infosys, TCS and Wipro. 

Others that have set up company-owned offshore centres in the past few months include US department store chain Sears, Fox Broadcasting Company, Swedish manufacturing major Saab and Northern Trust. French retail major Carrefour’s captive is also in the works.

15 Feb 2011: IBM plans to have 47 offices in India by 2013 With focus on the small and medium business (SMB) segment, IT giant IBM today said it plans to have 47 branch offices in India by 2013. About 15-17 branches shall be added every year. The company aims to accelerate sales by opening more branch offices in Tier-II and Tier-III cities and leverage from the local market eco-system.

15 Feb 2011: TCS targets $1 billion revenue from cloud computing services  Tata Consultancy Services (TCS) commercially launched cloud computing services and said they could generate $1 billion in revenue over five years from the small and medium business segment. 

Cloud computing helps users get access to hardware and software from companies like TCS on pay-per-use basis, without having to set up their own IT infrastructure. 

15 Feb 2011: All founders of Sequoia Capital quit to form new fund  

In one of the biggest management transitions in the Indian private equity industry, the entire founding team of Sequoia Capital has quit the firm to set up a new fund to invest in publicly-listed companies. 

The four founders, KP Balaraj, Sumir Chadha, Sandeep Singhal and SK Jain, expect to have the new fund, Westbridge Public Fund, in place by the end of 2011. 

The sudden and unexpected development—simultaneous mass exit of the founders of a PE fund has rarely happened in India—has turned the spotlight on the tension between those who seek to invest in the booming public markets and others who prefer the less volatile and quieter private route. 

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