Results & beyond

Folks

Zensar has announced the results for the Fourth Quarter and the consolidated Annual Result of FY 11-12. I am pleased to share that the consolidated revenue for the quarter shows a 32% growth year-on-year with a Profit Before Tax growth of 62% year-on-year. Due to currency volatility and higher tax rates this year our last quarter profits after tax have been lower than the third quarter  but the business fundamentals remain strong. The consolidated revenue for the year shows a 56.6% growth year-on-year with a Profit After Tax growth of 20.5 % year-on-year.

During the year, Zensar’s Retail Portal Solution for B2B collaboration, won the prestigious ‘Best Industry Solution Award’ at the national competition held by Computer Society of India (CSI). AutoZenics, a hosted on-premise solution deployed by leveraging a Hosted ERP solution on the cloud for the Manufacturing industry was also recognized by CSI in the product manufacturing category. We won the National Award in IT Excellence and Excellence in Global HR Strategy at the World HRD Congress 2012, which recognizes exemplary HR practices in talent management. We have also received the prestigious Service Excellence Award at the Cisco Supplier Day in San Jose, CA, amongst other significant technology services providers, and won the CNBC International Trade Awards for the fifth consecutive year.

There is a lot of concern about the future of this sector but I am sure strong companies will continue to do well !

Ganesh.

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An optimistic start to the new financial year !

A whirlwind two week tour of seven cities across UK and US and meetings with clients reinforced the feeling that business confidence remains strong and the likelihood of a second recession has receded in the first few months of this calendar year.  The voices being picked up by our sales teams across the globe also do not reveal any reason to panic with robust business inflows happening, not just in the West but also Australia Asia, Middle East and Africa. Big ticket projects may be put under the microscope particularly in the still sluggish Financial Services and Retail segments, but lights on spending and smaller projects particularly in the Cloud, Social Media and Mobility space will not be denied this year. The weakening Indian Rupee too will help in shoring up profits or providing the latitude to Indian IT and Business services exporters to invest in better marketing which is a good thing in a sluggish market. So what if anything can stop Indian IT from posting a high teens growth percentage for FY 13?

In spite of the twenty-three percent growth guidance given by new industry darling Cognizant and the recent upgrade in Accenture’s guidance, industry analysts like CLSA are a little wary about the growth prospects of the larger Indian providers due to the higher visa rejection rates particularly in the US and the higher “Requests for Evidence” that creates significant delays in application processing. The L1 visa rejection rates for Indian companies  jumped to over thirteen percent in FY 11 in comparison to an annual two percent three years ago, while the rate for most other countries remains between two and three percent, clearly a case for a discrimination discussion by the Indian Government.

My personal optimism is boosted more by the mood one can see across the US. Tech unemployment is almost non-existent and with both Indian and US firms stepping up their local employment drives, CIOs are also discussing new ways of reaching out to customers and optimize supply chains, the kind of discussion we always prefer to cost reduction and “doing more for less”. In fact the jump in apartment rentals in Silicon Valley suggests that innovation is alive and kicking, which will also spur CIOs particularly in B2C sectors to accelerate their spending on enterprise social media and mobility.

Whatever be the growth rate we finally see, one thing is sure and that is the diversity in employment we are seeing in the ranks of Indian IT firms. Ten years ago I remember inaugurating a sales meet of our company in Las Vegas and chatting with the coupe of American salespersons in the audience. This time the company sales kick-off in Cape Cod saw eighty Americans and Europeans outnumber the twenty Indians. Coming on the heels of our “all hands” meeting in Johannesburg where eighty young black South Africans have joined the group this year, a thought did strike “have we finally become proudly global?”

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This Article was published in the April Edition of DataQuest

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A new financial year - why this kolaveri?

It’s quite a dismal mood with which we start the new financial year in India. A weak Jan-March quarter for all industry sectors, lackluster performance by the stock market indices in a quarter where most internal bourses  recorded dramatic gains and a general feeling that India has lost an opportunity to take an international lead in three years of slowdown! Even as confidence seems to be returning to the US economy, are we as a country positioning ourselves to capitalize on the opportunities of the future?

A two week tour of seven cities across UK and US and meetings with clients in March reinforced the feeling that business confidence remains strong and the likelihood of a second recession has receded in the first few months of this calendar. Tech unemployment is almost non-existent in the US and with both Indian and US firms stepping up their local employment drives, the tightening of visas, expected in an election year seems overdone at a time when corporations are keen to invest in technology. CIOs are discussing new ways of reaching out to customers and optimize supply chains, the kind of discussion we always prefer to cost reduction and “doing more for less”! In fact the jump in apartment rentals in Silicon Valley suggests that innovation is alive and kicking, and this is borne out by the slew of new launches including new apps like Highlight and Glancee that use GPS to let people know about the proximity of friends or even strangers who share similar interests being in the vicinity and enabling networking to reach new levels.

There is enough hope globally that new technology capabilities in cloud, social media and mobility will push CIOs particularly in B2C sectors to accelerate their spending on enterprise social media and mobility. And the voices being picked up by our sales teams across the globe also show a new pull for better offshore services with robust business inflows happening, not just in the West but also Australia Asia, Middle East and Africa. Big ticket projects may be put under the microscope particularly in the still sluggish Financial Services and Retail segments, and this coupled with the lower growth projections of NASSCOM and some of the larger Indian and multinational providers have led some analysts to point to a slowdown for the IT sector this year. I am sure this will be proved wrong as the year progresses. So why this Kolaveri anyway? The Government in India seems to be recovering from the near paralysis it displayed towards the end of 2011 and there is hope that many of the bills that were unable to find their way through Parliament will get passed this year and we will see FDI, infrastructure investments and the much needed policy finalization for skills and education happen soon!

For the industry at large, there is a lot at stake if the GDP growth rates can be pushed up a couple of percentage points during this year. A virtuous cycle of growth, increasing demand, more job creation and wide spread prosperity can bring confidence back to consumers and investors and industry associations like CII will need to work hand in hand with Government to ensure that there are no roadblocks. For the IT sector, dependent as it is on exports to cross the hundred billion dollar mark overall and set course for two hundred billion dollars in exports by 2020, Government can do its part by providing more incentives for small towns to join the IT services party and special facilities and tax breaks for the product development fraternity . Industry doyen Narayana Murthy has rightly said that there will be a Bill Gates from India soon, because the youth of the country is ready and willing to choose the road less traveled and embrace innovation in their new entrepreneurial endeavours.

Finally some thoughts on the imperatives for entrepreneurship. At the biannual case study presentation on Zensar that is done at the Harvard Business School, I had the opportunity to interact with many young members of the Class of 2012 and understand their aspirations after an outstanding education and previous experience in consulting and technology majors. There is a desire to make a mark either with smaller global firms or through their own entrepreneurial ventures. There is also a confidence among both American and international students seeking to build entrepreneurial ventures in the tech industry that the eco-system support exists to give them a fair chance of success in their ventures. This is what needs to be strengthened in our country. Product development start-ups in the IT industry and indeed any innovative start-up across industry sectors will need to get the support in our country through enabling Government policies, association and venture capital support and the continued availability of high quality talent. This may be the year to ensure that all this happens!

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This Article was published on the April of The Financial Express

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The economic morass and Indian IT

We are truly living out the old Chinese curse “May you live in interesting times”.  As Ministers, top bureaucrats and senior members of Parliament spoke at keynotes and panels in the annual conference of CII, organized specifically to discuss the path to a return of economic growth, one fact became abundantly clear – every intelligent person in any position of influence in the country knows that we have hit a growth roadblock. Do we have a collective method of recognizing, accepting and removing these road blocks is the question that is always met with prevarication or silence!
It’s not that all is bad with the current state of the economy. Surely we can derive some satisfaction from the fact that the Gross Enrolment Ration in colleges is going up and the Right to Education bill has been passed, a National Manufacturing Policy has finally been formulated, the life expectancy in our country has almost doubled since Independence, some of the mission mode National eGovernment programs are being rolled out and over 200 million Indians will be covered by Nandan’s Adhaar scheme by end of the year. However the “policy paralysis” accusation that has been hurled often enough is now sticking, the land acquisition and labour reforms rationalization are yet to see the light of day and the delays in DRTC and GST implementation are likely to cost the country dearly. As one speaker rightly said, the roadblocks that were there in 1989 persist to this day and unless a way is found to eliminate friction in clearance and implementation processes, a quick return to a 8 to 9 percent GDP growth may well be a pipe dream.
For all of us in IT, the tax and duty issues for software products vendors, the lack of clarity on MAT for SEZs for the services folks and the weak budget for private equity and domestic venture capitalists does not augur well for a robust industry growth in this financial year at least.  A compounding factor is  the clouds that are hovering on the global economic horizon that have cause some concerns among the analyst community, particularly over the Financial Services vertical and large firms relying on hundred million dollar deals to keep their growth momentum intact. In an interesting report by a leading brokerage house on one of the large firms under the title “Rime of the ancient IT vendor” , three key shareholder concerns are articulated – how will companies who have been the darlings of the sector in India correct the loss of revenue and earnings to global peers, how will they restore predictability to their business and manage industry-leading operating parameters and finally when will they articulate a clear cash usage policy to avoid perceptions of shareholder value dilution.
In an industry which has been used to a CAGR of twenty percent, these questions have very rarely surfaced in the past but managements have to have strong answers ready if a period of lesser growth lies ahead!

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This Article was published in the April Edition of The DataQuest

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CII and the art of economic growth

The Confederation of Indian Industry’s annual meeting which starred the who’s who of government and industry had all the makings of a Bollywood potboiler! There was a debating society of parliamentarians Tharoor, Yechuri, Prasad and Singh that took the fine art of sarcasm and repartee to new levels but did not rain any new intelligence on the five hundred strong audience of business chiefs. It was amusing though not surprising to find that all the politicians from the treasury benches mouthed the party line and appeared almost startled at the extent of concern expressed at the economic quicksand the country is wallowing in. Leaders of the opposition could hardly conceal their glee at “watching the enemy commit suicide” as one worthy leader quipped!
As one takes stock of the year gone by, credit must be given to some of our well-meaning ministers for a few achievements and many new policy announcements. The National Manufacturing Policy with the creation of NIMZs, the multiple Education bills and the vocational education framework that are in play and the real progress in addressing skills are all signs of progress. However the track record of implementation of UPA-2 has been hardly creditable with many bills stuck in the quicksand of internal and external contradictions and the recent budget failing to enthuse both domestic and international investors and analysts. The admission of a state of political paralysis by one of the economic advisors to the Government and the suggestion that we would have to wait for 2014 to see any big ticket reforms can hardly provide much succor to over a billion Indians who are waiting to see a better future now that we know what it is to grow over eight percent, albeit for just a couple of years!
As Nandan Nilekani rightly pointed out, the country today spends over 300,000 crores in subsidies and other handouts. The role that initiatives like the UID or Adhaar can play in ensuring that finance and supplies flows to the right person at the right time has to be appreciated by the powers that be to eliminate major waste in the economy . Many other non-political steps – the Direct Tax Code, faster e-Government implementation to eliminate friction points between the Government and the citizens and well thought out PPP initiatives in Healthcare and Skills can also be accelerated to get some real results in the near term.
The IT industry has been hurt as well – by acts of commission that global software players are concerned about and acts of omission which smaller firms particularly product entrepreneurs fret about. As one of our most successful entrepreneurs has written in a recent hard hitting piece, the Government of Philippines must be thanking their Indian counterparts for the disillusionment of many IT CEOs which is resulting in the industry in that country growing faster than India. India has the potential to accelerate the growth of Software and Business Services exports to over three hundred billion dollars by 2020 if the right steps are taken to support and expand the sector. Clarity on transfer pricing and taxation, elimination or minimization of MAT on SEZs, special knowledge eco-system  creation in Tier 3 locations and tax and investment support to entrepreneurs creating valuable intellectual property from this country – the list can go on!
The results of the last quarter of the financial year FY 12 has been a mixed back. While most us have continued to grow our top lines though there have been some vagaries in the bottom line on a quarter to quarter basis, the results and more important the future commentary of some of the large firms have sent a few shivers down the spine of industry watchers and even prompted a rather unusual “open letter” from an analyst to one industry leader questioning the future directions of the firm. It is becoming clear that the next few quarters will not follow a predictable trend for the industry as a whole but the good stories will emanate from companies who are less defendant on Financial Services have a robust dual shore model and are able to have a wide enough portfolio to “farm” existing clients as well as “hunt” new deals!
And for a final thought, the near paralysis we are witnessing in the theater of political economics could not be better captured than the answer giving to a former public sector CEO who mentioned various reasons why his firm could not progress in the last few years. “The Government is seized of the problem” he was told! Will the nation itself have to get a collective seizure before an oxygen tank becomes visible to breathe life into the economy? These are interesting times, for the Government, the CII and all of us! There is a need for all of us to stay positive and defend the country vigorously in all international forums but it would be good to see some real steps towards progress in this financial year!
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This Article was published in the April Edition of The Financial Express

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