Press Release BPM - Business Process Management

Investments in global engineering talent, emerging markets, and transformational outsourcing will fuel HCLT’s top line growth in 2012

HCLT’s persistent attention on generating top line growth over margin expansion via re-investment into the business allows the firm to pull in growth above Infosys

Revenue growth rates continue to decelerate across the Indo-centric IT services vendors. HCLT’s top-line growth was 14.6% year-to-year in 1Q12 compared with 18.3% in 4Q11, while Infosys’ was 10.5% in 1Q12 compared with 13.9% in 4Q11. TBR believes macroeconomic uncertainty and debt concerns remain the primary factors impacting discretionary spend in European markets and financial institutions in the U.S. that have to deal with the European debt. Those that are spending are focusing on cost reducing consolidation engagements. Non-financial industry clients in manufacturing, energy and utilities as well as healthcare in the U.S. are loosening purse strings and pursing engagements that utilize new technologies, such Big Data, cloud and mobility. We believe HCLT will drive 23% top line growth in 2012 by capturing larger-scale, transformational outsourcing engagements.

Due to its strategic focus on investing in the business to drive revenue growth over margin expansion, HCLT’s operating margin of 15.7% remained below Infosys’ metric of 29.8%. Even with on-site and lateral hiring, the firm was able to keep its operating margin relatively flat quarter-to-quarter in 1Q12, which TBR attributes to increased offshore utilization and ramp-ups on larger-scale, transformational engagements.

 

HCLT is expanding local hiring to pursue growth in underpenetrated geographic markets, with an initial focus on South Africa

TBR believes HCLT is expanding its local delivery capabilities in South Africa to generate signings opportunities in the region, particularly in telecommunications, BFSI, retail and mining, and the public sector. As part of its overarching “Employees First, Customer Second” philosophy, HCLT continues to craft a “glocal” presence and foster IT services talent development in underpenetrated regions where it seeks to seed sustainable revenue growth.

HCLT announced the development of a South Africa Glocal Center of Excellence in partnership with Cisco. The facility will be located in Johannesburg and will serve as training headquarters for approximately 100 engineers HCLT will deploy on engagements throughout the country in 2Q12. TBR expects the firm will further expand its headcount and delivery footprint to promote continued revenue growth in South Africa during 2012.

HCLT will maintain its leadership position among India-based ESO providers through investments in global engineering talent

HCLT continues to drive growth through expansion of its engineering and R&D solutions business, which increased 19.8% year-to-year to account for 18.5% of the firm’s top line in 1Q12. HCLT surpassed Wipro ITS as the largest Indian vendor of Engineering Services Outsourcing (ESO) in 3Q11, and presently leads all India-centric peers in ESO revenue, percent of total revenue, and ESO revenue growth.

TBR believes the global Engineering Services Outsourcing (ESO) market will increase from $20 billion to $200 billion by 2020, of which 15% to 20% will be generated by India-based providers. TBR expects HCLT will capture this market opportunity by expanding global engineering recruitment and training efforts. We expect the firm will invest in additional “Glocal” Centers of Excellence in EMEA and APAC during 2012 to improve its access to top-tier global engineering talent and fuel ESO revenue growth.

 

HCLT’s transformational value proposition is generating large-scale outsourcing opportunities with European MNCs

HCLT’s Europe geography grew 17.1% in 1Q12 to comprise 27.6% of the firm’s total revenue. TBR believes HCLT’s ability to deliver end-to-end outsourcing services that offer cost reduction, operational efficiency, and IT transformation are gaining favor with European MNCs.

HCLT was selected by Union Bank of Switzerland (UBS) to provide end-to-end ITO services in a deal valued $250-$300 million. HCLT was also awarded comprehensive outsourcing engagements by Finland-headquartered paper pulp manufacturer UPM and Norway oil/gas producer Statoil. We expect HCLT’s pipeline of large-scale outsourcing opportunities in Europe will continue to grow throughout 2012 as regional firms become increasingly open to shifting infrastructure and business process management responsibility to offshore providers for improved operational flexibility.

 

 

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