Adobe Systems has shut down its North American offices for a week for the second time this year as part of cost-cutting measures, forcing employees to take paid time off during the days the company is closed.
An automated statement on Adobe's phone system confirmed that the company will be closed from Monday until Friday, July 3, and will resume normal business hours on Monday, July 6, after the nationally celebrated July 4 holiday in the U.S.
Adobe also shut down for a week earlier this year to help the company ride out the recession, and it plans to shut down for another week later this year in addition to its normal weekly closure between Christmas and New Year's Day in December, the company confirmed in a press statement.
"In each case, employees are asked to take the time as paid time off -- the net effect of which lowers the company's operating expense," Adobe said in a press statement.
Like competitors, Adobe has not been immune to the recession and has enacted a series of cost-cutting measures to ride it out. The company let go about 8 percent of its workforce in December and has frozen existing employee salaries as part of these efforts.
Some of Adobe's woes can be attributed to lackluster adoption of the latest version of its Creative Suite products, which are responsible for the bulk of its revenue. Sales in Adobe's second quarter, ended May 29, fell 21 percent, and the company posted its narrowest profit margin in more than three years.
Despite hitting tough times, the company has continued to invest steadily in updating its software for creating rich Internet applications (RIAs) and to make its Flash platform ubiquitous across the Web as it faces increased pressure from competitors like Microsoft.
The company also in the past month made its Acrobat.com worker collaboration and productivity services available to customers via new subscriptions, as well as released a preview of the next version of FlashBuilder, its main toolset for helping developers build RIAs. Adobe also rebranded the toolset to highlight the Flash brand; it was formerly called FlexBuilder.
Wednesday, July 1, 2009
Satyam
Satyam’s new team may renegotiate $80-m FIFA deal
The new management at Mahindra Satyam is set to re-negotiate its around $80-million contract with the Federation Internationale De Football Association (FIFA) to provide customised event management system for the 2010 and 2014 World Cups.
The pressure to trim costs at the beleaguered IT firm has triggered this move, said a senior official privy to the development. According to him, the company reckons the contract would not be a profitable one, as Satyam has to spend a sizeable amount on branding.
According to the agreement, FIFA will pay Satyam for the IT that it renders. At the same time, FIFA will display the Satyam brand across all platforms during the World Cup as the IT firm is one of the sponsors. This sponsorship works out to be expensive for Satyam.
“Our current scenario necessitates frugal financial management and we will continue to explore all possible means to address this situation,” said CP Gurnani, the new CEO of Mahindra Satyam. But FIFA did not reply to an e-mail sent by ET last week.
This deal was perceived to help Satyam increase its revenue share in the European region, which contributed to a quarter of the firm’s revenues. It was also expected to help Satyam leverage on FIFA’s brand equity and give the firm a foothold in the entertainment and media market world-wide.
“Mahindra Satyam has got all the attention it needed, good or bad. So this deal with FIFA is not important on a branding level,” said the official. Satyam is now focusing on raising its operating margins, and cutting cost would help improve margins and profitability. “The company’s objective is to retain clients, grow revenues and increase profitability. And if the FIFA deal gives them only visibility and not profitability, re-negotiating the deal is the right thing to do,” said Gartner principal analyst Diptarup Chakraborti.
Satyam bagged the deal nearly two years ago, along with a contract to build intranet and extranet applications for the football organisation. The extranet platform for FIFA was meant to enable its member organisations communicate with each other and organise the work flow.
“It would help us in knowledge exchange between different sports practitioners, particularly medical professionals in member countries,” Charles-Henry Contamine, head (new media), FIFA, had said when the contract was announced. Satyam was to directly implement extranet and intranet applications. The Hyderabad-based outsourcer has already started cutting down on infrastructure expenses.
“Infrastructure consolidation continues to be a key area of focus and have identified cost optimisation opportunities,” Mr Gurnani had said.
The pressure to trim costs at the beleaguered IT firm has triggered this move, said a senior official privy to the development. According to him, the company reckons the contract would not be a profitable one, as Satyam has to spend a sizeable amount on branding.
According to the agreement, FIFA will pay Satyam for the IT that it renders. At the same time, FIFA will display the Satyam brand across all platforms during the World Cup as the IT firm is one of the sponsors. This sponsorship works out to be expensive for Satyam.
“Our current scenario necessitates frugal financial management and we will continue to explore all possible means to address this situation,” said CP Gurnani, the new CEO of Mahindra Satyam. But FIFA did not reply to an e-mail sent by ET last week.
This deal was perceived to help Satyam increase its revenue share in the European region, which contributed to a quarter of the firm’s revenues. It was also expected to help Satyam leverage on FIFA’s brand equity and give the firm a foothold in the entertainment and media market world-wide.
“Mahindra Satyam has got all the attention it needed, good or bad. So this deal with FIFA is not important on a branding level,” said the official. Satyam is now focusing on raising its operating margins, and cutting cost would help improve margins and profitability. “The company’s objective is to retain clients, grow revenues and increase profitability. And if the FIFA deal gives them only visibility and not profitability, re-negotiating the deal is the right thing to do,” said Gartner principal analyst Diptarup Chakraborti.
Satyam bagged the deal nearly two years ago, along with a contract to build intranet and extranet applications for the football organisation. The extranet platform for FIFA was meant to enable its member organisations communicate with each other and organise the work flow.
“It would help us in knowledge exchange between different sports practitioners, particularly medical professionals in member countries,” Charles-Henry Contamine, head (new media), FIFA, had said when the contract was announced. Satyam was to directly implement extranet and intranet applications. The Hyderabad-based outsourcer has already started cutting down on infrastructure expenses.
“Infrastructure consolidation continues to be a key area of focus and have identified cost optimisation opportunities,” Mr Gurnani had said.
Outsourcing
IT looks at sunny days as deals begin to flow
As companies in the $60-billion technology services sector gear up to announce results for the first quarter of 2009-10, the straws in the wind suggest that they may have weathered the worst of the global economic downturn.
The biggest indication is the return of the deal flows, albeit in smaller sizes of about $25-30 million. A welcome development considering that in the past couple of quarters clients had battened down the hatches by suspending discretionary spending, freezing IT budgets and putting offshoring decisions on hold.
Many of the new deals involve what is referred to as ‘business transformation outsourcing’, where an Indian vendor would work with a client to reshape entire processes such as payroll or HR administration to make them more efficient and achieve cost savings.
In May, India’s largest software exporter TCS signed a five-year deal with the Volkswagen Group in the UK to provide IT support and transformation of its IT infrastructure. TCS also bagged a contract from ABB in the UK to implement business software. Wipro signed a $34-million contract to extend a deal with Sunoco, a US-based marketer of petrochemical products.
IT sector analysts believe that sales growth during the April-June quarter will not exceed 15%, but agree that the software services industry could be looking up. The first big result for the IT sector begins with India’s second-largest software exporter Infosys Technologies on July 10.
Infosys has forecast a decline of 6.5-8.2% in its dollar revenues and a 11-13% increase in rupee terms for the quarter ended June 30, 2009.
Research and advisory firm Booz & Co as well as investment bank Avendus Advisors see sales growing by 10-15% for the top six IT companies. Suvojoy Sengupta, a partner at Booz & Co, expects operating margins at over 20%.
“Of course, it’s a massive scale down from the 40% operating margin levels which companies had got used to,” he says.
However, Gartner, an IT-focused research company, predicts single-digit sales growth quarter-on-quarter for the sector.
While the Q1 results may only be marginally better compared with the previous couple of quarters, the outlook seems more promising. Says Partha Iyengar, vice-president and senior analyst at Gartner: “We have started getting calls from clients (in the US and Europe) on how to cut costs by offshoring. These are positive signs. We have already hit the bottom. But we might see a recovery only by late 2009.”
Software industry grouping Nasscom has said that it expects single-digit export growth during 2009-10.
Some analysts are advising investors to stay away from the sector in the short term. “I don’t see a recovery any time in the next two quarters. Infosys, however, has a habit of giving conservative guidance and may spring a positive surprise,” says Dhirendra Kumar, CEO, Value Research Online, a mutual fund watcher.
Harit Shah, IT analyst at Angel Broking, agrees that a wait of at least two quarters is warranted before a revised outlook is pronounced.
“In the short term, we might see single-digit sales growth for top tier IT majors. Year-on-year, we might see a flattish sales growth. However, in dollar terms, we might see a dip for some IT companies,” he said.
Operationally, the manpower-intensive sector, which employs about 2.3 million, continues with its freeze on recruitment. Selective hiring is, however, on for those with specialist skills in areas such as enterprise resource planning, business software and IT architecture development, but the numbers are negligible. There is also a greater focus on shifting employees and work from client locations onsite to offshore destinations such as India.
Among the positive signs is that the domestic market looks attractive despite lower margins compared to exports. Also, with former Infosys co-chairman Nandan Nilekani now part of the government to oversee the Unique Identification Card Project, domestic IT spends could get accelerated. Telecom, e-governance initiatives, state-run companies and the Indian Railways are throwing up newer opportunities for IT.
While export-focused companies look at the domestic market as well, the revival of confidence, especially among US clients, bodes well for large and small players.
“Clients feel that the worst is behind them. Especially in the US, many customers took aggressive measures to cut costs and renegotiate contracts,” says S Gopalakrishnan, CEO of Infosys.
Infosys Australia recently won an IT application development and maintenance contract worth A$450 million (Rs 1,800 crore) from Telstra, a large Australian telecom company.A weaker monsoon this year is expected to increase agriculture imports, and thus weaken the rupee just as the rise in crude oil prices has weakened the Indian currency.
Buoyed by the hope of recovery, IT companies are now going all out to spend more to win new contracts and increasing their sales force. However, challenges persist. As KS Ananthanarayan, CFO, Birlasoft points out, the biggest challenge now is getting new business.
“Companies are investing a great deal in salespeople, and there is an increased focus on incumbency of clients,” he says. Infosys, for instance, added 217 employees to its sales and marketing team in FY09, its highest ever since the company was founded in 1981, according to Edelweiss Research.
Similarly, Wipro, HCL, TCS and Birlasoft have augmented their sales teams. But this strategy needs to be improved with a focus on business rather than technology. “In the current scenario, multinational IT companies are still winning new contracts because of the effectiveness of their marketing teams which are focused on selling business needs. In comparison, Indian sales staff is focused on selling technical needs,” remarks Gartner’s Mr Iyengar.
One reason for that could be the lack of top-end skills and consulting capability. To plug this gap, companies are looking for acquisitions. The IT & ITeS sector accounted for 50% of cross-border acquisitions in 2007-08 and 40% in 2008-09. Buyouts like HCL’s acquisition of Axon last year will provide the much-needed boost.
Overall, the road to recovery seems visible now and companies just need the critical fuel in the form of new business to reach the end of this fiscal, after which offshoring is expected to see its next peak. Till then, the road is tough, but at least the worst is behind them.
The biggest indication is the return of the deal flows, albeit in smaller sizes of about $25-30 million. A welcome development considering that in the past couple of quarters clients had battened down the hatches by suspending discretionary spending, freezing IT budgets and putting offshoring decisions on hold.
Many of the new deals involve what is referred to as ‘business transformation outsourcing’, where an Indian vendor would work with a client to reshape entire processes such as payroll or HR administration to make them more efficient and achieve cost savings.
In May, India’s largest software exporter TCS signed a five-year deal with the Volkswagen Group in the UK to provide IT support and transformation of its IT infrastructure. TCS also bagged a contract from ABB in the UK to implement business software. Wipro signed a $34-million contract to extend a deal with Sunoco, a US-based marketer of petrochemical products.
IT sector analysts believe that sales growth during the April-June quarter will not exceed 15%, but agree that the software services industry could be looking up. The first big result for the IT sector begins with India’s second-largest software exporter Infosys Technologies on July 10.
Infosys has forecast a decline of 6.5-8.2% in its dollar revenues and a 11-13% increase in rupee terms for the quarter ended June 30, 2009.
Research and advisory firm Booz & Co as well as investment bank Avendus Advisors see sales growing by 10-15% for the top six IT companies. Suvojoy Sengupta, a partner at Booz & Co, expects operating margins at over 20%.
“Of course, it’s a massive scale down from the 40% operating margin levels which companies had got used to,” he says.
However, Gartner, an IT-focused research company, predicts single-digit sales growth quarter-on-quarter for the sector.
While the Q1 results may only be marginally better compared with the previous couple of quarters, the outlook seems more promising. Says Partha Iyengar, vice-president and senior analyst at Gartner: “We have started getting calls from clients (in the US and Europe) on how to cut costs by offshoring. These are positive signs. We have already hit the bottom. But we might see a recovery only by late 2009.”
Software industry grouping Nasscom has said that it expects single-digit export growth during 2009-10.
Some analysts are advising investors to stay away from the sector in the short term. “I don’t see a recovery any time in the next two quarters. Infosys, however, has a habit of giving conservative guidance and may spring a positive surprise,” says Dhirendra Kumar, CEO, Value Research Online, a mutual fund watcher.
Harit Shah, IT analyst at Angel Broking, agrees that a wait of at least two quarters is warranted before a revised outlook is pronounced.
“In the short term, we might see single-digit sales growth for top tier IT majors. Year-on-year, we might see a flattish sales growth. However, in dollar terms, we might see a dip for some IT companies,” he said.
Operationally, the manpower-intensive sector, which employs about 2.3 million, continues with its freeze on recruitment. Selective hiring is, however, on for those with specialist skills in areas such as enterprise resource planning, business software and IT architecture development, but the numbers are negligible. There is also a greater focus on shifting employees and work from client locations onsite to offshore destinations such as India.
Among the positive signs is that the domestic market looks attractive despite lower margins compared to exports. Also, with former Infosys co-chairman Nandan Nilekani now part of the government to oversee the Unique Identification Card Project, domestic IT spends could get accelerated. Telecom, e-governance initiatives, state-run companies and the Indian Railways are throwing up newer opportunities for IT.
While export-focused companies look at the domestic market as well, the revival of confidence, especially among US clients, bodes well for large and small players.
“Clients feel that the worst is behind them. Especially in the US, many customers took aggressive measures to cut costs and renegotiate contracts,” says S Gopalakrishnan, CEO of Infosys.
Infosys Australia recently won an IT application development and maintenance contract worth A$450 million (Rs 1,800 crore) from Telstra, a large Australian telecom company.A weaker monsoon this year is expected to increase agriculture imports, and thus weaken the rupee just as the rise in crude oil prices has weakened the Indian currency.
Buoyed by the hope of recovery, IT companies are now going all out to spend more to win new contracts and increasing their sales force. However, challenges persist. As KS Ananthanarayan, CFO, Birlasoft points out, the biggest challenge now is getting new business.
“Companies are investing a great deal in salespeople, and there is an increased focus on incumbency of clients,” he says. Infosys, for instance, added 217 employees to its sales and marketing team in FY09, its highest ever since the company was founded in 1981, according to Edelweiss Research.
Similarly, Wipro, HCL, TCS and Birlasoft have augmented their sales teams. But this strategy needs to be improved with a focus on business rather than technology. “In the current scenario, multinational IT companies are still winning new contracts because of the effectiveness of their marketing teams which are focused on selling business needs. In comparison, Indian sales staff is focused on selling technical needs,” remarks Gartner’s Mr Iyengar.
One reason for that could be the lack of top-end skills and consulting capability. To plug this gap, companies are looking for acquisitions. The IT & ITeS sector accounted for 50% of cross-border acquisitions in 2007-08 and 40% in 2008-09. Buyouts like HCL’s acquisition of Axon last year will provide the much-needed boost.
Overall, the road to recovery seems visible now and companies just need the critical fuel in the form of new business to reach the end of this fiscal, after which offshoring is expected to see its next peak. Till then, the road is tough, but at least the worst is behind them.
TCS, Wipro
TCS, Wipro, Infy among companies battling it out for Rs 2,000-cr defence deals
TCS , Wipro and Infosys, apart from SAP and IFS Defense, are pursuing contracts worth Rs 2,000 crore from the country’s defense forces, the Indian Air Force (IAF) and the Army, who are seeking to modernise their processes and become more efficient organisations.
At least three people familiar with these contracts said both IAF and Indian Army have issued several request for proposals for these projects. When contacted by ET earlier this week, officials at Indian Army and IAF confirmed that their organisations are seeking suppliers, but declined to elaborate.
“The main purpose is to bring efficiency and reduce cost, time and paper work. There are hundreds of IT projects going on, including one for automating HR. We give certain projects to private companies, but there are also some projects which are confidential and classified and can’t be outsourced to anyone,” said an Army spokesman.
An IAF spokesman, who confirmed that tech companies are bidding for these projects , said e-maintenance of assets and material management are among top projects being considered. “The significance of such a project is that it plays a key role in logistics maintenance and is vital for sustaining operational capabilities and material management . For example, if you need to change and supply critical spares for the aircraft, such IT integrated systems can give constant update, and help react quickly and reduce time and costs,” he said.
Two of the biggest IT projects currently underway at Indian Army and IAF are computerised inventory control project (CICP) and integrated materials management online system (IMMOS). Business software makers SAP and IFS Defense are currently exploring an integrated ERP opportunity at these organisations.
An ERP software will help IAF and army track and maintain inventory, and help them become more efficient by responding to the changing needs of modern warfare. Expert Ratan Shrivastava, director aerospace & defense Practice at Frost & Sullivan, says both IAF and the Army are now preparing for changing dynamics of warfare.
Indian defense organisations have been evaluating an integrated ERP software for some time now. Bangalore-based stateowned aviation company Hindustan Aeronautics Limited (HAL) is currently using IFS’ ERP software. “Apart from a packaged software from SAP or IFS, the project would involve some system integration work, which could be done by TCS, Wipro, Infosys or HCL,” As India’s defense forces prepare to buy equipments and gears worth almost $100 billion over next five years, they will need a more sophisticated technology system for managing various processes.
“Asset tracking is one of the important areas for the defense forces, and more importantly that needs to be integrated with a bigger enterprise system-similar to an ERP software,” said a government official familiar with defense modernisation program. He requested anonymity because he is not authorised to speak to media.
“Optimum utilisation and enhanced availability of inventory will be crucial for mobile warfare and this can be achieved by deploying a sophisticated ERP system,” he said. “You cannot have an F-18 fighter and have an archaic system for managing the inventory ,” said Mr Shrivastava.
While most of the Indian tech vendors are exploring these contracts now, the country’s biggest software company TCS has been working on several IT projects with defense forces for over a decade. “TCS has been working on Army’s CICP project for over ten years,” Mr Shrivastava added. Officials at TCS, Infosys and Wipro did not comment because they are under a silent period prior to the announcement of their financial results in July.
At least three people familiar with these contracts said both IAF and Indian Army have issued several request for proposals for these projects. When contacted by ET earlier this week, officials at Indian Army and IAF confirmed that their organisations are seeking suppliers, but declined to elaborate.
“The main purpose is to bring efficiency and reduce cost, time and paper work. There are hundreds of IT projects going on, including one for automating HR. We give certain projects to private companies, but there are also some projects which are confidential and classified and can’t be outsourced to anyone,” said an Army spokesman.
An IAF spokesman, who confirmed that tech companies are bidding for these projects , said e-maintenance of assets and material management are among top projects being considered. “The significance of such a project is that it plays a key role in logistics maintenance and is vital for sustaining operational capabilities and material management . For example, if you need to change and supply critical spares for the aircraft, such IT integrated systems can give constant update, and help react quickly and reduce time and costs,” he said.
Two of the biggest IT projects currently underway at Indian Army and IAF are computerised inventory control project (CICP) and integrated materials management online system (IMMOS). Business software makers SAP and IFS Defense are currently exploring an integrated ERP opportunity at these organisations.
An ERP software will help IAF and army track and maintain inventory, and help them become more efficient by responding to the changing needs of modern warfare. Expert Ratan Shrivastava, director aerospace & defense Practice at Frost & Sullivan, says both IAF and the Army are now preparing for changing dynamics of warfare.
Indian defense organisations have been evaluating an integrated ERP software for some time now. Bangalore-based stateowned aviation company Hindustan Aeronautics Limited (HAL) is currently using IFS’ ERP software. “Apart from a packaged software from SAP or IFS, the project would involve some system integration work, which could be done by TCS, Wipro, Infosys or HCL,” As India’s defense forces prepare to buy equipments and gears worth almost $100 billion over next five years, they will need a more sophisticated technology system for managing various processes.
“Asset tracking is one of the important areas for the defense forces, and more importantly that needs to be integrated with a bigger enterprise system-similar to an ERP software,” said a government official familiar with defense modernisation program. He requested anonymity because he is not authorised to speak to media.
“Optimum utilisation and enhanced availability of inventory will be crucial for mobile warfare and this can be achieved by deploying a sophisticated ERP system,” he said. “You cannot have an F-18 fighter and have an archaic system for managing the inventory ,” said Mr Shrivastava.
While most of the Indian tech vendors are exploring these contracts now, the country’s biggest software company TCS has been working on several IT projects with defense forces for over a decade. “TCS has been working on Army’s CICP project for over ten years,” Mr Shrivastava added. Officials at TCS, Infosys and Wipro did not comment because they are under a silent period prior to the announcement of their financial results in July.
Satyam
Tech Mahindra open offer ends today, sees negligible response
Firm may now subscribe to fresh equity shares of Satyam in 15 days.
Tech Mahindra is expected to subscribe to fresh equity shares of Satyam Computer Services (now Mahindra Satyam) through a preferential issue to increase its stake in the troubled company, as the ongoing open offer has failed to enthuse shareholders to tender their shares at Rs 58, the price quoted under the offer that is closing tomorrow.
As Satyam shares continue the uptrend on bourses and is hovering around Rs 70-80, sources said the open offer has hardly attracted any subscription. "Tech Mahindra will neither extend the open offer date nor revise the open offer price, but will subscribe to fresh equity shares of Satyam as per the clauses of the letter of offer," the sources said.
Tech Mahindra is expected to subscribe to fresh equity shares of Satyam Computer Services (now Mahindra Satyam) through a preferential issue to increase its stake in the troubled company, as the ongoing open offer has failed to enthuse shareholders to tender their shares at Rs 58, the price quoted under the offer that is closing tomorrow.
As Satyam shares continue the uptrend on bourses and is hovering around Rs 70-80, sources said the open offer has hardly attracted any subscription. "Tech Mahindra will neither extend the open offer date nor revise the open offer price, but will subscribe to fresh equity shares of Satyam as per the clauses of the letter of offer," the sources said.
TCS
TCS eyes more deals in healthcare sector
Tata Consultancy Services (TCS) on Monday said it is aggressively looking at deals in the life sciences and healthcare space, which is the fifth largest revenue generating vertical for the firm.
"The life sciences and healthcare vertical has not been impacted so much by the economic slowdown. This presents an opportunity for us. We are looking at bagging more deals in the pharma sector,'' TCS vice-president and global life sciences and healthcar e head, Mr Debashis Ghosh said.
Life sciences and healthcare became the fifth-largest vertical for TCS accounting for 5.7 per cent of the firms revenues at the end of the fourth quarter of FY 09.
"This is one of the growing verticals for TCS. In the first quarter of FY 09, the vertical was sixth largest and contributed 5.2 per cent of the global revenues. In few months time the vertical have become the fifth largest revenue generator for the comp any,'' he added.
"The life sciences and healthcare vertical has not been impacted so much by the economic slowdown. This presents an opportunity for us. We are looking at bagging more deals in the pharma sector,'' TCS vice-president and global life sciences and healthcar e head, Mr Debashis Ghosh said.
Life sciences and healthcare became the fifth-largest vertical for TCS accounting for 5.7 per cent of the firms revenues at the end of the fourth quarter of FY 09.
"This is one of the growing verticals for TCS. In the first quarter of FY 09, the vertical was sixth largest and contributed 5.2 per cent of the global revenues. In few months time the vertical have become the fifth largest revenue generator for the comp any,'' he added.
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