While peers race to buy entry into markets, HCLT adheres to core delivery strengths to build its reputation, with help from alliances in Europe

By Jennifer Hamerl, Analyst

HCLT will maintain double-digit revenue growth by leveraging its Digital Systems Integration, ALT SAM and infrastructure management services capabilities

HCLT continues to fly under the radar of larger India-centric competitors and global MNCs by aggressively pricing run-the-business outsourcing contracts to appeal to cost-conscious enterprises. This strategy enables the firm to gain a foothold with clients by alleviating short-term cost concerns, while positioning HCLT to grow relationships over time by introducing higher-value transformational solutions such as Digital Systems Integration (DSI). In 1Q14 HCLT’s revenue grew 14.3% year-to-year to $1.4 billion fueled by the signing of 12 contracts exceeding $1 billion in combined value for transformational deals. HCLT won the transformational contracts by utilizing its DSI, ALT ASM and infrastructure management services strengths to meet demand in the financial services and manufacturing verticals in the U.S. and Europe.

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Industry specialization and tighter collaboration in Atos IT Services coupled with high-growth offerings will support Atos’ growth recovery in 2014

By Elitsa Bakalova, Analyst

Growth areas such as cloud, big data, security and industry specialization will help Atos ramp up revenue through 2016

Atos continues to experience growth challenges, as its revenue declined 1.8% year-to-year at constant scope and exchange rates and 2.5% as reported in euros. This performance is in line with Atos’ expectations and the growth pressures will likely remain in 2Q14; however, TBR expects Atos’ growth to gradually recover in 2H14. Atos’ investments in higher-value services, with an emphasis on cloud, security and vertical specialization largely in C&SI but also starting in ITO, will help the firm ramp up revenue through 2016. Cloud is becoming a component in managed services deals, specifically IaaS and in regions such as France and North America, which indicates the firm’s investments in the segment are starting to pay off. TBR sees security as an immediate area where the firm will gain customers, revenue and profit due to its capabilities and investments to make the offerings more visible to clients.

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IBM will leverage acquisitions and partnerships with service providers to capitalize on demand for mobility-based solutions in enterprise markets

By Scott Dennehy, Engagement Manager/Senior Analyst

IBM will partner with its service provider customers to capture enterprise customer spending on cloud, security, and mobility

A combination of reduced customer spending and the company’s focus on margin growth resulted in IBM’s telecommunications segment revenue declining 11% year-to-year in 1Q14. In addition, IBM’s traditional business model, hardware, is suffering from commoditization and disruption due to the cloud, although the company will benefit from cloud-related software and services growth over the long term.

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IBM will endure revenue and profit declines during 2014 as it evolves to enable business outcomes

By Krista Macomber, Analyst

IBM faces a pivotal turning point during 2014 as it adapts its portfolio to enable business outcomes for the C-Suite

IBM’s 1Q14 financial performance outlines a company in the midst of a long-term strategic evolution and demonstrates cloud and big data–driven disruption impacting the IT industry as a whole. Revenue was $22.5 billion, down 4% year-to-year, with software and global financing IBM’s only segments to achieve growth. Net income fell a reported 21% despite improvements to gross margin as a result of $870 million in workforce rebalancing charges. IBM will continue to funnel broad-based investments to increase scale in the mobile, security and cloud marketplaces, while exiting less strategic marketplaces. For example, IBM plans to invest $1 billion in BlueMix PaaS capabilities to increase its foothold in hybrid cloud environments, continues to build out its SoftLayer IaaS capabilities, has acquired Database as a Service provider Cloudant and intends to divest the majority of its x86 server assets to Lenovo later in 2014. These actions, coupled with continued struggles to stabilize the hardware top and bottom lines during 2014, will create headwinds to corporate revenue and operating margin improvements during 2014.

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TCS’ low-cost positioning helps it compete in multisourcing delivery deals as investments in digital IP will help it capture transformational projects

By Bozhidar Hristov, Analyst

TCS’ double-digit revenue growth in FY15 will depend on the firm’s ability to expand its consulting foothold in mature markets as Digital transformation engagements are gaining momentum

Investments in R&D and strategic partnerships will ramp up TCS’ capabilities to meet demand on the supply side of digital transformational solutions spanning cloud, mobility and big data. However, to sustain its double-digit revenue growth in FY15, TCS will need to hire and acquire tech-savvy consultants who will help it to competitively tout its portfolio across mature and emerging market regions. The digital transformation market is still in its infancy and awards stemming from such engagements are yet to scale up, therefore, as TCS increases its focus on capturing such deals, consultants will help in capturing multiple digital-focused deals, supporting overall sales. Additionally, as TCS climbs the value chain, establishing a strong on-site consulting presence will support the firm’s efforts to shift its brand from a low-cost outsourcer to a business solutions provider.

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Strategic M&As and expansion in the underpenetrated Canada market will aid Wipro ITS’ revenue growth acceleration in 2014

By Jennifer Hamel, Analyst

While continuing to lag India-centric peers in revenue growth, Wipro ITS’ evolving delivery model propels the firm’s profit expansion

Wipro ITS edged closer toward industry-level revenue growth in 1Q14, growing 9% year-to-year to $1.72 billion, but remains well behind India-centric peers that have been faster to adapt to evolving demand trends. Peers HCLT and TCS reported 14.3% and 15.2% sales expansion, respectively, in 1Q14. Europe continues to drive Wipro’s overall IT services revenue growth, similar to its peers, as a combination of improved demand and the firm’s investments in onshore account management and regional leadership enabled the firm to increase its deal-conversion rate by 50% over last year on a company level. Wipro continues to hone its delivery efficiency and quality through the use of platform-based managed services offerings such as ServiceNXT, increasing the firm’s profitability despite smaller deal sizes. Gross profit jumped 32.4% year-to-year to $626 million, and operating margin expanded 430 basis points year-to-year in 1Q14 to 24.5% on the strength of productivity improvements and increased employee utilization. By contrast, HCLT and TCS expanded gross profit by 23.6% and 15.5%, respectively. Continue reading

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Packaging industry-focused consulting with IP-based analytics solutions sets IBM ahead of peers in the race toward digital transformation

By Jennifer Hamel, Analyst

Despite short-term impacts from restructuring efforts, IBM’s 1Q14 services results set the stage for continued profit expansion through technology-driven solutions

IBM took its medicine in 1Q14, accomplishing multiple strategic moves that impacted quarterly results, but position the firm for long-term profitable revenue growth in its services business. Divesting its low-margin customer care BPO business and restructuring its global workforce frees IBM to continue to bet aggressively on higher-value solution areas such as cloud, analytics, mobility and security that address clients’ business outcomes. TBR believes IBM’s blend of software, services and unrivaled R&D resources distinguish the firm in its ability to churn out productized IP-based solutions on a global scale, which we expect will return the services segment to growth by 2015. In the meantime, we anticipate continued margin expansion throughout 2014 driven by increased adoption of platform-based solutions such as BlueMix and consulting-led offerings such as IBM Interactive Experience. Continue reading

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