Hexaware sees strong order pipeline; 20% growth: Nishar

Atul Nishar, chairman, Hexaware, says that we remain quite positive on growing at 20% or more. We feel that if the situation improves with US elections and no debacle in Europe then the environment could only improve.

Atul Nishar, chairman, Hexaware , says that we remain quite positive on growing at 20% or more. We feel that if the situation improves with US elections and no debacle in Europe then the environment could only improve.

He also says that currently there are five deals in the pipeline and one is in the advance stage. The deals are spread across from the United States and Europe, and across major verticals like capital markets, travel and emerging verticals. And in the last nine quarters the company has signed seven large deals.

Below is the edited transcript of his interview to CNBC-TV18.

Q: Hexaware recently had a deal and there have been reports or analyst notes which suggest that the company is in conversation with potential clients for four deals and one is in advance stages. Do you think something could fructify in the near-term?

A: Currently, there are five deals in the pipeline and one is in the advance stage. The deals are spread across from the United States and Europe, and across major verticals like capital markets, travel and emerging verticals. And in the last nine quarters we have signed seven large deals.

Q: Are billings under pressure even if the deals are coming? Are they coming from tight fisted managements?

A: In over last two years, we have marginally improved our average billing on both on onsite and offshore. We don’t see any pressure on pricing on the IT industry. Repeatedly, we have guided that our pricing should be assumed to be stable.

The important point is that the client want value, greater performance, result oriented projects and fixed priced or greater commitment by off shoring companies.  Clients do want to cut their costs and get more value, but they also know if it is all done at the cost of the service provider, it will not sustain that particular situation.

Q: How much do you think is Nasscom’s 13-14% growth target under threat? What might it fall to half or high single digits?

A: Nasscom has guided for 11-14% and it is a wide enough range. In the industry we saw that some companies like mid-sized companies and companies who are scale players have also done very well. It is a mixed reason. We have seen more client specific issues coincidence for downsizing for whatever reason that may dent revenue that doesn’t mean they will not be able to grow in future.  

Q: Do you think Nasscom will hold the lower end of their 11% range?

A: That is the current optimism. So, there is no reason to believe that there is material change from the guided number.

Q: The one concern around Hexaware has been for some time that you have seen an improvement in margins, but going forward it would come under pressure because in Q3 wage hikes are expected to shave off margins to a certain extent. How do you respond to that?

A: In Q2, ours being calendar year, Hexaware reported 22.9% EBITDA which was higher than Q1. We gave normal 10% increment to all our off shore employees. The impact was absorbed in our margin and in spite of that the margin improved.

We also absorbed the significant visa costs that traditionally come in that quarter. In the coming quarter there will be onsite increase in wages. For off shore workers the date of increment is April 1 and for onsite employees the date is July 1, which remains unchanged. And we feel with this we can guide stable margins.

We are proud that at Hexaware, we have grown at higher than the industry average at good margins. We don’t believe in taking new deals by compromising on margins in any manner.

Q: So at this juncture you don't want to change your guidance of 20% dollar revenue growth any which way, up or down?

A: We remain quite positive on growing at 20% or more. We feel that if the situation improves with US elections and no debacle in Europe then the environment could only improve. 

 

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Excerpts from Midcap Radar on CNBC-TV18 Watch the full show »

 

 

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Short-term contracts give mid-cap IT cos new lease of life

With the duration of outsourcing deals getting shorter, deals worth nearly USD 85 billion are up for renegotiations this year, reports CNBC-TV18’s Shreya Roy.

Midcap IT players may get a new lease of life. With the duration of outsourcing deals getting shorter, deals worth nearly USD 85 billion are up for renegotiations this year, reports CNBC-TV18’s Shreya Roy.

Over the last few years, uncertain times have forced IT companies to go in for more short-term contracts. For mid-cap IT companies, this may have been a blessing in disguise.

Data from outsourcing advisory firm TPI says that around 700 contracts will be up for renegotiations this fiscal year, compared to 530 last year.

“There is a significant reduction in the tenure of contracts as they were originally signed. Compared to 10 years ago, when 500 of these were being done, there are 1000 a year. The tenure has gone down to five years instead of seven, so a lot of deals are naturally coming back to the market as renewals. In itself, this is a very large opportunity,” said Siddharth Pai, partner and MD at TPI India.

For many IT players, this may be just what the doctor ordered. After all, renewals account for almost 65% of the outsourcing market. Advisory firm Everest estimates that by October 2013, deals worth nearly USD 85 billion will be up for renewal.

These include a contract between HP and Bank of America, a mega deal from Shell group which is currently with AT&T, HP, and T-Systems, a blue cross blue shield deal with Dell and Manu Life's deal with IBM.

Many of these contracts are expected to be broken up into smaller chunks, as outsourcers are looking increasingly towards multi-sourcing. Analysts say this could work in the favour of the smaller players, especially those like Mindtree and Hexaware, which have been focusing on developing niche capabilities to help differentiate from larger players.

 

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Excerpts from India Business Hour on CNBC-TV18 Watch the full show »

Hexaware Technologies :Riding High! --nirmal bang,

Riding High!
Hexaware Technologies Limited (HTL) is a mid-sized IT company mainly catering to the capital markets (BFSI) and the airline (transportation) sector. It also focuses on enterprise software provided by PeopleSoft and Oracle. Recent large client wins has bought back the focus on this company which has good expertise in the niche areas. 


Investment Rationale

 Improved Revenue visibility due to large wins in the past 5 quarters

The deal wins of over $ 625 mn which HTL has gained in the past 5 quarters is commendable. HTL’s efforts of mining the existing clients in the gloomy days are paying off now reflecting in the incremental revenue streams it has earned. These long term deals give enough revenue visibility for CY12. In addition, HTL is negotiating almost 4 deals above $25mn which are in the pipeline.

 Margins moving northwards – room for further heights
EBIDTA margins have improved 812 basis points in the past 5 quarters led by drastic control in the operating costs. The company has in addition utilized its offshorablity lever in its advantage by moving almost 14% of work offshore during the same period. Currently, onsite: offshore mix stands at 53:47, utilization in early 70’s and plans to hire freshers would further aid the margins going forward. We expect HTL to report EBIDTA margins of 20% + in CY12E and CY13E.

 Proficiency in niche segments paying off
HTL earns 60% of its revenues from the Capital Markets and Travels industries and almost 30% of revenues come from enterprise solutions in terms of its service lines. In enterprise solutions, 60-65% of its revenues are from PeopleSoft where other software vendor’s focus is less.

 Guidance Revision of 20% on USD revenues for CY12E

On the back of good deals won recently, the company has revised the revenue guidance in USD terms to 20%. We feel this is a little conservative and the company can easily beat the guidance for CY12E.
Valuation & Recommendation

We expect HTL’s revenues to grow at a CAGR of 25% and adjusted profits to grow at a CAGR of 21% over CY11-CY13E. Margin improvement would remain under focus and we expect HTL’s EBIDTA margins improving by 313bps to 21.2% in CY13E from 18.03% in CY11. At CMP, the stock is trading at 10.4x and 8.6x for CY12E and CY13E respectively. On the back of improved financials and good revenue visibility, we recommend a BUY on the stock, assigning a target multiple of 11x for CY13E EPS with a price target of Rs. 147 which is a potential 28% upside.

Risks to our Rationale:

 Concentration in Discretion spending Revenues
Hexaware derives more than 50% of its revenues from Enterprise solutions and Business Intelligence and Analytics which could get affected in economic downturn. However, the recent deal wins re-affirms the revenue visibility for the company for CY12E.

 Industry Risks of wage pressures, rupee appreciation and competition
Rupee depreciation has acted in favor of the company and Industry per say. Any severe reversal of the rupee trend would affect the prospects of the firm.

 Exposure in the European Region
The company has 28.4% exposure in the European region and few of the major deals have been signed with clients in this region. Looking at the current economic scenario prevailing in the Euro zone, any delay in commencement of these deals or cancellation may impact the margins severely.

Valuation & Recommendation
We expect HTL’s revenues to grow at a CAGR of 25% and adjusted profits to grow at a CAGR of 21% over CY11-CY13E. Margin improvement would remain under focus and we expect HTL’s EBIDTA margins improving by 313bps to 21.2% in CY13E from 18.03% in CY11. At CMP, the stock is trading at 10.4x and 8.6x for CY12E and CY13E respectively. On the back of improved financials and good revenue visibility, we recommend a BUY on the stock, assigning a target multiple of 11x for CY13E EPS with a price target of Rs. 147 which is a potential 28% upside.

Configuring Informatica File Transfer Protocol

Informatica File Transfer Protocol can be used to transfer/move files from different environment into our pre-defined Landing Zone. It can also be used to transfer file to the destination folder/directories.   The Integration Service can use FTP to access any machine it can connect to, including mainframes.

Configuring FTP in Informatica Workflow

To use FTP file sources and targets in a session,

• Create an FTP connection object in the Workflow Manager and configure the connection attributes
• Configure the session to use the FTP connection object in the session properties.
• Specify the Remote filename in the connection value of the Session properties.

Guidelines

• Specify the source or target output directory in the session properties. If not specified, the Integration Service stage the file in the directory where the Integration Service runs on UNIX or in the Windows System directory.

• Session cannot run concurrently if the same FTP source file or target file located on a mainframe.

• If a workflow containing a session that stages an FTP source or target from a mainframe is aborted, then the same workflow cannot be run until it’s timed out.

• Configure an FTP connection to use SSH File Transfer Protocol (SFTP) while connecting to an SFTP server. SFTP enables file transfer over a secure data stream. The Integration Service creates an SSH2 transport layer that enables a secure connection and access to the files on an SFTP server.

• To run a session using an FTP connection for an SFTP server that requires public key authentication, the public key and private key files must be accessible on nodes where the session will run.

Configuring Remote Filename

Attribute	Description
Remote Filename	The remote file name for the source or target.  Indirect source file name to be entered, in case of indirect source file is sent. Use 7-bit ASCII characters for the file name. The session fails if it encounters a remote file name with Unicode characters. If the path name is provided with the source file name, the Integration Service ignores the path entered in the Default Remote Directory field. The session will fail if the File name with path is provided with single or double quotation marks.
Is Staged	Stages the source or target file on the Integration Service. Default is “Not staged”.
Is Transfer Mode ASCII	Changes the transfer mode. When enabled, the Integration Service uses ASCII transfer mode. -           Use ASCII mode when transferring files on Windows machines to ensure that the end of line character is translated properly in text files. When disabled, the Integration Service uses Binary Transfer mode. -          Use Binary Transfer mode when transferring files on UNIX machines. Default is disabled.

To know more about Transfer Protocol

Informatica – User Defined Functions

Informatica User Defined Functions are similar to Built-in Functions, where these functions need to be created once and execute multiple times. Transformation logics that are common across the ports are the ideal candidate for User Defined Functions.

Transformation Logic implemented without User Defined Functions

Validation “IIF( ISNULL(LTRIM(RTRIM(INPUT))),’TRUE’,’FALSE’)” is being performed in multiple ports.

The disadvantage with this approach is any changes to this validation need to be done in all the ports.

This can be addressed by creating a User Defined function and have the logic incorporated there.

Steps to Create User Defined Functions

Step 1 : Right-click on the User-Defined Functions folder in a repository folder in the Designer.

Click on “New”

Step 2: In Editor add the transformation logic / validation that needs to be performed.

Click ok and validate the UDF.

User Defined Function – Type:

Public if the function is callable from any expression. Private if the function is only callable from another user-defined function.

To Call User Defined functions from Port:

To know more about Informatica

Informatica Pushdown Optimization

What is Pushdown Optimization and things to consider

The process of pushing transformation logic to the source or target database by Informatica Integration service is known as Pushdown Optimization. When a session is configured to run for Pushdown Optimization, the Integration Service translates the transformation logic into SQL queries and sends the SQL queries to the database. The Source or Target Database executes the SQL queries to process the transformations.

How does Pushdown Optimization (PO) Works?

The Integration Service generates SQL statements when native database driver is used. In case of ODBC drivers, the Integration Service cannot detect the database type and generates ANSI SQL.  The Integration Service can usually push more transformation logic to a database if a native driver is used, instead of an ODBC driver.

For any SQL Override, Integration service creates a view (PM_*) in the database while executing the session task and drops the view after the task gets complete. Similarly it also create sequences (PM_*) in the database.

Database schema (SQ Connection, LKP connection), should have the Create View / Create Sequence Privilege, else the session will fail.

Few Benefits in using PO

• There is no memory or disk space required to manage the cache in the Informatica server for Aggregator, Lookup, Sorter and Joiner Transformation, as the transformation logic is pushed to database.
• SQL Generated by Informatica Integration service can be viewed before running the session through Optimizer viewer, making easier to debug.
• When inserting into Targets, Integration Service do row by row processing using bind variable (only soft parse – only processing time, no parsing time). But In case of Pushdown Optimization, the statement will be executed once.

Without Using Pushdown optimization:

INSERT INTO EMPLOYEES(ID_EMPLOYEE, EMPLOYEE_ID, FIRST_NAME, LAST_NAME, EMAIL,

PHONE_NUMBER, HIRE_DATE, JOB_ID, SALARY, COMMISSION_PCT,

MANAGER_ID,MANAGER_NAME,

DEPARTMENT_ID) VALUES (:1, :2, :3, :4, :5, :6, :7, :8, :9, :10, :11, :12, :13) –executes 7012352 times

With Using Pushdown optimization

INSERT INTO EMPLOYEES(ID_EMPLOYEE, EMPLOYEE_ID, FIRST_NAME, LAST_NAME, EMAIL, PHONE_NUMBER, HIRE_DATE, JOB_ID, SALARY, COMMISSION_PCT, MANAGER_ID, MANAGER_NAME, DEPARTMENT_ID) SELECT CAST(PM_SJEAIJTJRNWT45X3OO5ZZLJYJRY.NEXTVAL AS NUMBER(15, 2)), EMPLOYEES_SRC.EMPLOYEE_ID, EMPLOYEES_SRC.FIRST_NAME, EMPLOYEES_SRC.LAST_NAME, CAST((EMPLOYEES_SRC.EMAIL || ‘@gmail.com’) AS VARCHAR2(25)), EMPLOYEES_SRC.PHONE_NUMBER, CAST(EMPLOYEES_SRC.HIRE_DATE AS date), EMPLOYEES_SRC.JOB_ID, EMPLOYEES_SRC.SALARY, EMPLOYEES_SRC.COMMISSION_PCT, EMPLOYEES_SRC.MANAGER_ID, NULL, EMPLOYEES_SRC.DEPARTMENT_ID FROM (EMPLOYEES_SRC LEFT OUTER JOIN EMPLOYEES PM_Alkp_emp_mgr_1 ON (PM_Alkp_emp_mgr_1.EMPLOYEE_ID = EMPLOYEES_SRC.MANAGER_ID)) WHERE ((EMPLOYEES_SRC.MANAGER_ID = (SELECT PM_Alkp_emp_mgr_1.EMPLOYEE_ID FROM EMPLOYEES PM_Alkp_emp_mgr_1 WHERE (PM_Alkp_emp_mgr_1.EMPLOYEE_ID = EMPLOYEES_SRC.MANAGER_ID))) OR (0=0)) –executes 1 time

Things to note when using PO

There are cases where the Integration Service and Pushdown Optimization can produce different result sets for the same transformation logic. This can happen during data type conversion, handling null values, case sensitivity, sequence generation, and sorting of data.

The database and Integration Service produce different output when the following settings and conversions are different:

• Nulls treated as the highest or lowest value: While sorting the data, the Integration Service can treat null values as lowest, but database treats null values as the highest value in the sort order.
• SYSDATE built-in variable: Built-in Variable SYSDATE in the Integration Service returns the current date and time for the node running the service process. However, in the database, the SYSDATE returns the current date and time for the machine hosting the database. If the time zone of the machine hosting the database is not the same as the time zone of the machine running the Integration Service process, the results can vary.
• Date Conversion: The Integration Service converts all dates before pushing transformations to the database and if the format is not supported by the database, the session fails.
• Logging: When the Integration Service pushes transformation logic to the database, it cannot trace all the events that occur inside the database server. The statistics the Integration Service can trace depend on the type of pushdown optimization. When the Integration Service runs a session configured for full pushdown optimization and an error occurs, the database handles the errors. When the database handles errors, the Integration Service does not write reject rows to the reject file.

To know more about Pushdown Optimization

Informatica Performance Improvement Tips

We often come across situations where Data Transformation Manager (DTM) takes more time to read from Source or when writing in to a Target. Following standards/guidelines can improve the overall performance.

• Use Source Qualifier if the Source tables reside in the same schema
• Make use of Source Qualifer  “Filter” Properties if the Source type is Relational.
• If the subsequent sessions are doing lookup on the same table, use persistent cache in the first session. Data remains in the Cache and available for the subsequent session for usage.
• Use flags as integer, as the integer comparison is faster than the string comparison.
• Use tables with lesser number of records as master table for joins.
• While reading from Flat files, define the appropriate data type instead of reading as String and converting.
• Have all Ports that are required connected to Subsequent Transformations else check whether we can remove these ports
• Suppress ORDER BY using the ‘–‘ at the end of the query in Lookup Transformations
• Minimize the number of Update strategies.
• Group by simple columns in transformations like Aggregate, Source Qualifier
• Use Router transformation in place of multiple Filter transformations.
• Turn off the Verbose Logging while moving the mappings to UAT/Production environment.
• For large volume of data drop index before loading and recreate indexes after load.
• For large of volume of records Use Bulk load Increase the commit interval to a higher value large volume of data
• Set ‘Commit on Target’ in the sessions

To know more about Informatica