Indian BPO Firms' Earnings Indicate Recovery May Be Coming

Tuesday Cognizant reported quarterly earnings that beat Wall Street estimates: Quarterly revenue rose to $853.5 million, up 16 percent from the year-ago quarter and 10 percent from the previous quarter.

Wipro's most recent numbers showed a 6 percent jump in revenue overall, with IT products revenue growing 19 percent from the year earlier.

Finally, Tata Consultancy Services' overall revenue was down 2 percent from the same period in 2008, but BPO revenue was up almost 12 percent.

Still, not all Indian outsourcing firms posted such revenue growth. Infosys said overall revenue was up from the previous quarter by roughly 3 percent but still down 5 percent year over year. Even then the news was not all bad as the company reported revenue of $1.15 billion and added 35 clients.

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Cognizant added 46 new clients in the last quarter. It showed strong growth across all industry sectors and geographies, but one of the key factors driving the growth at all the Indian firms was the uptick in the financial services segment. For Cognizant, that sector contributed 43 percent to its third-quarter revenue.

"Clients, who have come to rely on us to help them achieve operational efficiencies, are now increasingly approaching us to serve as a consultative business partner as their industries face comprehensive upheavals from the recession, and secular shifts resulting from new technologies and other market forces," said Francisco D'Souza, president and CEO of Cognizant, on a conference call discussing the results.

Wipro -- with clients such as Citigroup -- also has a large stake in the success of the financial sector. Wipro said last month that it expects IT revenue to increase between 3.8 percent and 5.7 percent in October through December from the preceding quarter to $1.09 billion to $1.11 billion. Wipro posted a 1.9 percent sequential rise in July through September IT revenue and added 37 clients.

TCS' revenue was up nearly 4 percent from the previous quarter, but its results indicated weakness lingering in Europe, with that revenue down 27 percent, and the manufacturing and telecom sectors still sluggish. However, wins in the retail and utilities segments may indicate that customers are starting to make spending decisions in Europe, according to TCS. Among emerging markets, Latin America and Asia-Pacific continue to show growth rates above the company average, and financial services and health care were additional bright spots.

"In order to ensure that we have resources to participate in the recovery, we plan to add 8,000 new professionals in the October-December quarter," said Ajoy Mukherjee, vice president and head of Global Human Resources. During the most recent quarter, TCS made a gross addition of 5,530 employees (which equated to a negligible net addition of 320).