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Friday, 10 August 2012

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.

Shreya Roy, Reporter, CNBC TV18

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.


 

Tuesday, 7 August 2012

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.

Monday, 6 August 2012

Hexaware Q2 net rises 48% on higher revenues

Software service provider hexaware technologies has reported a 48 per cent increase in net profit at Rs 89.03 crore for the second-quarter ended june 2012 against the same period last year.

Click here to read more…

The-hindu-business-line-august-1-2012

Hexaware bets on UK, new verticals to lead mid-tier IT growth

Infosys, TCS and Wipro may be getting cautious in their outlook, but not hexaware technologies

.

After nine quarters of positive growth, the mid-tier leader is confident of a 20% year-on-year (yoy) growth in dollar revenues for fiscal 2013.

 

 

 

Thursday, 18 June 2009

Drools for Airlines

Enterprise Applications embraces a lot of business rules. These business rules are often critical areas in decision making processes that attribute to changes in the behavior of an enterprise transaction. While these business rules should be an integral part of the Enterprise Solution transactions, they should be easy to use, easily adaptable to modifications, should be segregated from the programming logics so as to be easily maintainable.

Most often, one of the architectural mistakes that we do is to embed these business rules as a part of the software application code. This methodology poses some severe disadvantages.
  • When new rules are enforced, it becomes all the more difficult to add them. The software program has to be modified to add this rule thereby causing a downtime of the application.
  • Embedding business rules with software program affords less maintainability.
  • Access to these critical business rules for business experts is minimal since they are bundled with the core application logic.
  • Efficient use of a business rules engine or a management system is inherently over looked.
  • Reliability of IT departments on the business rule modification.
  • Reduced or no usage of efficient algorithms for automated business decision process.
There are quite a number of business rule engines (management systems) available in the market. One of those that is prominent and noteworthy is the Drools (aka) JBoss Rules ™ that provides efficient way to handle business rules within an enterprise transaction. There are quite a number of advantages of Drools that makes it attractive to the others such as but not limited to:
  • Drools cater to many programming languages such as Java, Python, and Groovy etc.
  • Drools can run on .NET
  • Drools are Declarative in nature allowing programmers to use it at ease.
  • Drools are flexible enough to be used by means of Domain Specific Language (DSL) to address the semantics of problem domain.
  • Drools can be configured via decision tables (excel tables)
  • Drools is based on forward chaining inference mechanism, which means that changes to inference during rule executions dynamically change the output behavior. What this means is that the data is iterated through until the pre defined goal is reached unlike the backward chaining approach.
Drools employ the famous pattern matching RETE algorithm. When known facts are asserted into the knowledge base, the implementation fires the rules (defined by the rule set) in a sequenced manner until the end of the rule is reached and then looping back to the first if necessary.

Drools for Airline

Airlines reservation system is mission critical system and is characterized by deployment across the world requiring split second response for any input. I am considering a small business rule in the airlines passenger services space to explain the importance of the drools at runtime. A passenger list display for a flight might be queried with different parameters to search for. I am considering that a query has been supplied to match the requested origin and destination and a specific booking status of a passenger to match for display. The rule of thumb is to display only the confirmed passengers on board. Further the rule should check if the segment being queries is open for display.
Below is a snapshot of how the drools file would look like (denoted by *.drl extension)
Drools for Airlines

Well, one might argue that the above rule might be written through a java (or any program in that case) code. The code would not look complex but would not look simple either. The rule explained above is the simplest in its form. Resolving the above simpler logic into an application code itself would amount to redundant iterations, in efficient loops etc. Notice the line where the status of the FlightLeg is being checked for from the list of Flight Legs and the line where the passengers with confirmed status are collected. It is just a single line that does the work! Furthermore any one can infer the outcome of this decision, not mandating that java knowledge is absolutely essential.

There are flexible expression language extensions employed by drools which cannot be programmed efficiently when the business logic is embedded into the application code. Furthermore drools bring in an abstraction to employing the business rules thus keeping the application code more readable and more manageable. Above all the power of drools is realized when there are complex decision making processes during forward chaining inference, especially when a decision outcome should have inherent effect on the other.

The Rule Explained

As can be seen from the above screen shot, the rule file contains a package declaration at the top followed by a list of imports needed for the rule (similar to java environments). The next section is a set of rule definitions. A rule is recognized by a name followed by a set of conditions to check (denoted by the when keyword) and a set of actions to take as the conditions are satisfied (denoted by the then keyword). A rule file can define any number of rules to be fired and optionally a sequence in the firing manner (denoted by the salience keyword). You should probably use this salience attribute if the firing of one rule has a consequence on the other. The no-loop keyword in the second rule as can be seen from the screen shot is used to instruct the rules engine to skip looping.

Drools also provides a set of pre defined enriched functions to work with collections and the like (as can be seen from the above rule snapshot like the collect function), the retract function to evict objects from the working memory when they are no longer needed.

Invoking the rule

Invoking the drools rule file that we defined is simple. To start with,…… the rule we defined has to be built into a form of package. This is achieved by using the KnowledgeBuilder.

KnowledgeBuilder kBuilder = KnowledgeBuilderFactory.newKnowledgeBuilder();

A Knowledge builder in drools is responsible for taking an input rule definition file (the individual rule files, decision tables or the DSL files) and turning them into what is called a KnowledgePackage which the KnowledgeBase can consume. Typically this is achieved in the following way.

kBuilder.add(ResourceFactory.newClassPathResource(“person.drl”), 
ResourceType.DRL);

KnowledgeBuilder can report errors if the input rules definitions or decision tables cannot be compiled to knowledge packages. As a better programming practice it is always good to check if the KnowledgeBuilder has errors before adding resources.

When the Knowledge Packages are built, it is then ready to be consumed by the KnowledgeBase. This is accomplished in the following way,

KnowledgeBase kBase = KnowledgeBaseFactory.newKnowledgeBase();

kBase.addKnowledgePackages(kBuilder.getKnowledgePackages());

StatefulKnowledgeSession session = kBase.newStatefulKnowledgeSession();

//insert the objects that you want the rules to be fired for!
session.insert($object1);

session.insert($object2);

session.insert($object3);

//fire all the rules……
session.fireAllRules();

//dispose of this session since it is stateful.
session.dispose();

Wasn’t it simple? As can be inferred, writing business rules using Drools simplifies the task of embedding the rules into the application code that could otherwise result in redundant iterations, complex logics during dynamic decision inference etc. All of those are done behind the scenes through Drools. All the more Drools employ efficient algorithms for best performance which would otherwise have to be designed (or compromised which is what happens most of the time). Above all the rules can be written as decision tables, XML files which makes it more attractive.
Let us consider a small (rather ‘naïve’ to be precise) example to see how to employ Drools at run time. I am assuming a face book class where a single face book has a collection of persons and each person has an address. I am considering making use of drools for these 2 business rules:
  • No 2 persons in the face book instance can share the same email address.
  • When the address type of the person is not specified it should be defaulted to ‘Residence’
A  downloadable source code (a small stand alone example to start with) is provided for reference (as an eclipse project). The source code uses the drools binary distribution  (v5.x, http://www.jboss.org/drools), XStream (another impressive library to convert your java objects to XML without the need for schema definition Xor ML annotations, can be found at http://xstream.codehaus.org) and Apache Log4J http://logging.apache.org)

Tuesday, 24 March 2009

Agile – Take off to cost reduction


The word ‘Agile’ has been around for a while and has created a buzz in Software Development. The history of agile programming can be dated back to the 70’s.
‘Agile Programming and Practices’ introduces the concept of producing small units of output that are thoroughly Software developed and tested at a constant period of time (usually referred to as ‘sprints’). It emphasizes on delivering the smallest workable unit that best delivers the business ideas while constantly improving the product by adding functionalities to it over a period of time. The underlying fact of agile programming is that it is ‘iterative and incremental’.
Agile practices introduce small self organized teams that are highly interactive. Better collaboration is one of the primary outcomes of agile programming while little emphasis is given for formal planning and documentation. The agile concepts emphasize eliminating waste through’ Lean Programming’ techniques. It provides a means to rectify the flaws at an early stage, thereby reducing the rework costs to a greater extent. Above all the greatest advantage lies in the fact that the agile programming model ensures that the project proceeds in the right direction.
Agile practices provide an ‘adaptability to change’. Agile practices are best suited for object oriented software projects where individual objects (or modules) are developed and tested for their integrity and defects before being actually integrated into the final product and tested.
There are different agile methodologies that have been framed over the due course of time. Some of the noteworthy are ‘Agile Modeling’, ‘Agile Unified Process’, ‘Extreme Programming’, ‘Agile Data method’, ‘Scrum’, ‘Open Unified Process’ etc. Some of the noteworthy agile practices followed in the industry are Test Driven Development, Behavior Driven Development, Pair Programming, and Continuous Integration etc…
Let us examine the feasibility of applying a test driven development approach to a check in activity for an airline departure control solution. The prime aim of the check in activity is to ensure that the passenger has been successfully checked in, a seat allocated and a boarding pass printed and each of these is independent by their nature. A test driven approach to this always asserts that the end point is fulfilled as the functionality materializes. This would greatly reduce the rework overheads which otherwise would have increased if the whole system was designed to be tested in the end.

Thursday, 14 February 2008

Visibility Enablement for Express Mail/Cargo industry

Value added services hold the key to differentiate one service provider from the other in the increasing competitive express mail/cargo market. Near real time visibility of shipments and proactive exception management are essential for improving the customer experience and operational efficiency.
However, there are significant challenges in providing these value added services – large number of players, huge volume of shipments, intermediate manual operations and lack of electronic data exchange. In addition, the current technology infrastructure has limitations with respect to providing new features like messaging, e-tracking, m-tracking, proactive alert generation as well as interfacing with multiple devices for recording shipments.
Since a large number of players and platforms/technologies are involved, messaging holds the key to providing seamless connectivity required for real-time visibility enablement. At each check-point, the various parties who have subscribed to the specific checkpoint, would receive messages indicating real-time status of the shipment. Messaging would connect different systems with minimal changes to existing applications and system interfaces. In addition, it will enable workforces to become increasingly mobile and facilitate rapid response to shipment related issues.
Read More about  Point to Point