Computer Sciences Corporation (CSC), Accenture Plc (ACN) & Wipro Limited (WIT): IT Companies Shifting Focus To Next-Generation Technologies

Page 1 of 2

In order to establish footholds in an ever growing, globalized market, IT companies are realizing the potential of next-generation technologies like cloud computing and big data to open up new growth opportunities. According to Global Industry Analysts, the global IT service market is expected to reach $1.2 trillion by 2015, at a compounded annual growth rate of 5.88% from 2011. To increase their slices of the pie, three companies are harnessing these technologies to increase their prospects for growth.

Shifting from low-margin to higher-margin business

Computer Sciences Corporation (NYSE:CSC), known as CSC, is in a continuous process of divesting its non-core low-margin businesses. In last six months, it has divested six operational units generating $860 million in revenue.

Computer Sciences Corporation (NYSE:CSC)

With the proceeds of these divestitures, the company is focusing on improving its big data solutions. It will increase its revenue deployment on big data from 5% in 2012 to 25% in the next two to five years, which will raise its operating margin by more than 15% from the present level.

Computer Sciences Corporation (NYSE:CSC) has also witnessed a rise in higher value offerings like cloud computing, from 25% in 2012 to around 65% in its managed service sector bookings in fiscal year 2013. The company will generate revenue of $13.75 billion from this segment in fiscal year 2014 with an increased operating margin of 8.3% compared to 6% in last year.

In the first quarter of 2013, Computer Sciences Corporation (NYSE:CSC) planned for cost cutting of $1 billion-$1.2 billion in the next 18 months and $2 billion total in five years’ time. It plans to achieve these savings by optimizing enterprise systems, increasing use of shared services, and standardizing its service offerings. So far, its efforts have paid off: Computer Sciences Corporation (NYSE:CSC) saved $900 million compared to its target of $600 million in fiscal year 2013, which allowed it to revise its total cost cutting plan to $1.3 billion, with a $400 million target for fiscal year 2014.

Cloud computing with strong outsourcing business

Accenture Plc (NYSE:ACN)‘s revenue in the second-quarter was driven by strong growth in its outsourcing business, which grew year-over-year by 9% to $3.3 billion. The company received new orders worth $9.1 billion, out of which $4.7 billion were in outsourcing. The continuing growth opportunities in Accenture Plc (NYSE:ACN)’s outsourcing segment will allow the company to broaden its portfolio. Two-thirds of the company’s employees have deep industrial experience, and the company is focusing on around 40 industries.

Accenture Plc (NYSE:ACN) has also increased its marketing investments, which will help maintain strong order bookings in the coming months. It expects total new bookings in the range of $31 billion-$34 billion for the entire year. Accenture expects to generate revenue of $13.65 billion from its outsourcing business for fiscal year 2013, compared to $12.3 billion in 2012.

One arm of Accenture Plc (NYSE:ACN)’s marketing strategy is an increase in social media, mobile computing, and the cloud. It will spend nearly $400 million by 2015 to develop its cloud-computing business, which recently reached the $1 billion mark, nearly 3.5% of 2012 revenue. The company is currently working with 25 cloud service providers, has worked on more than 4,000 cloud projects for clients, and has around 6,700 professionals trained to work in the cloud. Accenture Plc (NYSE:ACN) expects its cloud business to grow in-line with or to exceed the projected growth of the global cloud market, which the IDC estimates will reach $98 billion by 2016, a growth of 245% from $40 billion in 2012.

Page 1 of 2