Amid concerns regarding a slowdown in globalisation, French IT consulting major Capgemini is positive on the outlook for the sector in 2017.
Patrick Nicolet, Member of Group Executive Board believes Capgemini is well-positioned for challenges that may impact the models of IT companies. He said automation remains a key challenge in the current scenario.
The company sees a good growth opportunity in its digital and cloud portfolio, said Nicolet in an interview to CNBC-TV18 conducted on the sidelines of NASSCOM India Leadership Forum 2017 in Mumbai.
While IT spending depends on a client's agenda, Nicolet admitted the pressure on costs and budget will continue.
With regards to hiring and visa issues arising out of US President Donald Trump's protectionist policies, Nicolet said Capgemini would assess options that would be beneficial to employees.
"Rather than bringing the people to the work, you might think and discuss with your clients how you bring the work to the people. That addresses the visa concern, because you don’t need to lend resources for the clients," he said.
Below is the transcript of Patrick Nicolet's interview to CNBC-TV18's Kritika Saxena.
Q: There has been a lot of uncertainty around IT spending in 2016. That seems to have had an overhang in 2017. What are your clients telling you as far as your IT spending is concerned as we enter the year 2017?
A: We should distinguish between what is linked to maintaining the current IT systems under pressure on the cost and the budget remains and will remain. It has been here for a while. And then the other part, spend in technology which is about to be everything that is related to digital and this is growing and continues to grow. Will it balance overall to be seen, it really depends on the maturity by clients, the agenda of every client. But, all in all, the combination of both still gives us a good outlook for 2017.
Q: As far as the guidance is concerned, you have guided for a 3 percent growth for 2017, correct?
Q: In terms of, if I had to purely see the numbers, the guidance that some other IT companies is substantially higher. What is the reason for the fairly cautious guidance that has come in?
A: A guidance is a guidance. I will not comment if it is cautious or not, but it is a guidance.
Q: But is it because of the uncertainty that is there in the macro economic environment?
A: No, it is linked to our own portfolio mix. We have informed the market about a reduction in our engagement with the custom and tax authority in the UK, so we have some effect and this is also linked to the year-on-year comparison. So, we did significant acquisition with iGate so it has an impact. And all these things are normalising. What is important to note is the growth in our digital and cloud portfolio that is largely above 20 percent and one should pay more attention on the rebalancing of the portfolios than the net-net.
Q: So, as we go forward, what are the uncertain factors, the macroeconomic factors that you are watchful for?
A: The macroeconomics, there are quite a few, we believe we are at the end of a certain era or globalisation which we see it for, it has started a couple of years ago. We believe it is accelerated on some well-known factors such as Brexit or the announcement of the new administration which goes into this direction. So this has an impact on our operating model notably and how we redefine our relevance locally. I think we are very well positioned for this challenge.
Q: That has also contributed to the guidance as well in terms of the visibility that you have? The macroeconomic environment, you have kept these uncertainty points in mind while giving the guidance?
A: Yes but I think we are well equipped to address those right now. There are other challenges, digital is changing the business models of most of our clients, ours as well. Automation is another aspect, it is less macroeconomic but still has big impact. So, there are quite a few challenges with which you have to play.
Q: Half your headcount is from India. Now that the Trump administration has changed the game as far as Visa’s are concerned, at least there are proposals that can be dampening. Would there be any change in your mix as far as hiring is concerned?
A: Our perspective is that the most adequate reaction to Visa is that the visa is for lended resources in the US. So, rather than bringing the people to the work, you might think and discuss with your clients how you bring the work to the people and that addresses the visa concern because you don’t need to lend resources for the clients that will insists on having this. This might have an impact on the cost because then you will have to recruit locally. In this sense we are also well-positioned to address these scenario as we have a strong local presence in every geography where we operate.
Q: What are the plans for India expansion? You have acquired iGate, are there any assets that are attractive right now as far as acquisition within India is concerned?
A: No not acquisition. We just finished end of January the formal integration. It has been successfully done. Now we have one Capgemini across all of India which we will have soon 100000 colleagues of us. So, we are very proud of this achievement. We have a very solid basis. While we have done this we equipped India with infrastructure to support the group and leverage the potential of 100000 people in one geography.
The challenge for India and in our multicultural perspective is that we must build India as any other country that we have within the group. So, it is about talent, it is about digital where we need to invest. So, now starts a new phase of transformation.
Q: So in terms of additional investment, in terms of creating more delivery centres in India or in terms of head count addition, what is the plan?
A: We voluntarily kept our growth in order to be able to transform because as I said, important is the portfolio. There is a big demand for digital. We are totally convinced you can deliver, you can develop from India. So it is not about the volume game only, you need to look at the qualitative aspects, so you must reserve space so that you offer to the talent, here in India, the opportunity to have the most exciting job. I would like to add also that India is a vibrant economy today and this creates competition for us as well to attract the best people. There are a lot of opportunities available, luckily, for all these people, but we have to face this challenge. So, if we do not adapt, we become irrelevant and it is not a good fate for any company.