Capgemini India to expand capacity, increase hiring

Capgemini, the largest IT services and consulting company in Europe, will expand capacity in India in a plan to have halve its staff in offshore locations, the biggest of which is India.

Capgemini had about 47,000 employees in India at the end of 2013, a growth of about 15% for the year. Though the company does not disclose its future hiring numbers, it does plan to expand its headcount in India over the next three years.

"We have a three-year strategic plan to boost our offshore employees to 50% of our total headcount," said Salil Parekh, chief executive of the company's UK, North America and Asia application services unit. He added: "Since most of our offshore employees are in India, that would mean growth over here."

Capgemini has about 58,000 offshore employees currently, or about 44% of its total employee base. The shift to more work offshore will help Capgemini boost its margins.

The company, which just reported revenues of over 10 billion euros for the year ended 2013, had an operating margin of 8.5%, far lower than its Indian competition. The company expects that margin to grow to between 8.8% and 9% this year, on an organic revenue growth of between 2% and 4%.

"A lot of our workforce is onshore , so our margin will be lower than some other companies. But it's also a benefit, for example, in the United States which accounts for about 20% of our revenue because we do work onshore we aren't as affected by the visa issues," Parekh said.

Within India, Capgemini expects to post industry-beating growth in 2014. Though the domestic Indian IT services market will be worth $11.2 billion this year, according to research firm Gartner, Indian providers have struggled in the market and traditionally have looked to America and Britain as their biggest markets.

Capgemini, however, sees large opportunities in India and is concentrating on key sales areas to benefit. "In 2013, our Asia-Pacific and Latin America combined growth rate was 12%, but the Indian market grew faster than that rate and it would likely grow faster than that level in 2014 as well," Parekh said.

Though the reporting periods are different, which makes a direct comparison hard, Capgemini's India business has been growing above the general industry growth rate. For the fiscal year through March 2014, the National Association for Software and Services Companies (Nasscom) expects the Indian domestic market to grow 10% and 9-12 % in FY2015. Capgemini follows a calendar year reporting cycle.

Parekh credits Capgemini's combination of consulting, technology and outsourcing and its focus on the market in helping it do well in India. Its ability to keep individuals on local projects, rather than shifting them to service international clients, has also helped it win business.

"We work with about 45 clients in India and one of the things they mention is our ability to deliver on projects and not shift staff... I think is the difference," Parekh said.

Its ability to deliver within the local markets is also a reason Capgemini is doing well in China, Parekh added, another market where Indian providers have struggled.

"This year we will see good growth in China. In some ways, the shift of Chinese companies to digital technologies is even more rapid than some of our other more developed markets." The company is now focused on improving project management in China to increase the margin in that region.