FY2017 was an exceptional year for Cyient. Stakeholders around the world joined us incelebrating 25 years of your company's remarkable journey. It is gratifying to see howCyient has grown from a small geographic information systems (GIS) company into a highlyrespected global technology player. Cyient has grown at a healthy pace and is activelyinvesting in emerging technologies and capabilities that will allow us to address thefuture growth market.
I am happy to say that Cyient was una ected by the geopolitical disruptions thatoccurred in FY2017. We remain focused on our strategy to grow in core markets and become aleading brand for design led manufacturing and technology solutions. In order to ride thewave of digital transformation Cyient has been promoting an internal culture ofinnovation and consciously investing in reskilling and upskilling its workforce. Yourcompany has continued to create positive social impact through various digital-centriccommunity initiatives. Recognized and respected for its corporate governance your companyhas further strengthened its Board and brought special focus to diversity and inclusion inits business.
Let me elaborate on each of these themes in more detail.
Disruption is changing our world
We live in interesting and challenging times. Volatility uncertainty complexity andambiguity are the new normal and have an extraordinary bearing on enterprise strategy andgrowth. The velocity of change has increased. Moore's Law states that the number oftransistors in an integrated circuit will double every two years which also means thatthe computing speed of devices will grow exponentially. This creates many newpossibilities that did not exist a few decades ago. At the same time the predictabilityof change has decreased. Consequently it is now harder to predict the future of emergingtechnologies and resultant changes to market demands and customer expectations. Thelifespan of technologies and organizations has decreased significantly in the last fewdecades.
The global political environment is constantly creating new challenges andopportunities for industry. However these disruptions are likely to be temporary andcyclical. FY2017 was an eventful year at the local national and global level. On onehand we experienced demonetization in India (which did not have an impact on theIT-Business Process Management industry) while on the other we witnessed Brexit and theU.S. elections.
Many developed economies including the U.S. UK Singapore and Australia areenforcing protectionist policies with regard to movement of skilled talent. From India'sperspective we have an equal number of companies from developed nations that areoperating in the country. They view India as a large market. There is an imperative needto have a global framework within which trade and services are delivered. The World TradeOrganization should implement an amicable framework that would enable global multinationalfirms to operate in di erent countries and provide a clearly defined set of rules formovement of skilled talent.
Setting geographic boundaries in the digital era is not conducive for global growth.Global leaders need to speak up and provide a level playing field for the growth of alleconomies around the world.
Technology disruptions are redefining our industries and customers leading to pressureon many existing businesses while simultaneously accelerating new business models andvalue propositions. There are multiple factors that are amplifying digital technologydisruption that in turn has led to an unprecedented wave of innovation in almost everyindustry. Computation storage and connectivity are becoming exponentially faster cheaperand smaller. Collaboration communication and consumption of similar technology platformsacross the developed and developing world is spurring global innovation. Today with themillennial generation having a high level of comfort in technology usage employees nowexpect the same ease of use at their workplace. This has led to the multiplier effect oftechnology. Individual technologies built on diverse platforms are amplifying each other'seffects setting the stage for what some are calling a "fourth industrialrevolution."
Customers and markets are changing
Today's customers have equal access to information and consider suppliers to be anintegral part of their product and service ecosystem. They are willing to invest time tobetter understand their suppliers and in turn also expect those suppliers to have in-depthknowledge about the their business.
They look to suppliers as technology consultants with domain expertise and expect themto drive projects with a shared vision. Business models are shifting from the traditionallabor-based onsite-o shore model to a cloud-based o -premise model. There is growinginterest in non-linear models and there is greater appetite with vendors to link revenuesto business outcomes.
Over the last year we have also seen decentralization of decision making. Buyers arechanging their approach as much as solution providers are repurposing their businesses.Buy-side influencers are expanding beyond CIOs to CMOs COOs and other business leaders.In today's fast changing world innovation has become hygiene and is not limited tointernal e ort. Corporations are now leveraging a new ecosystem for innovation throughacquisition funding incubation and collaboration.
Cyient is prepared for the disruptive environment
Cyient has always embraced change and pioneered many transformations to keep it alignedand focused on customer and market requirements. Disruptive forces have created newchallenges that organizations need to address immediately through the right initiatives.In this context Cyient has defined three focus areas (1) Strategy (2) Innovation and(3) Skills and Leadership to navigate through its changing environment and is investingsignificant e ort and resources on these initiatives.
During the past 25 years Cyient has transformed from a GIS data conversion vendor to asuccessful Design Build Maintain & Operate partner with expertise and engagementacross multiple industries including design led manufacturing. In the process we havecreated a business that delivers sustainable value to our stakeholders.
Our strategic vision is to become a major tier-1 supplier in select industries withinthe next ten years. To achieve this vision we have articulated a strategy focused onexpanding from Services to Systems and Solutions (the S3 Strategy). We need a very carefuland focused approach to achieve this aspirational goal. To that end we are leveraging theAGILE framework which will support the transformation of Cyient through the five keylevers of Ambition Growth Investment Leadership and Execution. In May 2017 Cyient wonthe Institute for CompetitivenessTimes Network Award for Strategy in recognition ofour role in "shaping the industry creating unique positioning and altering thebasis of competition." This award is a credible endorsement of Cyient's growthstrategy and acknowledges that our Design Build Operate & Maintain value propositionis reshaping our industry positioning and redefining our growth paths.
I am also happy to share with you that our strategy to pivot our organization towardsan industry vertical structure (business unit) from a geography based structure hasstarted paying off. We see increased ownership and growth momentum post this alignment.
Innovation is implicit in Cyient's DNA and our engineers have always strived to delightclients with innovative solutions. During FY2017 we made perceptible progress in enablinginnovation across all the industries we serve. To continue nurturing a culture thatfocuses on innovation we introduced the Idea Management Tool (IMT) a SaaS basedenterprise system that enables leadership to solicit ideas from all associates regardlessof global location. We also launched the New Technology Accelerator (NTA) program toincubate and grow new technology ideas at Cyient.
We renamed the Customer Experience Center to the "Cyient Innovation Hub."This change aptly reflects the innovation being executed in the labs that are housed inthis facility. There were two important additions to the Innovation Hub in FY2017:
LEGO Lab: LEGO is an extremely creative rapid prototyping platform for engineers.It is often difficult to explain a concept or design. LEGO gives our engineers the basisto quickly build functional prototypes using a robotics platform
ANSYS Lab: This lab has been built in collaboration with ANSYS a simulationplatform company and a strategic partner. It provides our engineers with the environmentto build complete virtual prototypes of complex products and systems involvingmechanical electronics and embedded software components to incorporate all of thephysical phenomena that exist in real-world environments.
During FY2017 Cyient co-filed 5 patents and 6 technical papers in leading publicationsacross various industries. We also worked across a number of emerging technology areasincluding augmented reality and virtual reality. Examples include a collaboration with LVPrasad Eye Institute and Microsoft development of a UAV based data acquisition anddecision support system and a project that uses Natural Language Processing (NLP)technologies in a commercial setting.
As always Cyient has been innovating for its customers and has been recognized for itsindustry leading practices.
Skills and Leadership
In today's volatile business environment skills and leadership development arecritical needs to help organizations cope with rapid and disruptive change. Domainspecialization and soft skills are the new expectations we are seeing across thetechnology sector. In this environment technology and automation have taken center stageand companies have to deploy them rapidly to match a new competitive intensity. Whiletechnology will automate some jobs it will also create new roles. It is estimated that alarge part of the existing workforce will have to be re-skilled to adapt to these newroles.
Cyient continues to make significant investments in training and developing its globalworkforce. The Learning & Development function has adopted the latest trainingtechnology and methods including gamification flipped learning and augmented andvirtual reality to enhance the learning experience and improve retention. New ideas andthinking like networked learning for instantaneous and contextual suggestions from peersare also being adopted to help Cyient develop a highly skilled and competitive workforce.
During FY2017 Cyient invested in virtual training modules that can be accessed at anytime from anywhere. Cyient also developed tools that give employees visibility tonumerous opportunities within the company.
Leadership is an important factor for growth and success for any organization. Cyientcontinues to implement highly competitive programs for emerging leaders that help todevelop and nurture them for future leadership roles. Your company also conducts regularleadership lectures for middle and senior level management that address core leadershiprelated issues; I directly lead the "Value Based Leadership" sessions.
Cyient has also been investing in external speakers and coaches to train emergingleaders on industry best practices talent retention succession planning and otherleadership qualities.
Corporate Social Responsibility Governance and Compliance
Corporate Social Responsibility (CSR) has been extremely important to Cyient. FY2017was a milestone year for the Cyient Foundation with the launch of multiple initiativesthat focused on digital literacy education and social empowerment.
An organization can only achieve sustainable growth when it has the right corporategovernance and compliance processes in place. Technology has brought lot of benefits tosociety and at the same time a lot of risks to business. During FY2017 Cyient activelyinvested in IT hardware and cyber security compliance and standardized policy guidelinesacross the company. Cyient has also kick started various initiatives to leveragetechnology for paperless and sustainable options and create more eco-friendly operations.
Corporate Social Responsibility
While we celebrated Cyient's 25th anniversary in in FY2017 we also strengthened ourcontribution to society by announcing the launch of 54 Cyient Digital Learning Centers(CDCs) that provide 1000+ desktops complemented with 4 MBPS link to every governmentschool located in Serilingampally Mandal of Ranga Reddy district in Telangana State.
The CDCs aim is to provide high-quality digital educational resources tounderprivileged students of these government schools and accelerate digital literacy. TheCDCs are providing digital education to more than 20000 underprivileged children. Beyondstudents over 50000 citizens from communities residing around the CDCs also have accessto the Centers.
Apart from this significant new initiative other flagship programs of the CyientFoundation continue to grow and create a positive impact on society: Support to EducationCommunity Development and Support to Social Innovation.
Your company has been a shining beacon when it comes to corporate governance. Over theyears Cyient has had some of the best industry leaders on its Board of Directors.Recently we added another industry veteran and former U.S. Ambassador VinaiThummalapally as an independent director on the Board. Cyient will benefit from theexperience and expertise that Ambassador Thummalapally brings to our Board and leadershipteam. Today Cyient operates from 48 global locations in 21 countries with nearly 14000associates. To ensure that Cyient resembles a true multinational organization it hasconstituted a new Board committee to deal with matters relating to diversity andinclusion. Cyient is also launching a specially designed training program that focuses ondeveloping more women engineers in its workforce thereby helping in our way to reduce thegap in this industry.
While technology has brought us enormous possibilities it has also increased thevulnerability to cyber threats. In recent months there have been multiple attacks on ITsecurity and cyber threats have become a challenge globally.
Cyient has taken significant steps to enhance IT hardware and information security byrunning multiple initiatives to improve internal processes and employee awareness. We havestrengthened our Asset Management Policy to improve current IT hardware tracking and anInformation Security Policy & Compliance Policy has been implemented to maintainconfidentiality integrity availability and safety of information and data.
To monitor and ensure compliance to all company policies and applicable regulations wehave globally launched the "Comprehensive Compliance Manager" a software tooldeveloped by Ernst & Young. This tool covers all applicable laws and acts as athird-party validation of internal controls on an annual basis.
Recently our industry has faced visa and work permit related issues across severalparts of the world. I am glad to reassure you that your company has always been compliantwith the laws and regulations in all the countries we operate in.
FY2017 was an exceptional year for Cyient when we saw double digit growth of our topand bottom lines. While the IT-BPM industry growth average is 9%1 Cyient hasbeen surpassing the industry average for several years. In FY2017 our revenue grew by16.3% YoY and operating profit and net profit grew by 15.7% and 10.7% respectively (inINR terms). The 5-year CAGR is 18.4% and the net profit CAGR for the same period stands at18%.
Cyient is actively investing in emerging technologies that are reshaping expectationsin our industries and will spur your company's growth. We have focused on select industryverticals to build deep domain knowledge and support digital transformation for customersthat will make us their preferred partner for design led manufacturing and technologysolutions. Our goal is to democratize technology to help mankind and create a positiveimpact in everyone's life.
I would like to take this opportunity to thank my associates for their relentless eorts to make Cyient successful. I would also like to thank our clients who have trusted uswith their business and provided us with opportunities year after year. Your company'sperformance makes me very confident that we have a bright future in front of us.
Wish you all the best.
BVR Mohan Reddy