Goldman Sachs: India IT: Sapient (SAPE, CL-Buy, $12.93)

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Sapient (SAPE, CL-Buy, $12.93) 
 Employee attrition has stabilized – Management indicated that employee attrition
peaked in July and has stabilized. The company has a standard approach on salary
adjustments, which typically take place in 2Q of the calendar year. In 2010 Sapient
decided to put through another round of wage increases, given increased competition
for talent in India, which has been an industry wide phenomenon.

 Demand remains robust, some fungibility exists for entry level resources – Sapient
indicated that some fungibility exists between its Nitro and Global Markets resources,
particularly at the bottom of the employee pyramid. That said, fungibility is not as
relevant of an issue as demand remains robust in both business segments.
 Leveraging global delivery for interactive work – The company highlighted that a lot
of the front-end interactive work can be done in a shared model leveraging centers of
excellence and global delivery, which provides incremental margin leverage. Sapient
also discussed its ambitions to gain increased mind share of the CMOs in India and
highlighted its work with Citi and Coke in the country over the last two years.
 Technology foundation and focus on digital capabilities are differentiators – The
company believes that its strong technology and digital capabilities remain significant
differentiators against its competitors and large ad agencies, particularly given the
increased focus on multi-channel commerce and integration. For Sapient, digital
thinking and capabilities have always been at the core of the company’s business
model, rather than serving as add-on’s to traditional strategies.