Time to sacrifice margins for growth, says Infosys CEO

Bangalore

SALIL PAREKH did not get much time to settle in after taking over the helm of Infosys Ltd. Since becoming chief executive officer in January, the 53-year-old has crisscrossed three continents to meet customers and employees to get his hands around the challenges facing India's iconic tech-services giant. He talked with 48 clients in his first three months - and he is determined to see every single one face to face in the next two quarters.

He is already making tough decisions. He has said that Infosys has to sacrifice profit margins now by investing in advanced technology and skills in order to capture the opportunities ahead. That includes pumping more money into technologies such as the Internet of Things, retraining employees, localising its workforce in the US and building up the sales staff.

"To build the future Infosys, we have to make those investments now," said Mr Parekh, perched on a couch in the office that he clearly has not used much. On his sparse desk are three photos of his family, a laptop and small statue of the elephant-head Ganesha, the god of new beginnings. "If we don't do that now, the real concern is that we won't be relevant to our clients in the future."

It is a message that may unsettle investors. On Monday, Infosys shares tumbled after the information technology (IT) services giant said that it expected operating margins to be 22-24 per cent, lower than the previous year's. On Wednesday, shares declined as much as one per cent while Indian markets rose. The stock is trading at about the same level as it did two years ago.

Mr Parekh contends that Infosys has a rare combination of skills and experience that will benefit the company in the years ahead. It has been working with customers for decades, and can use that understanding to help them navigate shifting technology trends, such as cloud computing and artificial intelligence. Infosys now reaps US$2.8 billion in revenue from such digital services. But the potential market is US$200 billion.

"We are best positioned to help clients navigate their journey into the future, and take them to the next phase," said Mr Parekh. "Our clients are pushing us because they know we have the capabilities."

Mr Parekh may also cut some big acquisitions, like he did in his previous job. He has already met the mergers and acquisition (M&A) team, and asked them to draw up a short list of possible targets that could help buttress its digital capabilities. He is also on the lookout for "opportunistic things that we can do that will help accelerate our digital pace".

In his first interview with international media, Mr Parekh was engaging and a bit disarming. He explained that he was in the process of signing the lease on a house for his wife and youngest son to join him in Bangalore from Mumbai, even as he sends another son off to college in the U.S.

Through it all, his focus clearly is on urgent challenges at Infosys. Mr Parekh is trying to get the company back to stable footing after the tumultuous tenure of his predecessor. Vishal Sikka arrived in 2014 as a well-respected executive from SAP SE, but quit in August after a clash with the company's founders over strategy and compensation.

Mr Parekh was a surprise choice as CEO. He was plucked from Capgemini SE over a field of internal candidates and former executives. He joined Capgemini in 2000 as part of an acquisition and then built its India business to the point that it competed with Infosys and rival Tata Consultancy Services Ltd. BLOOMBERG