On a day when its closest rival Tata Consultancy Services achieved the distinction of becoming the first Indian IT company to cross $100 billion in market cap, top leaders of Infosys led by newly appointed Chief Executive Officer and Managing Director Salil Parekh were busy convincing investors in Mumbai how they are trying to build a company that has put in place all the building blocks to emerge as a leader in the digital space, where most of the client budgets are going today.
Unlike his predecessor Vishal Sikka, Parekh consciously stayed away from giving out any specific quantifiable numbers, though he minced no words in spelling out the new Infosys which is investing in future technologies, building the digital workforce of tomorrow and making strategic acquisitions to strengthen digital capabilities. The company made it amply clear that protecting margins at the cost of growth is not something it will look at, at least in the short to medium term.
Parekh, however, said that 2018-19 is going to be a year of stabilisation for the company, which is just coming out of the turbulence of some of the management decisions and changes that occurred during the past 18 months, before accelerating growth. The company also said it has laid out a three-year road map as a part of its transformation journey where the focus in 2018-19 will be on stabilising the state of the affairs while in 2019-20 the company will work towards building the momentum and accelerate growth in 2020-21.
“Given where we stand today as far as the transformation journey is concerned and the changes that happened (at Infosys) in the last 12-18 months, 2018-19 will be the year of stabilisation for us,” Parekh told analysts, adding that the company is making sure all the elements are in place to tap into a higher share of clients’ budgets. “The first year we will be to stabilise where we are, the second year we will start to build momentum and the third year we will start to accelerate so that we can have more and more share of our client’s revenue and that will obviously translate overall to a better Infosys,” he said.
Even though the company talking about bringing back stability is something that may worry investors in the short-term, Infosys said it is looking at digital to accelerate growth. It has already made strong inroads, closing 2017-18 with revenue of $2.79 billion from this segment. This translates to 25.5 per cent of the company’s overall revenue. Parekh said there is a huge potential to grow it further as the overall opportunities in the digital space stands at around $160 billion, but growing at a rate of 15 per cent year-on-year, much higher than growth in traditional IT services.
“So for us it is an exciting market and that is why the first pillar for us is to scale our digital business… This is a business where all of our clients are moving knowing that the core is the key to driving digital change,” said Parekh. “So for us, the real definition of digital is a fast-growing market where we ourselves are growing very well, and we want to invest in this pillar to make sure we become more and more relevant for our client’s future,” he added.
Infosys said it is focused on growing five different dimensions in the digital space, including experience, insight, innovate, accelerate and assure. “These five elements comprise all the digital activity that we are doing today and reflects how we are thinking of our company and what our client’s journey is as we look at digital,” added Parekh.
Infosys said most of its dollars will be invested towards human resources, both onshore and offshore, and in driving localisation. It would also look at acquiring niche technology companies while at the same time ensuring that shareholders are rewarded adequately, for which it has spelt out a disciplined capital allocation policy.
U B Pravin Rao, president and COO of Infosys, also emphasised on the need for hiring local talent in every market it operates in and said the company has now revamped its talent sourcing strategy by hiring of freshers in the US through campus selection. The company last year hired around 800 graduates in the US through campus recruitment and plans to replicate the model in Europe and the UK, he added.
Other than localisation and upskilling, Infosys said a huge amount of its focus is also going to be on the sales team so that they participate and win more large deals. The company is investing to build a team of ‘deal directors’, ‘multi-tier architects’ and ‘client partners’ whose focus would be on ensuring better (deal) originations and better win rates, said Mohit Joshi, President and Head - Banking, Financial Services & Insurance (BFSI), Healthcare and Life Sciences, at Infosys. “Large deals are a very important engine of growth for us and we have identified six specific areas where we are going to invest our dollars,” he added.
At the end of 2017-18, Infosys had 1,204 active clients, including 20 clients which fetch the company an annual revenue of $100 million and more.