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This article was first published 8 years ago  » Business » Unlike some large Indian start-ups, we believe in consistent profits: Vishal Sikka

Unlike some large Indian start-ups, we believe in consistent profits: Vishal Sikka

By Bibhu Ranjan Mishra & Raghu Krishnan
January 15, 2016 10:13 IST
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'The big thing is on the works on Zero Distance, the initiative to bring innovations in every project'

Vishal Sikka, managing director and chief executive officer of software giant Infosys, took the helm at the Bengaluru-headquartered company in August 2014. After demonstrating steady growth for three quarters, he seems in control of the situation. The former SAP Technology head, after a strong December quarter, in a free-wheeling chat with Bibhu Ranjan Mishra and Raghu Krishnan. Excerpts:

In execution of strategy, how much road have you traversed?

It is still early in our journey. Some of the things like operational excellence that we have been talking over the past one and half years have been slower to adopt. If you look at all the metrics in innovation, especially newer innovative areas like Aikido, the adoption has been good.

The big thing is on the works on Zero Distance, the initiative to bring innovations in every project. If you walk around the campus, there is a huge amount of excitement; we have covered 50 per cent of the entire delivery organisation through this initiative, while for all the projects Infosys has managed that have been before November 2015, we have covered almost 100 per cent of the delivery organisation. If you had asked me if we could achieve this when we started it in March, I wouldn't have believed it.

Do three quarters of strong financial performance and raising of full-year revenue guidance (expectation) mean short-term predictability is back?

There is a certain amount of inherent volatility in the business, primarily because of the external events. So, it's difficult to foresee projects that close suddenly. Otherwise, we have brought visibility under control. Especially after Ranga (chief financial officer Ranganath Mavinakere) took over the role of CFO, we have handled forecasts quite well.

Will you resume giving short-term (quarterly) revenue guidance?

No, I don't want to do that. Not because it is not possible but it invites lot of speculation. If you look at the currency drama…despite such volatility, we are quite in control. I feel comfortable that we will get to 12.8 to 13.2 per cent (revenue) growth this year, from what we have achieved so far.

What really changed during the quarter? At the start, you had anticipated softness due to seasonality in the business, extended furlough, etc. You seem to have bit those. Whom should the credit go to?

To (our) people. This quarter is incredible; I call this the quarter of the Infoscions. Ninety days ago, when we were looking ahead to this quarter, our visibility was not good. Third quarters are usually bad; besides, there were some headwind factors in the industry, in sectors like retail, oil & gas. And, we came from an extraordinary quarter, where we had one client-specific issue. So, it was no doubt in our minds that this is not going to be an easy quarter. T grow on top of all that is amazing.

Typically, whenever there is a global economic crisis, outsourcing generally improves. Do we see that beginning to happen?

Probably not, at least, not to the same extent as before. I think it is not so much about outsourcing as about capabilities -- working with companies that have the right capabilities, right economics and innovation. No client asks us only to get the job done, as far as I know, for the cheapest price. Everybody is looking for something valuable, something pro-active, something innovative. We feel we have the right capabilities that we can deliver.

In the December quarter, your operating profit margin also got impacted to pricing decline. Does it mean you are ready to sacrifice margins for the sake of growth?

We deeply believe in consistently profitable growth. That was (founder-head) Mr (N R Narayana) Murthy's mantra. Of course, there was a time when Infosys was reporting 29-30 per cent (annual) growth in margins. We also want to get to get there by 2020. As time goes by, we feel more comfortable with that (aim). Consistent, profitable growth is the way to do this.

These days in India, we have many start-ups; they don't seem to believe in profits. We do. I don't want to lose focus on that. I don't believe that throwing more money on some of these problems can buy us revenue. Our focus is on organic growth, with small acquisitions of next-generation technology companies. Beyond that, it is to believe in our own people, educate them. That will get us industry-leading growth in the coming years.

There are asset-light companies such as Uber and Airbnb, disrupting traditional businesses. What are the solutions your customers are asking to battle them?

Software is redefining businesses. Earlier, it was software-defined network and data centres; now, it's software-networked cars and hotel companies (Uber and Airbnb). This requires a new kind of consulting, strategy and design thinking.

Recently, we had a design session with one of the biggest clients. We discovered the number one problem they had was demonisation of sugar and how it impacts the chocolate business. One of the solutions that came out was to 3D-print a custom chocolate with the right amount of sugar and butter. And, you can print in any shape for the customer. This can't come from traditional consulting practices. There are several things like consumer experience that we can automate. The mechanism is to engage in a design session with our clients and find solutions. The more we do these kinds of projects, the more strategic it will become.

Are you seeing some challengers emerging in IT services business who can potentially be threats for companies like you, bringing in disruption?

It is already happening in IT services. There are small companies that are doing a great job. This is the trade-off between agility and innovation on the one side, and scale on the other side. If you are able to establish that you innovate at scale and be agile, then it's a natural course of action that new companies will come and rethink business models.

As long as we are able to innovate in an agile way, and keep our scale growing, I see no challenge. See how GE is in the middle of the transitioning into digital. It's possible to do that and be relevant across generations.

What are the challenges before Infosys in the foreseeable future, which might challenge your 2020 vision?

There are always the macro economic challenges. The biggest challenge is that we have to execute. Unlike other companies (Uber or Airbnb), we are in a situation where our success or failure is largely, but not entirely, in our own hands. It's up to us to execute and to transform ourselves. If we do that, we will be one of the leading IT companies in the world. That is what keeps my mind running.

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Bibhu Ranjan Mishra & Raghu Krishnan
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