Infosys boss says new strategy moving in right direction, optimistic of regaining bellwether status.
Vishal Sikka, chief executive officer and managing director of Infosys, on Thursday provided a snapshot of initiatives the Bengaluru-based information technology (IT) company had taken to become a “next generation” services company and regain its bellwether status.
In his first address at the annual Infosys analysts meet, Sikka said while strategy was moving in the right direction, it would be supplemented by an ‘active inorganic strategy’ for technologies expected to disrupt the future of the industry.
In October, Infosys unveiled plans to renew core activities and innovative in new areas.
“We are interested in acquisition of small innovative companies,” Sikka said at the company’s campus at Hinjewadi in Pune.
“We are not interested in acquiring technologies from yesterday, but in acquiring technologies of tomorrow,” he added. Some of the areas Infosys was exploring, Sikka said, included artificial intelligence, automation and the internet of things.
Sikka singled out collaboration technology as having big implications for IT services companies working on a globally distributed delivery model.
“Increasingly, collaboration technology-based remote and globally distributed teams will be the basis on which services will be delivered. Therefore, a great embrace of collaboration technology, not only for our own use but also bringing it together with clients’ teams, will be important,” he added.
Infosys has often been criticised by industry experts for its conservative approach to inorganic growth and not effectively using its cash reserves. On September 30, 2014, the company had cash and cash equivalents of Rs 33,616 crore (Rs 336.16 billion).
One part of the inorganic growth strategy, Sikka said, would be engagement with the start-up ecosystem. Apart from working with them, Infosys is also looking at investing in these companies to “expand their capabilities with our own engineering or other operational services”.
“Transformation like the one we have embarked on will take time. But based on what I have seen in the last 123 days, I stand here in front of you feeling confident that with all the initiatives we have taken, we at Infosys can once again aspire to become a leading bellwether IT company that we used to be,” Sikka said.
Replying to analysts, the Infosys CEO acknowledged the company’s sales process had to be renewed to mine accounts better and build a pipeline of deals as well adopt ‘new ways of selling’.
“Much of sales for our kind of business, at least a big part of it, can be made automatic. We can create marketplaces where at least longstanding customers can directly work on creating project teams for new areas,” Sikka added.
Praveen Rao, Infosys’ chief operating officer, said the company had strengthened the sales team, hiring 207-odd people in the previous two quarters, 104 of them in the Americas and 42 in Europe.
“We are improving the capabilities of the sales force by retraining them with emphasis on strategic, consultative and effective negotiation. We continue to focus on large deals and today we have become much more aggressive in chasing and winning large deals,” Rao said.
The company also said it was expecting the attrition level, which had peaked at 20.1 per cent in the preceding quarter, to stabilise. Infosys said it was comfortable maintaining an operating profit margin of 25-28 per cent. In the quarter ended September 30, its operating margin was 26.1 per cent.
“There seems to be a sense of positivism in the management team. The indication we are getting is that there is not going to be much volatility in revenue. The company seems to be in control over operations,” said an analyst with a leading domestic brokerage house who attended the meeting today.
Key highlights
- Exploring to acquire companies in newer technologies like artificial intelligence, collaboration, automation, Internet of Things
- Engaging with startups to complement capabilities and invest in them where required
- Acquiring 'innovative? companies for geographic penetration
- Improving sales engine by retraining and launching automation platforms like marketplace
- Expanding headcount in newer technologies like big data & analytics, cloud and digital
