In our case, the reason for this downward revision of guidance is because there are clients where we have had one time hits because of ramp-downs and things like this, says the Infosys CEO.
Even after a better Q2, India’s second largest software exporter Infosys has lowered its revenue guidance to 8-9 per cent growth in dollar terms in FY17.
Chief Executive Officer Vishal Sikka tells Ayan Pramanik and Raghu Krishnan that ramp-downs and internal reasons forced the company to give a downward projection.
Do you see the growth in services and software offsetting the slow growth in IT services?
It is not yet happening. It is an incremental thing. There is a very steep decline in pricing that can only be compensated by an even steeper improvement in production because of automation… and consequently, by an acceleration of innovation and higher value services. The steeper the decline (in pricing), the more the pressure (in IT services).
In our case, however, as you see in the core services business, we have grown quite well and we have outpaced the pricing decline. I don’t know about the peers but there is severe pressure. In our case, the reason for this downward revision of guidance is because there are clients where we have had one time hits because of ramp-downs and things like this. But it is generally because of our own weakness in a couple of service clients like consulting and BPO, and of course overall effect of this price, which would have led to even faster growth.
How steep is the pricing decline?
On year-on-year basis, our volume grew by close to 12-13 per cent, but the revenue growth was lower than that. This is what is happening. The only way to compensate these is to bring more productivity benefit from automation.
Are you at a stage where you can say that you are back on the growth trajectory?
Yes, absolutely. We have a couple of internal and external factors holding us back. Otherwise, both the core business and new businesses are growing very strongly and I do anticipate that this will come back.
Where are you on the digital (business) front?
When we refer to digital, we have something called Digital Experience Practice. In parallel, we have few other areas like Skava platform for building next generation mobile experiences. Last quarter, we launched the e-commerce platform for Skava and we have some customers. That is the key cornerstone.
Similarly, in the work that we do in our engineering practice with the Internet of Things, we have network operating system that controls every operation, from power utilisation to digital farm. That is how we see digital as a very pervasive kind of a thing and in all these dimensions we have been making great progress.
You had talked about the challenges of engaging with CXOs. Where are you on that?
That is a very deep transformation for us. We continue to focus on it. We are elevating our consulting practice, freeing up the president’s bandwidth; I have been managing top 25 clients through the office of the CEO for the last year and you see the result. This is an area that is going to take time. It will be a gradual progress.
Image: CEO Vishal Sikka with Infosys founder N R Narayana Murthy.