Salil Parekh sets 3-year consolidation, growth plan for Infosys
24 April 2018
On a day when India’s information technology leader Tata Consultancy Services became the first Indian IT company to cross $100 billion in market cap, top leaders of former IT bellwether Infosys, led by newly appointed chief executive officer and managing director Salil Parekh, were busy convincing investors in Mumbai that they are trying to get their act together.
Parekh said the company has set a three-year transformation strategy that would start showing faster growth by financial year 2020-21. Part of the strategy will be for the company to invest in sales to win the kind of large deals TCS is bagging.
“This is a three-year transformation plan. In year one, we will stabilise the company and invest. In year two, we will begin to show momentum and in year three, we will accelerate growth,” Parekh, who took over in January, told investors at a meeting held in Mumbai.=
Unlike his predecessor Vishal Sikka, Parekh stayed away from giving out specific numbers for growth, though he said 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 clear that protecting margins at the cost of growth is not a priority, at least in the short to medium term.
According to The Economic Times, Infosys’ three-year plan has analysts worried that the company will lag its peers in growth. Infosys’ FY19 revenue forecast of 6-8 per cent is already below the 7-9 per cent target issued by industry body Nasscom.
“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.
Infosys said it is looking at the digital space 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.”
Infosys, Parekh said, 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,” he said.
Infosys said most of its dollars will be invested in 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 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 that fetch the company annual revenue of $100 million or more.