The robust numbers posted by Infosys for the third quarter of FY13 took everybody by surprise and it seems that the company?s 3.0 strategy has started paying dividends. In an interview with PP Thimmaya & Debojyoti Ghosh, Infosys CEO SD Shibulal, satisfied with the quarterly performance, says the company is on the path of becoming a next-generation consulting & system integration firm. Excerpts:
Is the Infosys 3.0 strategy now showing early signs of success?
In this quarter, we have performed well and if one analyses the numbers, the growth has been more broad based. In consulting and system integration segment, we grew 8% that is higher than company?s average. In the business & IT operations segment, we won eight large deals totaling $700million. In the products & platforms space, we have seen one of highest total contract value (TCV) of $600 million, four quarters ago, it was less than $100 million. The aspiration is to create a balanced portfolio. This quarter we have performed well but we will remain cautious. What we are seeing now is the result of the strategies we have executed in the last three quarters.
Will growth reported in Q3 become a secular trend for Infosys?
There are still gaps to be filled. We are looking for acquisitions in areas of products and platforms. Remember, 3.0 is a 5-7 year plan and when I look at the good performance this quarter, it is definitely reflective of the execution of that strategy. Though we have done well, the external environment is still challenging and there has been no change. That is why we remain cautious.
Are all the elements of strategy coming together for Infosys?
We have benefitted from consulting and system integration more than others. It has contributed towards revenue productivity but all the other elements are coming together. However, the economic situation still remains unstable.
Why has the profitability growth been flat for Infosys?
Our operating margins have dropped marginally mainly due to the currency movement. Our aspiration is to maintain high margins and industry leading growth. This has not changed for us. We took a compensation hit of 6% wage hike, which affected margins. We continue to invest in products, solutions, sales & marketing. This kind of business requires more investments. We expect Lodestone to be EPS accretive in the next 18 months.
Will Infosys now be more comfortable with acquisitions after your successful purchase of Lodestone?
Lodestone has gone down well, though it is in still early stages. We had a combined win this quarter though we have to see more of those. Infosys is comfortable with acquisitions but the challenge is to find the right kind of company in the strategic spaces we are looking at.
What is the long term horizon of Infosys?
We want to evolve into next generation consulting and system integration company which is completely relevant all kinds of technology spend. We will strike a balance between services and products & platforms.
Will Infosys now look at hiring different breed of professionals?
Through Lodestone we have got 700 management consultants. There is a kind of talent we want to hire in products and platforms space. We are hiring from other large product companies in areas such as product visualising and marketing. In the business IT services space we have traditional strengths.
