Infosys, despite all the recent HR troubles, seems to be inching ahead every quarter. Infosys CEO SD Shibulal tells Debojyoti Ghosh and PP Thimmaya that the company will continue with its cost optimisation drive to remove more flab from the system to improve operating margins. Edited excerpts:
Do you feel there is a definite turn around in the market going by Infosys? overall performance for the nine months of the fiscal?
What we are seeing is that client confidence has improved marginally. We are seeing that budgets are being closed on time. However, for our portfolio of businesses, budgets will be flat. We are seeing that clients are very much focused on cost optimisation. It does open up opportunities for us to work with them to reduce their cost and deliver value. In sectors like retail, which is more seasonal, we will have to wait to gauge the impact because the holiday season has to complete and retailers have to find out what to do next. While the sales during the holiday season was kind of weak, the online sales were impressive. But there are some exceptions like the telecom vertical, which is still struggling.
In terms of geography, how are US and Europe playing out for Infosys?
US is still slightly ahead of Europe. However, we did well in Europe during the quarter, but one should not take it as a secular trend and we are focused on five key countries: Germany, France, Netherlands and Belgium. Among these, France is not doing well.?
Can we expect certain aggression from Infosys in the market given the current uptrend?
We have always been more aggressive in the market. Look at our client additions. We have added 54 clients this quarter and previous quarter it was 66. Our consulting and system integration revenue have gone up once again this quarter. We have won $500 million of outsourcing business this quarter. The last two quarters we won $1.5 billion. We won 14 new deals in the products and platform segment this quarter. This shows that we have been always aggressive in the market.
What are key challenges now?
From a larger perspective we had a cost-management issue, which we have brought under control. Due to the cost optimisation initiatives, our margin has improved and pricing is stable. However, the large outsourcing deals are price sensitive and there is some part of the business, which is commoditised. The market determines the price and we have to manage the cost. So we have to be aggressive in cost management. The discretionary spend is still not at the same level what it used to be earlier and we have a large dependency on such spend, which creates a volatility in our business that we need to manage. Though our attrition numbers have come down this quarter compared to last quarter, it is still high on a last twelve months basis, which we need to manage.
What steps would Infosys take to bring down the attrition level?
In the last six months we have announced compensation hike, promotions and restructuring of variable compensation. Now we are looking at what we can do in the next cycle. It is not just higher compensation, we are debating various possibilities to manage attrition. Higher salary alone is not a mechanism for retention. We need to look at different options.
How is the pricing environment?
Our pricing had declined few quarters back but this quarter it was up by 0.7% largely due to the portfolio change. Some parts of our business is under pricing pressure and we need to manage it. The pricing environment also depends on the volume of business and the IT budgets. In terms of budget for next year, we expect it to be flat.
