Shortly after announcing the results, Infosys Chief Executive Officer and Managing DirectorS. D. Shibulaltold this correspondent that increased dependence on discretionary spending made the company more vulnerable to “market volatility” compared to other industry players.
Excerpts from the interview:
You attributed the ‘soft volume growth’ this quarter, and the cautious guidance to an ‘extremely volatile’ market environment? Is this situation comparable to the situation in the immediate aftermath of the 2008-09 global financial crisis?
The 2008 global crisis, and others, they’re more like events; whereas this situation seems more like a continuous thing.
The volatility we are facing now, and have been dealing with over the past eight quarters, is pretty strong. We are faced with huge uncertainties. Our clients are finding it tough to take any decisions in this climate.
The impact does not appear to be uniform across IT companies. Your guidance for 2013-14 is far below the projections for the industry.
We have a larger dependency on the discretionary spend. That sometimes impacts our ability to predict because the discretionary spend part needs to be refilled continuously.
Infosys’ dependence on this spend is 32-33 per cent, while it is 17-18 per cent for the industry.
And, we have seen some pricing pressure. It’s not extreme, but our revenue productivity has come down by 3 per cent this year.
Also, one cannot simply compare with the industry average.
Our revenue from consulting and systems integration is over 30 per cent, far higher than the industry average.
The markets have reacted sharply today. Going ahead, do you see a shift in strategy or focus areas?
Our focus areas will be the same. We have to fire on all cylinders — we cannot take a chance on any of them, or slow down any one of them. Business and IT operations are a large part of our portfolio, we have won very large deals there, and have to win more.
Consulting and systems integration is a very important space for us, but it is a discretionary spend and is volatile. But even during these tough times, it has remained somewhat stable.
How far has Infosys’ products and platforms business come?
Products and platforms is in its nascent stage, and is not going to move quarter-on-quarter. We have to move organically in a very slow manner but (also need to) do inorganic acquisitions to remain relevant. Also, this poses a completely different set of challenges: In services, you can hire and train people, put them on programmes and make revenues. This takes about six to eight months. But building a robust product, like Finacle, takes years. The investments over long periods are huge. Also, there’s no bet on services, while in products out of 10 investments, only two may work.
In recent weeks, the media has reported on protests by industry freshers/campus hires on deferred recruitments. Where does Infosys stand on this? In the light of this, is there a need for an industry ethic or standard on this?
I will answer only from an Infosys context. We had definitely delayed, but we informed them and clearly committed that the jobs are on. They (those recruited from campuses in 2012) will be joining by September 2013, we have promised. We are an organisation with strong values towards all stakeholders, and employee is an equally important stakeholder. Yes, it is a difficult time to plan hiring because it is an extremely volatile environment. The volatility impact will also vary across portfolios.
