Infosys CEO and Managing Director S. D. Shibulal insists that the “good performance” should not colour expectations in a market that is fraught with risk and uncertainty. Excerpts from an interview to The Hindu:
Do you see the results as marking a turnaround in your fortunes after several disappointing quarters?
There is no doubt that we have done well. But the world has not changed in the 90 days that we have done well. We remain cautious because the world remains volatile and uncertain. We have to grow 2.7 per cent in the current quarter in order to meet our revenue guidance. It is true that we have 96 per cent visibility but 4 per cent of total revenues of $1.8 billion is still a lot of money (laughs).
The euphoric reaction of the markets suggests that they were lulled into believing prior to the results announcement that Infosys was expecting a worse performance…
We registered a volume growth of 1.5 per cent and pricing growth of 1.8 per cent. It is important to recognise that the pricing growth shows up only late in the quarter, depending on the shift in portfolio, which can happen on a daily basis. In contrast, volume growth is visible through the quarter. Seen from this perspective, the headwinds in the form of additional furloughs, a couple of deal ramp downs, or something like Hurricane Sandy, we had to state in December the facts as we saw them. However, the increase in revenue productivity, and our ability to mitigate the effects of adverse circumstance resulted in better performance.
The profile of new client acquisitions shows that most of them are not big million-dollar clients. Infosys has always been regarded as a company that is choosy about clients. Does this pattern reflect a new approach?
We have not added so many new clients in the last several quarters. What it shows is that growth has been broad-based this quarter, which has been unique. But this should not be seen as secular trend. As a company, we are geared to address the needs of Fortune 2000 companies. Ours is a relationship-based approach, we have a sales force of only 1,000.
You said employee utilisation is about 10 percentage points lower than what you would like…
It is very simple. If the company grows, utilisation will improve. We had planned for 10 per cent growth but we are now growing at 5 per cent. Given that the recruitment cycle is 18 months, we had recruited people for the growth that has not happened. Therefore, utilisation came down.
Is this why you are slowing down recruitment?
Oh, yes, we are re-planning. This year (September 2012) we have given only 6,000 offers to freshers, compared to 26,000 offers that we made in 2011. About 7 per cent of the workforce is benched, about 7,000-8,000 persons.
The carrying cost of this workforce is about 1.4 per cent and the opportunity loss is about 2.5 per cent, implying an impact of 4 per cent on margins.
Is there something you can do about this?
Other than growth there is nothing we can do differently.