Infosys CEO and Managing Director S. D. Shibulal has defended the company’s performance in the last quarter saying that strategies take time to deliver, and the early indicators of its transformation in business model are good.
In an interview with The Hindu , Mr. Shibulal pointed to three major reasons for the company’s relatively low-key performance and guidance in the first quarter of 2012-13.
First, the company is in the midst of transforming its business model. Second, the transformation has “fortunately or unfortunately” coincided with a tough business environment. And finally, the fact that compared to peers Infosys derives a relatively high proportion of its revenues from discretionary spending by clients and on the vertical of BFSI (banking, financial services and insurance), which are the first to be affected in an economic slowdown.
“In a volatile environment, the first thing to be affected is discretionary spending, which is about 30 per cent for us, and the second is financial services spend which is about 34 per cent for us. So, totally, about 64 per cent of our business is undergoing challenging times, which is reflected in our short-term performance,” Mr. Shibulal said. He refused to agree with the view that the focus on BFSI was excessive pointing out that the company’s objective was to have a balanced portfolio that will offer value to clients while delivering high margins.
Talking about the impact of Infosys 3.0, the company’s new business model that was rolled out last year, Mr. Shibulal said: “It is three quarters since we rolled out our strategy. You have to give it time, right? Strategies take time to deliver. What we can do though is look at the early indicators, and see if the strategy is effective.’’
He explained that the company suspended the practice of giving quarterly guidance because of difficulty in predicting deal closures. “While we are confident of the yearly picture, quarterly we are finding it difficult to predict because even delay in one programme can upset the prediction,” he said.
Talking about the cash hoard on its balance sheet, Mr. Shibulal said that the company would like to keep the powder dry for possible acquisitions. “There are some very strategic areas where we can look at inorganic growth. We have expanded our search area much wider in the last 6-9 months and we are at it,” he said.
Asked whether the rotation in stewardship of the company amongst its promoters was affecting performance, Mr. Shibulal came out strongly pointing out that neither he nor his predecessors occupied the corner room by virtue of their being promoters.
“We are here because we are thorough professionals, let’s be very clear. I don’t think you will find people who are as professional as we are in any criteria you may want to consider, whether it is Krish (Mr. K. Gopalakrishnan), Nandan (Nilekani) or me,” he shot back. He pointed out that strategy formulation and continuity in execution were independent of the person at the top. “The only thing which will change is the style, which is not bad as long as the strategies are implemented,” he said.
The soft-spoken Mr. Shibulal became forceful when asked about the Jay Palmer suit the company faces in the US. He said that it was a case of employee retaliation, and refused further comment as the matter was sub-judice.
