Vishal Sikka unhappy with pace of innovation at Infosys

Of the 23,000 ongoing projects at Infosys, only 400 are in the areas of disruptive technology such as artificial intelligence and open-source technology

CEO Vishal Sikka is betting on projects in disruptive technologies to transform Infosys into a $20 billion behemoth by 2021. Photo: Hemant Mishra/Mint
CEO Vishal Sikka is betting on projects in disruptive technologies to transform Infosys into a $20 billion behemoth by 2021. Photo: Hemant Mishra/Mint

Bengaluru: Vishal Sikka’s attempt to change the decades-long perception of Infosys Ltd as a company that merely offers engineers to perform mundane technology work for large conglomerates to that of a true innovator is going to take a while longer.

The first non-founder boss of the country’s second largest software services company is unhappy with the pace of taking on work in disruptive areas such as artificial intelligence (AI) and open-source technologies.

The enormity of the task at hand can be gauged from a simple fact: even two years after Infosys embraced these new areas under Sikka, it works on projects related to AI and open source for less than 4.5% or 50 of its 1,126 customers.

That translates to less than 400 of the 23,000 ongoing projects in areas of disruptive technology, according to three executives. The company had about 200 such projects in March 2015.

The slow progress in these areas is despite Sikka’s numerous efforts to reposition the 35-year-old company, which was founded by N.R. Narayana Murthy and six friends in 1981.

Some of these steps include teaming up with Tesla Motors founder Elon Musk in setting up a non-profit AI research facility (Open AI) in the US, training more than 104,000 employees in the user-centric approach of Design Thinking (which Infosys claims is the largest ever initiative undertaken by any company globally), aggressively investing in start-ups focused on newer technologies, and Infosys itself strengthening its offering in disruptive technologies such as machine learning and blockchain.

Hearteningly for the company, a few executives from innovation-led companies such as Google Inc., SAP AG and VMware Inc. joined it during this time.

Still, Infosys is finding it difficult to give itself an image boost, blaming it on the way Fortune 1000 clients engage with technology outsourcing firms.

“The thing that I find two years after being in the industry is that the conversations that we have with clients are still not strategic, not very high level; we, by and large, are an industry of procurement. IT-oriented kinds of conversations are largely RFP-driven (request for proposal), cost-driven and so on,” Sikka told analysts in Pune last week.

“It is something that has been a source of unhappiness... I wish we had the ability to have much more strategic conversations. We have started that, but it is a relatively small number of clients. I would say approximately 50 clients out of more than 1,000 clients—where we have really elevated the conversations to very strategic levels by using some of the new areas of engagement. This is the case with the entire industry. It is not only specific to Infosys,” Sikka said.

To be sure, none of the Indian outsourcing companies such as Tata Consultancy Services Ltd (TCS) and Wipro Ltd disclose the number of projects in AI and open-source technologies.

Most domestic IT firms still choose to disclose only revenue from “digital” technologies, which include moving existing applications to cloud computing and mobile platforms—a fuzzy area as many analysts believe it is merely re-badging traditional outsourcing work as digital.

Some analysts attribute the slow progress to the way Fortune 1000 clients have traditionally worked and also to technology outsourcing firms not investing much on building leadership teams, which can change this perception.

“CEOs and boardrooms traditionally go with the strategy firms (like Accenture Plc.),” said Ray Wang, founder and chief executive of Constellation Research. “The reality is that the strategy firms are adding more technologists just as the IT services firms are adding more business folks. The IT services firms need more dedicated strategy consulting capability, design thinking experts and industry analysts to raise their thought leadership.”

“The perception thing will take a few more years, say two-three more years to break, but we do see signs of this as every CEO is relying on VC and tech companies for more and more co-innovating and co-creating,” he added.

To be sure, Infosys does not disclose revenue from digital technologies even as industry leader TCS claims to generate over 14% of its $16.54 billion total revenue from that area and smaller rival Wipro ties 18% of its $7.35 billion revenue to business from data analytics, cloud computing and mobility platforms.

Sikka first articulated a “new and renew” strategy when he took over as CEO in August 2014. As part of the strategy, he wants to start new projects and build open-source platforms on the lines of Hadoop, automate a lot of mundane work and use design thinking to make Infosys engineers think out of the box while writing software codes.

He hopes to make Infosys a $20 billion behemoth (currently $9.5 billion in revenue) and increase its revenue per employee to $80,000 (from the current $50,900) by March 2021.

Last year, Infosys ascribed a shortage of skilled engineers coming in the way of the company having more people in AI and open-source projects. To bridge this gap, it set up a centre of excellence for AI at its Pune development centre, with an aim to train 500 engineers over 14-day classes every quarter.

Close to 9,000 engineers have been introduced to newer languages in AI and the company has introduced training modules in blockchain at its Mysuru training facility, according to one of the executives cited above, who spoke on the condition of anonymity.

In the past two decades, Indian IT services companies have recorded impressive growth by performing back-end work for customers across industries and geographies. However, lately, Indian IT vendors’ traditional approach of outsourcing work to cheaper locations is under pressure, as automation platforms and cloud computing erase the labour arbitrage enjoyed by these firms.

This has made Indian outsourcing companies invest in building platforms that focus on disruptive technologies including cognitive technologies, automation and machine-to-machine learning as they seek to edge past competition in winning outsourcing deals.

“Such repositioning is increasingly critical given the substantial demand shifts we see underway in the major categories of the IT services industry,” said Rod Bourgeois, founder and head of research at US-based DeepDive Equity Research.

Advisors like Wang believe that “Infosys has had a good start” over companies like TCS and Wipro, but added that “the battle is wide open”.

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