Bangalore: India’s second largest software services company Infosys Technologies Ltd is looking at selling a combination of hardware, software and services to customers as part of an effort to grow its business in the domestic market.
In the quarter to December, Infosys recategorized and disclosed, for the first time, revenues from the so-called systems integration or SI business, at 2.7% from total revenues of Rs4,271 crore. The company used to previously count revenues from SI under the head of application development and maintenance, or ADM.
“In India, we want to try and focus more on SI kind of work rather than application development work,” said S.D. Shibulal, chief operating officer of Infosys. ADM refers to the creation and maintenance of software used for business processes.
There are multiple pieces to SI such as programme management, contract management, services and hardware. “We will build skills in most of these areas,” said Shibulal, adding the company would go for “loose” alliances with hardware vendors on a deal-by-deal basis. Infosys will provide the software solutions and services on hardware supplied by its partners such as Hewlett-Packard Co. and IBM Corp.
“The reclassified service offerings underscore a renewed focus on newer non-ADM lines,” said Ashish Thadani, an analyst with Gilford Securities Research, based in New York. “Infosys has a competent practice— supported by its displacement of global SIs on some recent engagements,” Thadani added.
Contrary to the popular perception that SI is a low-margin business, Shibulal said that on the services side the margins on the business were reasonable.
Pure-play software services companies such as Infosys had largely stayed away from pitching for local business because of lower billing rates. However, with the domestic market growing in size, such companies now sense a big opportunity. Infosys recently formed a separate business unit to explore the Indian market.
Wipro Technologies, part of Wipro Ltd, had recently said that SI was a focus area for it and would account for one-sixth of its revenues by March 2009, up from about 1% in 2006-07.
Technology research firm Gartner estimates the Indian IT services market to grow at a compounded annual growth rate of 23.2% to reach $10.7 billion (Rs42,050 crore) by 2011, up from $3.7 billion in 2006.