Bangalore: Infosys Technologies Ltd has begun jointly creating intellectual property (IP) with some clients to boost its IP portfolio, a top executive said.
Unlike in the traditional outsourcing model, Infosys will co-create IP-based products with clients in the US and Europe in seven new areas of growth that it identified in a meeting of its senior executives in January.
The new business model, Infosys says, would allow it to reuse the IPs for other clients after a period of exclusivity and lower the cost of development as the expenses would be shared. The thrust of this new model lies in the effective development of the system—key for a company that’s gradually shifting to a high-margin, non-linear model, where growth in business isn’t linked to a growth in workforce.
As Indian software firms graduate to larger and more complex projects, they see IPs giving them an edge over the competition and the muscle to charge a premium. Infosys owns just four patents and is awaiting approval for 203 more patents in the US and India, it said in January.
Sanjay Purohit, head of corporate planning and business assurance at Infosys, said the firm wants one-third of its revenue to come from platforms, products and the new areas that are oriented to intellectual property. Infosys earns less than 5% of its revenue from this segment, which it calls its “new engagement model”.
Another one-third of its revenue would come from business transformation and consulting, and the rest from large, complex outsourcing deals, Purohit said, but did not specify a time frame for achieving these targets.
In January, at an annual strategy meeting of top executives in Mysore, Infosys zeroed in on seven growth areas to focus on over the next five years: digital platforms, sustainability and environment, new areas of commerce such as micro payments, emerging economies, modelling for higher predictability, healthcare and cloud computing.
These are in addition to the four business verticals—infrastructure management, independent testing and validation, business process management and system integration—that Infosys expects will earn $1 billion (Rs4,550 crore today) each by 2013.
In February, Infosys signed among its first deals under its new business model with Irish biotechnology firm Elan Corp. Plc to build a drug discovery research information system.
In the co-creation model, Infosys would hold workshops with clients, identify specific areas for jointly building an exclusive system, implement it, and later use the product for other clients as well, said Purohit.
A spokesperson for Elan declined comment.
Analysts say such efforts are positive even if Infosys would not see returns immediately because of the long gestation period involved in developing and marketing IP-based products.
“Once the model is ready and the company starts churning (a) good number of IPs, perhaps then revenue streams would get streamlined,” said Shashi Bhushan, senior research analyst, Prabhudhas Lilladher Pvt. Ltd.