Bangalore: Infosys Technologies Ltd’s chief executive officer S. Gopalakrishnan says signs of recovery have to be sustained before confidence can return to the sector.
“Suddenly, the sentiment has become negative. So that is why we say volatility will continue; it will still be unpredictable and (the) environment will continue to be challenging,” the CEO said in an interview after the company announced better-than-expected profits for the June quarter and raised its full-year estimates. Edited excerpts:
Larger role: Infosys Technologies CEO S. Gopalakrishnan. Jagadeesh NV / Mint
What have your clients been saying the past few months about the business environment?
Actually, in May and June, probably they were feeling slightly better. They were feeling (that they have) better control over their own business. But suddenly, their ability to forecast has become negative.
What is the reason?
In (the) last one week, the credit card defaults (in the US) have gone up more than what was projected, unemployment continues, some economists are demanding another stimulus, somewhere like $2 trillion (Rs97.4 trillion).
Suddenly, the sentiment has become negative. So that is why we say volatility will continue; it will still be unpredictable and (the) environment will continue to be challenging. When there are signs of recovery, it has to be sustained. It has to settle before confidence retains.
Is the slow business the reason for beefing up your sales team?
The first, of course, is to improve business. But another (is) we are getting into new business and new markets in West Asia and Latin America. It is an investment and over time, it will yield results. (In) the rest of the world, business is 10%. Over time, we want it to double to 20%.
Which sectors will see growth once the business environment recovers?
The one sector that will recover early is finance and the sector that gets delayed will be manufacturing. Healthcare is not much affected. Energy consumption has come down and may not pick up (as much) because the awareness is there about conservation. We can’t generalize.
In a downturn, there may be fundamental changes happening, which will make changes happen. For example, in the auto sector, even when the recovery begins, I strongly believe that people will buy only hybrids or electrics. If the capacity is not there to produce these vehicles, the demand will be low. Because people won’t buy.
Can Infosys continue to sustain its high margins?
We have sustained till now. This has been asked every time over many years. Even when there has been a tremendous fluctuation in the currency, when we invested in business, right from being (an) application, development and maintenance (ADM) to a full-service company, we are confident we are able to sustain the margins in a narrow band. Our goal is to have the highest margins in the industry. We will work very hard to sustain (that).
I don’t agree that the margins will compress to a narrow band or an average may happen when this industry matures and there is no more growth. I think it is a long way to go for this industry.