Infosys sees better revenue growth in FY11

Infosys sees better revenue growth in FY11

Bangalore: India’s Infosys Technologies expects revenue growth in the fiscal year starting in April to be better than 2009/10 as a recovery in the global economy spurs investments by its clients, a senior official said. India’s second-largest IT services exporter has forecast its dollar revenue will decline 1.0-1.3% to $4.60-$4.62 billion in the current fiscal year to March, making it the company’s first ever year of negative growth.

“At this point, we do believe that there will be better growth next year than we have seen this year. We just don’t know how much," said Subhash Dhar, senior vice-president and head of global sales and marketing. “The Jan-March quarter will be critical because that’s when the budgets will be revealed to us and we get to know the trends much better," Dhar, who is also an executive council member at Infosys, told Reuters in an interview on Tuesday.

Growth in India’s once-booming software services firms has slowed sharply as the largest downturn since the Great Depression triggered a collapse in outsourcing demand from overseas clients and put pressure on prices. Nasdaq-listed Infosys, which develops applications, designs supply chains and manages call centres, was seeing good demand for services from its financial, energy, healthcare and retail clients, Dhar said.

The company, however, is not seeing a pick-up in technology investments by clients in the telecoms sector, which accounts for a bulk of Infosys revenue and which has been a drag on its revenue in the recent quarters.

Infosys, which counts BT Group Plc as one of its top clients, said the telecom sector accounted for 16.2% of revenue in the September quarter, down from 16.9% in the previous quarter and 19% a year earlier. “Telecom segment is pretty capital-expenditure driven, and that was the problem in the last 12 to 18 months because the credit squeeze actually sucked away a lot of expenditure from this segment," Dhar said.

“But I think if you look at our clients, their networks are built to capacity and they are in the mode of expanding their networks now," he said. “We are very hopeful the next year will look much better than this year."

Dhar said there was stability in outsourcing demand in the financial sector, which was hit hardest by the global economic downturn and which accounts for a third of Infosys’ revenue.

New Engagement Models

Infosys, which on Monday unveiled a new application platform for mobile phone operators called Flypp, has seen a sharp jump in a new model of engagement contracts with clients, although the contribution to overall revenue is very small, Dhar said. Under the new model, Infosys develops solutions for an industry and gets its fee in the form of revenue sharing with clients or rentals.

In the traditional model, Indian IT firms provide services and solutions to specific clients, with pricing based on the numbers of hours company engineers worked on the project. “It’s a relatively new initiative, probably less than a year old. We are gaining a lot of traction. We have seen over 60% growth in our bookings this year," Dhar said, referring to contract won under the new engagement model.

“It’s too early to say it will have any significant impact on our revenues and margins and so on because it is very small at this point in time. It’s in small single-digit percentage of our revenues. Our vision is to create it much bigger."

Infosys, which has opened a sales office in New Zealand to tap opportunities there, was seeing robust growth in Australia and New Zealand, Dhar said.

Shares in Infosys, which the market values at $31 billion, rose 0.3% on Tuesday to 2,506.55 rupees in the Mumbai market that fell 1.3%. The stock has more than doubled this year, outpacing a 75% rise in the main market.