Salil Parekh sets 3-year target to stabilize, turn around Infosys
Salil Parekh presented a three-year roadmap to restore Infosys’s former position as the bellwether of India’s $167 billion IT industry, promising to make the company “more relevant” to its top customers
Bengaluru: In his first formal address to investors as CEO of Infosys Ltd, Salil S. Parekh pledged to stabilize and turn around the fortunes of India’s second largest information technology services company in three years.
On Monday, Parekh presented a three-year roadmap to restore Infosys’s former position as the bellwether of India’s $167 billion IT industry, promising to make the company “more relevant” to its top customers, who farm out hundreds of millions of dollars of business to it every year. In recent years, Infosys has ceded the bellwether tag to rivals such as Tata Consultancy Services Ltd and US-based Cognizant Technology Solutions, which have consistently outpaced the Bengaluru-based firm in terms of new business generated per year.
“Internally, we’ve set a three-year roadmap where we want to do all these changes in a step-by-step way. The first year in fiscal 2019 will be to stabilize where we are. The second year, we will start to build momentum. And the third year, to start to accelerate where we can have more and more share of our clients’ relevance. And that will translate overall to a better Infosys,” Parekh told a gathering of analysts and investors in Mumbai.
Parekh and his senior management declined to clarify whether the three-year journey implied that Infosys will only start posting industry-matching growth from the third year. Analysts present on the call interpreted it as an admission that the company needs to stabilize first for the next two years.
“Over the last 12-24 months, there has been a lot of change… For this reason, we have said FY19 will be year of stabilization, and all the investments we have spoken about, we expect to see momentum on this from FY20,” Parekh told analysts.
Infosys also shared some of its priorities as part of Parekh’s four-pillar strategy to revive Infosys. These include looking at a few markets, such as Nordics in Europe, Canada and Latin America, and building a team of leaders to help the firm bag so-called “mega IT outsourcing deals” (larger than $500 million).
The address to investors on Monday also marked the return of analyst day at Infosys, as Mint had reported on 13 April.
According to experts and analysts tracking Infosys, Parekh’s three-year plan for Infosys sounds similar to the one that co-founder N.R. Narayana Murthy highlighted in 2013, shortly after the board of Infosys asked him to return to the company and restore its former glory. Murthy returned to the former sector bellwether after it posted several quarters of poor numbers, missed its own revenue and profit forecasts and then ultimately stopped issuing quarterly revenue forecasts.
However, while Infosys did end up posting industry-matching growth rates of 11.5% under Murthy’s watch in fiscal 2014, an encore seems unlikely with its current revenue growth forecast of 7-9%—effectively dashing any hopes of it matching arch-rival TCS’s double-digit revenue growth forecast for 2018-19.
Parekh’s statement also comes weeks after Infosys signalled its intentions to make a fresh start under the new CEO by effectively jettisoning the legacy of previous CEO Vishal Sikka and announcing the sale of Panaya and Skava—two of the company’s most expensive acquisitions in recent years.
“We will look selectively at programmatic inorganic moves and our M&A team has started to identify some opportunities. Those will map into the future we’re looking to build for our clients. For example, the acquisition we did last week—WONGDOODY. That’s the sort of acquisition that we will look to make across our portfolio,” said Parekh.
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