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Salil Parekh, chief executive officer of Infosys (Photo: Bloomberg)
Salil Parekh, chief executive officer of Infosys (Photo: Bloomberg)

Infosys is reaping benefits of early digital investments: Salil Parekh

  • ''We laid out a few elements of our plan. The biggest part of that was the focus on digital and that has driven a lot of the transformation and growth that we see with clients.''

BENGALURU : IT services firm Infosys Ltd is in the final leg of its three-year roadmap that was laid out in April, 2018. Since then, the company has managed to achieve faster growth especially on the back of its digital business. In an interview, Salil Parekh, CEO & MD, Infosys spoke about the company’s growth, demand environment and digital business. Edited excerpts:

In 2018, you spoke of a three-year transformation plan – from stabilizing to gaining momentum to accelerating growth. How has Infosys fared on that front?

The thinking we had then has actually gone really well. We laid out a few elements of our plan. The biggest part of that was the focus on digital and that has driven a lot of the transformation and growth that we see with clients. In the first year, we grew at 9%, in the second year, it was 9.8%. This year, we are still growing amid this global medical crisis. Part of the reason is a lot of the large enterprises worldwide are now going faster on their digital transformation journey. So the investments we have made in digital are really helping us. Another key element of our plan was focus on automation, artificial intelligence (AI), and cost efficiency which has also worked out well and our own work on automation and AI has become more relevant for our clients. The third part of our plan was reskilling of our employees which has again done exceedingly well. We have reskilled a large number of our employees on new areas of the digital. And the fundamental tenant of all of these was being relevant to what our clients are doing. Clients are going through digital transformation which has further accelerated during the crisis. One of the big themes has been moving to the cloud and as part of that, we launched the Infosys Cobalt brand, which has a lot of cloud focus for the benefit of our clients.

Do you see digital crossing more than half of your total revenue?

Our digital growth has been quite strong. We grew 25.4% y-o-y last quarter and we have been consistently growing at that rate and higher over the last few quarters as we started our investments very early on. Today, the share of digital in our business is 47.3% and we anticipate it will cross over 50% fairly quickly. This is because clients are driving their new spends on transforming from a digital perspective ranging from cloud, data, cyber security, or simply how people interact with technology. We want to be ready for our clients and we don't have a split on what the percentage will be over time. It's more of a benchmark to show that we are moving with our clients and are extremely relevant to what they are looking for.

What is the basis of Infosys raising its FY21 revenue growth guidance?

We have had very good momentum in the way our large deals have shaped up as well as growth of our digital business. So that’s part of the reason for raising our guidance. Based on the current deal pipeline, we also felt comfortable that we could raise the guidance as we were seeing more and more traction with our clients.

What type and size of deals are gaining traction?

The pipeline remains quite healthy and few trends have emerged in the last six months. One is the move towards digital transformation deals and acceleration to cloud. Second, we see a lot of focus with clients on efficiency, automation, and deploying AI for getting more benefits on their IT spend. The third trend is around consolidation. Many clients we are in discussions with want to consolidate their work with us as our service delivery has been really top quality. Internally, we have successfully enabled efficient work from home keeping employee safety and client service delivery in mind. And that is being noticed by our clients. We are seeing more on consolidation activities. So that's a sort of mix of the overall pipeline. It's always a mix of large, medium and small activities with our clients.

Infosys raised the outlook for operating margins to 23-24%. What are the factors helping improve the margins?

Towards the end of March last fiscal, we put in place a very careful program to cut back on costs. As we saw the medical crisis developing, we were extremely careful on what we were spending on. We also put in some of the strategic levers on the right mix of onshore and offshore and our work with subcontractors. All of these factors have helped us achieve a 25.4% margin in Q2, and hence, we were comfortable to raise the FY21 guidance for operating margin.

What is the acquisition strategy?

Our organic growth is really very strong in digital especially in dynamic areas like cloud, data, cyber security, and internet of things (IoT). The thinking for acquisitions is very focused on digital. We did three acquisitions, of which one was around the Salesforce ecosystem, another one was around the ServiceNow ecosystem, and one more around the Adobe ecosystem, all of them in the software-as-a-service space. And we have a good pipeline of those types of companies. Our focus will remain on those types of acquisitions. We also have very good organic growth in those areas. But acquisitions give us incremental additional focus. And we also balanced it between Europe and the US so that gives us focus in both our major geographies.

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