Infosys targets return to glory days as market perception turns positive

With its ‘renew and new’ strategy, Infosys is expected to catch up with its peers, get back to industry-leading growth and margins by the end of the 2016 financial year, but would continue to struggle in the near term.

The Bangalore-based company that was once the leader – both in terms of margins and growth – has been struggling to keep pace with peers like TCS, Cognizant and HCL Tech, who have consistently, beat the company in terms of growth and to some extent even in terms of margins. The company has stated its objective of 15-18 per cent year-on-year revenue growth, coupled with 25-28 per cent operating margin growth.

To get it back on track, CEO Vishal Sikka has put together a skunkworks or a small team that puts together digital proof of concepts (PoCs) that will go after valued projects, both in terms of mining existing clients as well as going after new ones, according to sources within the company. These teams involve anywhere between 8-12 employees.

Sikka’s initiatives, such as ‘renew and new’, meaning training employees on new technologies, connecting better with employees and look at newer ways of delivering software projects, employees and analysts are upbeat. In line with this, Infosys has made investments in design thinking workshops, proof of concepts for 50 clients. Analysts seem to be impressed.

“Clients’ perception has changed since Sikka has taken over and now they look at Infosys more as a strategic partner,” said Ravi Menon, IT analyst at Centrum Broking. This change in perception is important as there were some disgruntled clients who felt that the company was not delivering on its promise, according to analysts.

This was re-emphasized by Sikka in his recent address to investors in the company’s Pune campus, when he said that its Product Engineering and Design team involved the integration of the physical and digital worlds.

However, some analysts believe that the company has to tackle the issue of employee productivity and arresting attrition if it has to achieve its above-stated goal.

“Both of these have considerable scope of improvement,” said Sarabjit Kour Nangra, Angel Broking VP-IT research analyst.