India’s second largest IT company Infosys which was under-performing for about two years as compared to its peers is trying to regain its bellwether position.

The company which is working to regain the lost glory is undergoing a transformation. Vishal Sikka, the first outsider CEO of Infosys has adopted a new strategy of ‘renew and new’ ways of doing business led by automation and artificial intelligence.

In an interview with The Hindu the CEO talks about his plans. Edited excerpts.

You have mentioned earlier that you want to make Infosys an innovative company. What are the things you are doing?

If you think about industry strictly — mathematically or logically — we realise that this road goes to only one place. We have reached a point, where we are just providing people of certain skills, at a certain cost, within a certain time period to clients. If you take that thought process just further two or three steps, you will realise that the nature of the game is that exactly a downward spiral. Hiring people faster and faster, jamming them in to projects faster, hiring them cheaper and charging less and less for them. This spiral goes and ends at zero. This has to stop. Our company, our people and our industry has to become innovative and also more proactive. We have identified a new strategy of renew of existing and new. The idea of renewal is simply to bring innovation through automation, through Artificial Intelligence and technologies to all the things we do.

Does focusing on innovation mean bringing new products?

Bringing new products is not the only way to innovate. Innovation has to be brought to whatever process we do. We have currently more than 22,000 projects going on. I would like to bring each team to bring innovation to the way they are working on it proactively. If we proactively work with the clients and identify areas of innovation and opportunities that are relevant for them, then we can bring more value to clients. Products are new dimension which we add to our mix, it is not because we want to become a product company.

When you talk to clients about your new strategy, what are their responses? Are they really impatient? How do you balance today with future?

We have to do both the traditional business and also need to look at future. Without one we are just grinders and without the other we are just dreamers. We cannot abandon today’s business, that will be there. We have to non-disruptively bring renewal to everything that we are doing today. The first step of renewal is improving existing project through automation and so on. We have laid out some very good nice goals to our team. Internally, we have certain goals to improve every service line through the power of automation. This is not like one stuff continues and then there is the new stuff. Everything what we do, we have to bring that renewal.

Do you think the R&D spend is adequate for the kind of work you are doing? Worldwide innovative companies spend around 10 per cent of revenue for R&D?

My view on that is entirely is different. My perspective of R&D is that everything what we do on delivery side is R&D. Second one, is that research and innovation has to be rethought. The other thing is that patent based mechanism to measure innovation is completely flawed. They slowdown the software innovation. Most of the software patents that the industry does today is around protecting things which have no business importance. Most important thing is that innovation has become more and more collaborative.

Recently, Infosys announced the expansion of innovation fund to $500 million. Can you elaborate the plans on funding?

We are working with many start-ups right now. As of now, we have not done any investments but you will hear about it in the near future. We are looking at start-ups doing next generation kind of things like bringing new experiences for customers, designs, artificial intelligence based technologies.

On the newly announced Innovate in India Fund

There is a tremendous excitement around that. We have just started it and nothing has happened so far. It is a $250 million fund dedicated to invest in Indian start-ups and help them scale from an engineering point of view and also to help them in terms of go to market. Indian start-ups struggle to achieve scale. Our hope is that we can help them and we are setting up a team for it.

Will you hire an outsider to lead the fund?

We don't know yet. One thing I can say now is that the fund will be overseen by an insider. There is a possibility that it will be run by an insider also. Ritika and the team is thinking about how to set this up. We have a few options and we are looking into it. In the next two-three weeks we will be able to talk more on this.

Start-up funding part of acquisition strategy?

This is not an acquisition oriented move. We want to participate in their financial success and growth. With Innovate in India Fund we want to create an ecosystem of innovation all around us. In many ways the IT companies have not kept up with today's IT needs of the world. That is why it is important to invest in new companies that are thinking about things in new ways.

You brought in many initiatives to bring back those who had left Infosys, how many have returned to the company? Can Infosys bring them back?

Attrition and employee engagement is not about rewards and incentives. There are lots of tactical reasons and things that have to be fixed and we are fixing it and salary is a big part of that.

To me the most important thing about employee engagement is, are we inspiring people are we creating a culture of doing things that we find motivating to work on. Once you do that, then people don’t think about the number of hours they are spending at work. I get 40 emails a day asking for jobs and I try to track down each one of them. A big percentage of those mails are former Infoscions and many are from competition.

Infosys has been talking about acquisitions, what are the acquisition plans? Has the thinking changed on the way you want to look at an acquisitions now?

Yes. I have no interest in buying yesterday’s technology or padding up our revenue by buying companies that are doing the same kind of work that we are doing. This would completely miss the point. We are interested in acquiring companies that help us in automation, artificial intelligence to help renew our services and give us that jolt of innovation to improve our productivity; in companies that bring some new capabilities or new skills to our company. Collaboration is another area and Design is another area that we are interested in.

Will Infosys acquire a product company?

Why not. But, we are not a product company so we will turn them into our services model. We will certainly not say no to product companies.

How do you see the year 2015 for the IT services industry?

The next new generation solutions for software and systems are in such a different realm than the traditional ones. It is very clear that the future belongs to the new generation of software and systems. In this year you will see a much more clear establishment of which one is where. It will become clearer this year – are we participating in the next wave of things or are we continuing with the way things used to be.

What do you think is the right onsite/offshore revenue model mix and Fixed Price Projects vs Time & Materials projects?

We will see much more distributed, real time collaborative teams working using the power of technology and sitting in multiple locations. Onsite and offshore will become less relevant. There is obviously no substitute for onsite but the key is to amplify the onsite teams with the teams elsewhere. I don’t know how that mix will play out. Today, we do 56-58 per cent time and material projects and the rest are fixed price projects where our margins are higher. While more than 40 per cent of our projects are fixed price, outcome based projects constitute less than 1 per cent of the 22,000 projects that we have today. I want to grow the contribution of outcome based projects significantly, where we get a revenue share.

pradeesh.chandran@thehindu.co.in

(This article first appeared in The Hindu dated January 19, 2015)

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