Infosys seems to be finally getting its act together. In an interview with Business Line , Its Chief Executive Officer S.D. Shibulal says the company is still work-in-progress and more hard work needs to be done to achieve stability. Excerpts from interview:
Have you been seeing a secular trend in terms of improved realisations?
No, we are not seeing any secular improvement in realisations. Last quarter, I think there was a pricing decline. We have seen ups and downs in small levels. I would say the price increase has been stable.
We are winning more large outsourcing deals which are price-sensitive. This quarter, we saw price increases, both offshore and onsite. I won’t consider it secular.
You talked about broad-based volume growth, which is basically because of the focus on execution. What exactly do you mean by that?
All units have fared well. Service lines have run well. The deals we won last year, in the second half of last year, have yielded revenues. If you look at growth, manufacturing and financial services have grown. If you look at service lines, engineering services have grown.
Our strategy of making sure we have multi-service capabilities, multi–tower solutions, lot of client relevant work and go-to-market strategies are all working out.
We are working towards cost-optimisation, more off-shoring, increase in sales force capabilities and effectiveness. These steps are in the early stages and will take sometime to evolve.
Does that also mean you are chasing big deals even at lower pricing?
It only means we have been able to chase the big deals. Pricing is only one lever. You can’t use pricing and win deals. Because clients want only solutions. So, I would consider having solution capabilities, a bigger lever than anything else.
What exactly is happening to 3.0? Have you tweaked it now?
It is in execution mode. Tweaking is a continuous business. We have tweaked by increasing focus on growth markets. We will continue to tweak processes. But as a strategy there will be no changes.
As part of 3.0, one of the things you needed to do was to go in for acquisitions aggressively.
We did the Lodestone acquisition and its integration is complete. I don’t think we need to do anything more on consulting and in Europe. Other areas we plan to look at arte products and platforms. We continue to look (at acquisitions there).
Lodestone as an acquisition took time to acquire. We have a set of criteria, are quite aggressive and demanding when it comes to acquisitions, but we will continue to look for them.
Apart from using cash for paying out dividends, is there anything specific for which you are preserving cash?
Cash is extremely strategic to us. This is a very volatile industry. We have challenges, such as the downturn and the US Immigration Bill.
Our infrastructure investments are quite heavy. Whenever we have found excess cash, we have returned it to investors and have given 400 per cent dividend this half year.
Manufacturing has done exceptionally well this quarter. Anything specific there?
Hi-tech manufacturing has done very well in the quarter and hence has led to the overall vertical doing well.
There is a lot of turmoil right now in the US. The Government there has shut down. How has this impacted you?
We have a strong relationship with our clients. Their challenges, in many ways, are our challenges. The environment is volatile.
That creates indecisiveness and delays in decision-making, which impacts us. We are their strategic partners and as they share those concerns with us they expect us to adjust some of the things that we do for them. That’s why we have initiated this star account program, where the client partners with us in each of the accounts.
But is the sentiment negative?
Frankly, there has been positive movement about the sentiment in the US.
Europe has only now started to look better. So, there is a marginal improvement in positiveness in the US market.
The top end of the guidance remains at 10 per cent.
There are multiple factors from the Infosys perspective. Historically, quarters two and three have been soft for us. Factors which influence us externally are the fewer number of working days, end of the budget in-cycle and beginning of the in-cycle.
While we have started winning those deals, the internal changes which we are driving to make the deals productive — such as whether it is cost-optimisation, sales-effectiveness or productivity improvement — are in their early stages. It will take a few more quarters to get results. So, we remain cautious.
Utilisation has increased to nearly 78 per cent. Is it set to head higher?
We will be comfortable with around 80 per cent levels.