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As a part of its renewed focus on business IT services (BITS), Infosys, India’s second-largest information technology (IT) services company, is strengthening its infrastructure management services (IMS) offerings, a space that aided the industry’s growth even during uncertainties. The increased focus on this segment is expected to provide a boost to the company’s BITS business, which accounts for about 60 per cent of its total revenues.
“In the last two years, we have done a lot of incubation and innovation in the BITS space. Henceforth, these are all going to be used more vigorously,” Chandrashekar Kakal, senior vice-president and global head (BITS), told Business Standard.
“We have looked at giving a thrust to the infrastructure management space. Earlier, we were known only for remote infrastructure management. But now, we are looking at end-to-end capability in the infrastructure space. So, we are winning large deals that are infrastructure-led and all of these would actually be accelerated as we go forward in the new direction.”
Soon after assuming charge as executive chairman in June, N R Narayana Murthy had acknowledged lack of concentration in winning large deals in the BITS segment had hit Infosys in the past few years. During an interaction with investors earlier this month, he had admitted the lost focus in the BITS business had been a mistake. In the last couple of years, IMS, which has been growing at a faster pace than the industry average, has been a key growth driver for most IT companies. However, Infosys’s presence in this segment is somewhat low compared to its large Indian peers. IMS accounts for only six-seven per cent of Infosys’s overall revenues, against 12-28 per cent for peers that have successfully used this to snatch market share, despite the fact that most deals in this space have thin margins.
According to an August 2 report by equity analyst firm CLSA, Infosys has been avoiding this space citing unacceptable deal terms. However, this seems to be changing now and recent deals-wins, including Harley Davidson, Ricoh, India Posts and BMW, are examples of that.
“With a number of large infrastructure deals signed by the likes of IBM, HP and CSC in the last decade coming up for renewals, this segment will be crucial to growth prospects. Infosys can ill-afford to stay away from this any longer,” the CLSA report had said.
Kakal, at the helm of Infosys’s BITS business for the past two years, said the company has formed partnerships across categories to strengthen its IMS business. These include partnerships with data centre providers, hardware vendors, end-user computing companies, logistics providers, etc. While some of these are strategic partners, Infosys has entered into teaming agreements with others.
“We use this system very well to make sure we will provide the complete value to the client. So, we developed an ecosystem of partners to offer end-to-end capability for the infrastructure space, rather than being limited to remote management of infrastructure,” Kakal said. He added there were huge opportunities in the infrastructure-led business space, and these would be driven by bids coming up for renewal, as well as by the large outsourcing deals expected to be unveiled.
He, however, refused to comment on Infosys’s order pipeline in this space.
THE COMPETITION IN IMS
Infosys: Lower share of infrastructure business continues to hurt overall growth. However, it is improving off a low base
TCS: Remains a strong player. Infrastructure management services (IMS) has consistently grown faster for the company
HCL Technologies: IMS is the key growth driver for the company. It has been extremely aggressive in the restructuring market
Wipro: Has failed to capitalise on the big IMS practice. Its early lead hasn’t translated into better growth
Source: CLSA August 2, 2013 report
