We've not yet covered even 20-30% of digital transformation journey: Parekh

After delivering a good performance in 2020-21, Infosys, India’s second-largest IT services provider, closed last year (FY22) on a high note, with constant-currency revenue growth of 19.7 per cent, strong momentum in large deals and focus on margin performance. For SALIL PAREKH, chief executive officer and managing director, who has transformed Infosys into a fast-growing company, it is all about future growth. He is working on a plan that is more focused on clients and what they want, to create a structure that is able to tap into the latest technology breakthroughs. But at present Parekh is facing one of the biggest challenges on the supply side. He spoke with Shivani Shinde about the future road map for the company. Edited excerpts:

It has been more than four years since you took over the helm of the company, with a lot of concerns on the founders’ role at the time. What has been your experience with them and how do you see the last few years?

I think I am quite privileged to have this opportunity, because it’s an incredible business. My own view is that the founders have built this business, which is at a different level, from a global perspective. The way that client relationships are developed, how people are trained, and the delivery capabilities are world-class.

I think what was critical, when I took over, was the approach we took to engage with clients. Our focus was on what clients need, so we put a lot of emphasis on building digital capabilities, cloud capabilities, data analytics capabilities, and all of the digital parameters and experience capabilities, which resonated well with clients. And the results are there to see. In FY18, digital revenue was around 25.5 per cent and at present it is close to 60 per cent, and that’s the fuel for our industry-leading growth.

The other focus area was people and we spent considerable time re-skilling all the employees, and then we created a new focus called the “One Infosys”. These things have helped us also add tremendous stability within our leadership teams. I personally had tremendous support from the founders and also from the board.

After Finacle, in terms of innovation, there was Cobalt, which was organically built out. How significant has Cobalt been in turning the fortunes of the company around?

Cobalt is a huge critical element for what we’ve seen in terms of traction with clients. Today, Cobalt is an industry-leading platform for the cloud. We are extremely focused on building the capability within it. There were already some elements and we added several more elements.

This was also part of our early bets. If you recall, when I joined, we also took a decision to take some of our operating margin and put it into building capabilities. So we reduced our operating margin range and guidance. Part of it was used to build out Cobalt. Cobalt is a comprehensive service across the cloud. It has an infrastructure-as-a-service, software-as-a-service platform, and looks at private cloud and public cloud. More importantly, it caters to 300 industry cloud solutions and has about 30,000 or so components, which are ready for use by anyone who wants to go into the cloud. We have built an entire ecosystem around Cobalt.

In platform-as-a-service we have all the tools to build any cloud native application for any environment. We also build a private cloud solution where we can stitch together from industry components. One thing we’re doing is that every quarter we add a little more, so Cobalt is not a static platform.

What will be the focus, going ahead? Is Infosys revisiting its internal structure to tap into the demand environment?

From a client perspective, the concept of “One Infosys” will be crucial. When clients are working on a digital transformation programme or a cloud transformation programme, it’s not just one service, they need some help. There are multiple sides and we as a company need to bring our capabilities together to give the benefit to the client. And we have put that in place internally to make sure that the best of Infosys is put in front of the client.

We have not changed the organisation structure, it is the same, but we made sure that there are individuals who are aligned to our customers and bring all that Infosys has together. That makes a huge difference. We also made sure the way we motivate and incentivise our people is aligned to this “One Infosys” model.

Besides Cobalt and the continued expansion of the platform, we will also look at building capabilities in newer areas of technology. Recently, we launched the Metaverse foundry and we are already having client discussions. We are working in augmented reality, virtual reality, and looking at how this can be applied on a manufacturing floor, and how it can be used for training to protect workers. We also started some work — it’s still in the early stages — on the gaming ecosystem, because a lot of work is going on in the gaming area. These are all new areas that form a part of your newer thinking, which may not give results in FY23, but this starts building the foundation for something very large in the coming years.

One of the biggest challenges for the industry is people. Reskilling is an issue but so is attrition. How is Infosys making sure that it can address these issues?

There are two aspects, one being the content for skilling. So, part of it is used for reskilling, part of it we also have to create, because we are hiring in huge numbers from campuses. In FY22 we have done over 80,000 campus hires. A lot of the emphasis when we hire graduates is the learning for these new technologies — whether it’s cloud and digital data analytics, cybersecurity, or IoT, but also some of the new ones, such as Metaverse or other newer areas. We are focused on building out that capability and the capacity of our recruitment today is really large.

Would you want to focus on skills rather than just degrees?

At this stage we have not gone outside of the employer programme. We recruit from the four-year degree programmes and the three-year degree, and we then internally have different programmes where people can attain that specific skill or digital skill. Our focus is more on internal resources to create talent, as this also gives employees a well-defined career path.

Building digital and cloud capabilities also means focus on acquisitions. If you look at some of the global players, that is how they have developed their capabilities. What will be Infosys’ strategy?

We’ve had this view for a while, that the focus is going to be on making sure we build out our digital capabilities with that. We’ve always kept an eye open. We’ve done seven or eight acquisitions, though small in size, which we could quickly integrate and work with our clients on. We are looking at midsize acquisitions now, or even larger ones, and we have a good balance sheet for it. It’s more a function of finding something that fits, where our strategic outlook is, and making sure that the culture fit is also aligned.

Are Indian IT services companies extra cautious when it comes to maintaining high margins?

We are a high-margin business. And it’s got nothing to do with anything else but making sure that the value we provide to our clients is reflected. Margin is a function of making sure we have an efficient model in terms of delivery, a very effective model in terms of the value we create for clients, and making sure that the pricing reflects that; and we will continue to do that. If you look at last year, we had 20 per cent growth with a 23 per cent operating margin. It is one of the best years that the company has had in a very long time.

I also want to make sure that, as we did four years ago, when we put this strategy in place, there are times when we see a great opportunity, like cloud or now when we want to invest in employees and engagement, we are able to do so. And that is when we want to make sure that we have a margin target, which allows us to remain relevant, and relevant for employees. Margins will never be a constraint for us. But we will remain a high-margin business and there are many, many levers that can be used.

As an aeronautical engineer studying at IIT-Bombay, did you ever envisage this is where you would be?

I haven’t really had a set plan. So I’m quite happy to go along with the opportunities or the situations as they come.

How has the technology universe changed between the time you were a student of technology and now?

Technology is the centre of the world today. Every client that I talk to wants to become a tech company and the reason is technology is fuelling so much change, whether it is the progressiveness of the internet or the pervasiveness of a device which allows us to do so much, and connectivity across the world. I think there is huge respect for Infosys. I don’t think there’s any company which has a better reputation for getting things done for clients in technology.

Going ahead, do you see more challenges or more opportunities?

I’m actually quite optimistic about things in general and I see the future as extremely strong. The opportunity for tech is massive. Everyone wants to do something. The trend of digital transformation and the cloud is still in the early stages. My guess is that maybe we’ve not even covered 20-30 per cent of the journey. So it’s a long, long runway for big enterprises and governments to go through technology change.