After Wipro and MindTree, India’s second-largest IT services firm, Infosys Technologies, is in the midst of a reorganisation, said two industry officials with knowledge of the developments.
“The Infosys reorganisation aims to address the challenges it has been facing in the recent past. They include the lack of agility and flexibility. It wants to become a nimble organisation that can move quickly and address attrition issue as well,” said one official.
The reorganisation is also attributed to stiff competition from rivals Tata Consultancy Services (TCS) and Cognizant. Both have been performing much better that Infosys in recent times.
“I cannot comment on any speculation,” said CEO S Gopalakrishnan, when asked about the reorganisation plans.
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However, the industry officials confirmed that the company is looking at a three-part organisation that will address issues such as large outsourcing deals, consulting & intellectual property (IP), and innovation. “There might also be a restructuring in terms of how the company looks at certain geographies,” said the source.
“The offshore IT market is changing. What clients are asking for are more engaging models from services providers – the way they are paid and share risk. Service providers cannot bank on the old software services-centric business. IP, innovation and consulting will change in the next five years,” said Sudin Apte, principal analyst & CEO, Offshore Insights.
CLSA analyst Nimish Joshi and Bhavtosh Vajpayee wrote in a recent report: “Some chances exist that another passing of the baton among the founders is likely, leading to a new CEO. Some of these changes should reverse well-intended, but not very effective steps of the past, such as the industry orientation of delivery manpower and the industry-based grouping of European businesses.”
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There is a possibility that the baton could be passed onto S Shibulal, COO & co-founder. “We think it is a matter of time before this change takes place,” said the CLSA report.
Another move being planned is a relook at its geographical strategy.
“Splitting sales teams in Europe along industry units has not proven very effective – focussing on a country-based split could have made the sales effort culturally more grounded and successful,” said the CLSA report.
According to an industry analyst, almost 90 per cent of the work of Infosys and other IT firms comes from traditional IT services. Some 4-5 per cent comes from transformational work and consulting and 2-3 per cent is contributed by IP and innovation. “Our estimate is that while the absolute numbers for the traditional IT business will remain large and grow, it will drop to 50-60 per cent in the next three to five years. The other part will contribute about 15-20 per cent,” said Apte.
In October 2007, Infosys had gone through a similar rejig in which it had introduced six vertical-based business models across regions, along with five horizontal units embedded into the verticals. The company had also marked a new growth engine to focus on emerging markets and also create a ten-member executive council.
At the time, the company had aligned its manpower to industry verticals. Some of these issues would likely be addressed by consolidating delivery manpower into a common pool or a ‘delivery factory’ model. The delivery factory could be further broken down into segments based on employee skill-sets.
Infosys is also reaching a scale where fresh thinking is necessary for the next level of growth. At $6.1 billion in FY11CL revenues, Infosys will need $3.5 billion of “new” revenue over the next two years to keep growing at around the 25 per cent mark. “Recent quarters have also shown some stretch in the system, with continuous underperformance compared to TCS and Cognizant creating some discussion,” said CLSA.