)
Numbers for January-March seem lower than expected. Analysts feel growth in the information management system (IMS) seems tapering. Even the enterprise systems’ integration business has fallen. Any reasons for concern?
I am happy with the growth this quarter. It’s only that the currency played spoilsport. From a business growth point, we have done well.
The pipeline in the IMS space continues to be strong. This segment does tend to have spikes in certain pockets, but one needs to look at how the core business has been growing. Year-on-year, IMS has grown a little less than 20 per cent. I think the opportunity we have is large. There is no real change in the competitive market landscape. The only shift we have is that the traditional big five companies’ shares have dipped further and the competition is coming from local and regional firms. But that’s a market we compete in, and we will continue.
Even in terms of markets, we see growth opportunities in North America and Europe. We had thought that Germany would need some more time for a pickup, but it’s already opening up.
But the enterprise systems’ integration business has fallen five per cent.
Applications’ services is one area that has seen the most disruptions. That’s where the most scrutiny of deals for return on investment is happening.
But again, if you look at the business growth year-on-year, the segment reported an eight per cent growth. We divide this business into traditional business, which is run-the-business work, and we see that services continue to grow well. This quarter they have grown by 4.4 per cent.
Enterprise systems integration SI is where we have the packaged software or SI work. The previous two quarters were really good. We saw the closure or completion of one large transformational engagement in retail and consumer package segment.
Margins at 21.3 per cent did come as disappointment. Do you still have headroom to improve it in coming quarters?
We have always said our ideal operating range will be 21-22 per cent, we have done better than that in the last few quarters. Based on market outlook we have made some bets. There are three areas that we wanted to accelerate our investments in — next-gen ITO, digitalisation and IoT. Given the traction we see in these segments we thought we needed to accelerate our investments. After making these investments we have still managed to maintain our margin band.
Could you elaborate more on the investments that the company has been making?
These investments are primarily in five pockets. First, we have been creating co-innovation labs. We have seen some great advantage and success of helping our customers journey to both IoT and digitisation journey. These are more onsite centric as this allows us to work with clients directly. We are enhancing our investment in the co-innovation lab.
The second is that the very nature our offerings is becoming end-to-end, in other business as well. So far we had seen this in the IMS space, hence the need to have global delivery centre. We have created three of these. We invested in 100,000 square feet of space in North Carolina.
Thirdly, we have set up engineering labs. We have said in the past that we will focus on medical devices, aero and auto segment and industrial goods. There is a need to expand our lab capability to cater to this. We invested in 100,000 square feet of space in Bangalore to setup a lab.
We see compliance and regulatory needs of certain vertical segment going up, we need to up our infrastructure in these segments. Plus we have hired over 100 plus professionals to to assist us in the digitisation journey.
What does the spend cycles look for the next few quarters?
The way we see it, deal pipeline is robust, it is better than what it was same time last year. The trajectory that we see now is where we want to be. What is comforting is that we remain agile to grab market share.
