As a part of its renewed focus on the Business IT Services (BITS) business, Infosys, India’s second largest IT services company is strengthening its infrastructure management services (IMS) offerings, a space that aided the growth of the industry even during the period of uncertainties. The increased focus on IMS is expected to provide a lift to the company’s BITS business which accounts for over 60% of Infosys' total revenues.
“In the last two years, we have done a lot of incubation and innovation in the BITS space, which all are going to be used henceforth more vigorously,” Chandrashekar Kakal, senior VP & global head of BITS told Business Standard.
“We have looked at giving a thrust to infrastructure management space. Earlier we were known only for remote infrastructure management, but now we are looking at the end-to-end capability in the infrastructure space. So we are winning over large deals which are infrastructure-led today and all of these will actually be accelerated as we go forward with the new direction now,” he added.
Soon after assuming the charge at the company in June this year, Executive Chairman N R Narayana Murthy had acknowledged that a lack of concentration in winning large deals in the BITS segment was one of the mistakes Infosys had made in the past few years. During an interaction with investors earlier this month, Murthy had also admitted that the lost focus in the BITS business as one of the three mistakes made the by the Bangalore-based company.
IMS, which has been growing at a faster pace than the industry average, has been a key growth driver for most IT companies in the last couple of years. However, Infosys’s presence in this segment is somewhat low as compared to its other large Indian peers. IMS makes for only 6-7% of Infosys’s overall revenues as compared to 12-28% for its peers who have successfully used it to snatch market share despite fully aware of the fact most of the deals in this space come at a thinner margin band.
According to an August 2 report by equity analyst firm CLSA, Infosys has been avoiding this space citing unacceptable deal terms. However, the company’s thought process around infrastructure deals seems to be changing and some of the 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 said.
Kakal, who has been at the helm of Infosys' BITS business for the past two years, said the company now has formed various partnerships across categories to strengthen its IMS business. These include partnerships with data center providers, hardware vendors, end-user computing companies and logistics providers, among others. While some of these are strategic partners, with others Infosys has entered into teaming agreements.
“So we use this system very well to make sure that we will provide the complete value to the client. So we developed an ecosystem of partners to offer end-to-end capability for infrastructure space, rather than being limited to remote management of infrastructure only,” he said.
Kakal also said that there are huge opportunities in the infrastructure-led business space in the future which will be driven by bids coming up for renewal and large outsourcing deals which are expected to be unveiled. He, however, refused to comment on Infosys' order pipeline in this space.
| Competitive landscape in IMS space |
| Infosys: Lower proportion of infra business continues to hurt overall growth. However, it is improving off a low base |
| TCS: Remains a strong player in this market; IMS has consistently grown faster for the company |
| HCL Technologies: IMS is the key driver of growth for the company; the company is has been extremely aggressive in the restructuring market |
| Wipro: Has failed to capitalize on the big IMS practice; its early lead hasn’t translated into better growth |
| Source: CLSA August 2, 2013 report |
