Despite posting a profit growth of about 24 per cent, Infosys on Friday failed to cheer the market yet again, since it did not revise its revenue guidance upwards. In an interaction with Bibhu Ranjan Mishra and Pradeesh Chandran, Infosys’s CEO & MD S D Shibulal says the company has seen reasonable success in Q2, at par with the company’s strategic vision. Edited excerpts:
Despite making two acquisitions last month, you have not revised your revenue guidance. Why is it so?
The acquisitions of Lodestone and Marsh BPO are not yet closed. Once we close those, we will take into account the revenues we will accrue from them. In case of Lodestone, we were waiting for the anti-trust clearance from Germany which we have obtained now. It will be closed in a week or so.
What happened to your largest customer who was giving you over $300 million in annual revenues? Besides, you also seem to have a churn in the $200 million plus clients list.
We have not lost the client, but the revenues we were deriving from that customer have marginally come down below $300 million in annualised basis. Similarly, we have also not lost any $200 million plus client but their revenue contribution might have come down marginally. If you look at our $1 million plus clients’ list, it has in fact gone up to 413 this quarter.
What is the rationale behind making V Balakrishnan step down as CFO and give him responsibilities he was already managing in his capacity as board member?
Change is a constant thing in life. In this case, Bala has stepped down from one of his roles to focus on some areas we believe are promising for our future. In Infosys, every person in this company has been groomed for higher roles.
Would we expect any more change in the roles of senior leaders?
If you look at today’s decision, Bala was doing only the CFO’s job until last year. Then he started looking at business portfolio. These are the changes at the leadership level which will continue to happen. You need to rotate people and give them wide experiences at the leadership level.
You said you margin was impacted by higher subcontracting costs. Are you relying more on temping now due to uncertain times?
We don’t have a strategy of hiring of temporary staff. We have always done sub-contracting especially in niche fields. When you expand your business in niche fields, you have to do sub-contracting when you don’t have those required skill-sets to meet the sudden demand. We have done some sub-contracting in some onsite locations for getting skills like consulting and system integration.
In the beginning of the year, you had said that you would reconsider the decision of not giving wage hike when the business environment improves? What really has changed in the business environment since then?
From environment point of view, nothing has changed from last quarter to this quarter. But from a strategic point, we have seen early indicators of success of our strategic vision in Q2. The kind of client wins we have done during the quarter reflects our approach to building a balanced portfolio. This, we clearly believe, will give us long-term profitable growth. So our decision to give a compensation hike is also a reflection of our confidence in the long-term strategic direction.
You are still heavily dependent on two geographies – North America and English-speaking Europe – for a large chunk of your revenues. What is your geographic expansion plan?
We look at newer geographies all the time. We are focusing more on continental Europe now and investing in countries like Germany, France, Switzerland, The Netherlands and Belgium. With the acquisition of Lodestone, we have increased our presence in Europe. We are also seeing opportunities in emerging geographies like China, India and Brazil.
