S D Shibulal, the man in the hot seat at information technology (IT) services firm Infosys, says the company’s expectation is based on ground realities. In an interview with Bibhu Ranjan Mishra & Pradeesh Chandran, the managing director and chief executive officer of the Bangalore-based company details why he believes the fundamentals of the company are much better than the peers. Edited excerpts:
Your revenue guidance (expectation) for 2012-13 is lower than that given by Nasscom. Is this a problem specific to Infosys?
It is very important to remember that different people have different aspirations and different models. If you look at our revenue profile, 30 per cent of our revenues come from consulting and system integration works. That means we definitely have a bit more dependency on the discretionary spend. So, our guidance and our observations are quite relevant to the industry. But, it is much more relevant for us, given the present reality.
But, is it not true that there are other people giving much better revenue guidance under the same circumstances?
You can never be relevant to your clients if you do that (what others are doing). The purpose of what we are doing today is to become relevant to our clients in all segments. We are saying we need to actually work with the clients, not only for their IT operations, but also on transformation, product and platform space. We have no plans to defocus on what we are doing. It is a mechanism to be more relevant, deliver higher business value and expand addressable market.
Industry watchers say Infosys is losing to peers because of too much focus on high margins. Any plan to revisit this strategy?
Our decisions are based on some core beliefs and it is important to understand those. We clearly believe the industry will face the following challenges. First, some parts of the industry have been commoditised over time. If you are stuck to that part, you are going to get into trouble. This means you have to balance the portfolio. Second, hiring of huge numbers of people will be challenging in the long run, meaning you have to delink that from revenue growth. So, our strategy of focusing on products and platform, consulting and system integration works, will help us address all those problems.
Is this why you have announced hiring of 35,000 people this year as against 45,000 you hired last year?
We hired 45,000 people last year when our guidance was much higher. Our guidance to hire 35,000 this year is purely based on our guidance for FY13. Besides, when we are expanding our products and platforms business, the number of people required will not be that high. Product companies don’t hire people in huge numbers.
When over 30 per cent of your revenues are coming from SI (system integration) and consulting, you have to depend on discretionary spending. Is there a way out?
We have to depend on the discretionary spend for that 30 per cent of the business. Actually, our approach is to make our portfolio of services more balanced. If you look at our long-term strategic vision, we are expecting our portfolio to become more balanced over the next five to seven years.
Why don’t have much visibility on clients’ IT spending now, unlike previous years?
It is a very tough and volatile environment. If you look at the events in the last quarter, the US was starting to look better, when certain regulatory requirements made some clients defer their investment plans. There were some issues with Greece last month. It will continue to be volatile.
In 2008, you had decided not to give a wage hike initially; subsequently, you changed that decision. Is the situation so bad this year, as you are saying you will do what you did in 2008?
We had one quarter of negative growth and another quarter where the guidance is flat. So, it is definitely a volatile environment. We are not saying we will not make any compensation increase. We are making a point that we will have compensation increase when the visibility becomes a little better.
Do you think a time has come when you should revisit your practice of giving guidance?
We have stuck to our principles. Our principle was that we will give guidance; we will remove the asymmetry of giving information between the external and the internal world. So, at this point, we will stick to our principles.
