In­fosys on track to meet $20 bil­lion sales tar­get by 2020

The Pak Banker - - COMPANIES/BOSS -

In­fosys Ltd is con­fi­dent of achiev­ing its am­bi­tious tar­get of hit­ting $20 bil­lion in sales by 2020 de­spite the pall of eco­nomic gloom hang­ing over the In­dian in­for­ma­tion tech­nol­ogy (IT) in­dus­try, a top ex­ec­u­tive at the firm said.

"We be­lieve it is very much doable. We do not doubt and we be­lieve there is enough and more op­por­tu­nity for a com­pany, which is not com­pla­cent, able to think dif­fer­ently, and ex­e­cutes this well," In­fosys chief op­er­at­ing of­fi­cer U.B. Pravin Rao said in an in­ter­view this week.

The com­ment comes less than 10 months af­ter In­dia's se­cond largest soft­ware firm first out­lined its am­bi­tious tar­get. The op­ti­mism comes just days af­ter ri­val Cog­nizant Tech­nol­ogy So­lu­tions Corp. is­sued a weak sales fore­cast of 1014% growth this year, ver­sus 21% last year (2015). Un­cer­tainty over a global eco­nomic re­cov­ery is mak­ing many large global banks (which spend the most on IT) put their tech­nol­ogy spend­ing on hold.

Re­cently, in­dus­try body Nasscom pro­jected a lower out­look of 10-12% growth for In­dia's $146 bil­lion IT sec­tor in 201617 ver­sus 12.3% growth in the year end­ing 31 March. In­fosys re­mains on track to achieve its goal and if chief ex­ec­u­tive Vishal Sikka's strat­egy of "new and re­new" is ex­e­cuted well, it can grow up to 5% above Nasscom's guid­ance in the next four years, Rao said.

To achieve its goal, In­fosys will look at also buy­ing firms that will shore up rev­enue, ver­sus its strat­egy of in­vest­ing in firms that have new-age tech­nolo­gies and will help over the longer term, fur­ther­ing Sikka's am­bi­tion of bring­ing $1.5 bil­lion in busi­ness from merg­ers and ac­qui­si­tions.

The com­pany also ex­pects sig­nif­i­cant busi­ness from big data an­a­lyt­ics-pow­ered plat­forms and In­ter­net of things as part of its out­look of gen­er­at­ing $2 bil­lion in busi­ness from new-age tech­nolo­gies by 2020. Its tie-up with con­glom­er­ates such as Gen­eral Elec­tric on cloud com­put­ing plat­forms (GE Predix) is a case in point.

"If you look at the last few years, TCS (Tata Con­sul­tancy Ser­vices) and Cog­nizant grew 17-18%. The in­dus­try grew at-best 13%. So it is pos­si­ble for some­one who is ex­e­cut­ing well to grow 3%, 4%, 5% higher than in­dus­try," Rao said on Mon­day. When In­fosys shared its aim of be­com­ing a $20 bil­lion firm by 2020 last April, it meant the firm had to grow at an an­nual com­pounded growth rate of 18.11% a year from its rev­enue of $8.7 bil­lion in 2014-15. Even if In­fosys grows at the high-end of its 9.3% guid­ance, it will end with $9.5 bil­lion?in?rev­enue by March 2016.

This will re­quire In­fosys to now grow at a higher com­pounded growth rate of 20.4%. "We said that $1.5 bil­lion will come from in­or­ganic ac­qui­si­tions, $2 bil­lion from mostly dig­i­tal tech­nolo­gies and plat­forms. The re­main­ing $16.5 bil­lion is from tra­di­tional ser­vices busi­ness. Reach­ing $16.5 bil­lion is doable if we ex­e­cute well," said Rao. In­fosys needs to grow at an an­nual com­pounded growth rate of 14.8%, as against 13.66% from its rev­enue in 2014-15, to get to $16.5 bil­lion in com­modi­tized out­sourc­ing busi­ness. Rao, who joined In­fosys in 1986 as a soft­ware en­gi­neer, said scal­ing up busi­ness from tra­di­tional out­sourc­ing is eas­ier than gen­er­at­ing $2 bil­lion rev­enues from the dig­i­tal space for now.

Those steps in­clude mak­ing its over 100,000 en­gi­neers (who write codes) think imag­i­na­tively by us­ing the user-cen­tric ap­proach of De­sign Think­ing to gen­er­ate more busi­ness from ex­ist­ing clients. The change in ap­proach has helped In­fosys in­crease the num­ber of large deals to $800 mil­lion from $400 mil­lion in the year-ago pe­riod. The man­age­ment fur­ther ex­pects it to in­crease the num­ber of large deal wins to "at least $1.5 bil­lion in a quar­ter" in the next fi­nan­cial year, al­though Rao de­clined to put a time­line. In­fosys will also buy firms to drive rev­enue.

Since the start of 2015, In­fosys has spent $390 mil­lion in buy­ing three com­pa­nies, in­clud­ing $200 mil­lion on au­to­ma­tion firm Panaya, $120 mil­lion on mo­bile com­merce firm Skava, and $70 mil­lion on Noah Con­sult­ing. Rao de­clined to share the rev­enue of th­ese com­pa­nies al­though the three firms are es­ti­mated to have less than $100 mil­lion in rev­enue, ac­cord­ing to ex­ec­u­tives at In­fosys who did not want to be named. "Right now the ac­qui­si­tions have been mainly tech­nol­ogy ac­qui­si­tions be­cause the fo­cus for now was tech­nol­ogy ac­qui­si­tion.

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