Infosys bets on automation for 30pc margin on $20b revenue by 2020
Infosys Ltd, the second biggest information technology (IT) firm in the country, is embracing automation and futuristic technologies such as virtual reality and assisted driving to innovate itself at a time when the industry is going through a major digital transformation.
By deploying fewer employees on projects that could be automated, Vishal Sikka, chief executive officer of Infosys, hopes to increase the revenue per employee from around $50,000 currently to $80,000 by 2020. This, he believes, will help the company achieve a target of 30% margin on $20 billion revenue by 2020.
The digital transformation shaping up the world has led to a lot of "client anxiety" in every industry, an opportunity that Infosys aims to tap. Companies such as Uber and Airbnb, which have respectively revolutionized the cab-hailing and holiday-room rentals, are empowering the end-user. This kind of end-user-centric approach is putting a dual burden on legacy companies of different industries in terms of costs and the ability to innovate.
"It has become possible to dis-intermediate a long established industry in very powerful new ways, faster than ever and more effectively than ever. And that is also fueled by a tremendous cost pressure that businesses feel because the existing infrastructure that businesses have becomes much more of a burden to deal with because of its limitations, because of its high costs. And lowering the cost of the existing landscape becomes a massive priority for businesses," said Sikka on Monday at a conference organized by Kotak Institutional Equities in Mumbai.
"We are at a time where there is a massive transformation of the world around us driven by digital technology. And at this time, the world is in a very interesting situation. The traditional IT companies are not the ones helping the great IT transformation. They are in fact a part of the problem, not a part of the solution. Then you have a whole bunch of start-ups. While they have exciting ideas, technologies and solutions, they don't have the maturity, the scale to solve the complex problems that enterprises need," said Sikka. "I believe that we have a unique opportunity to be the leading IT services company in this time. And that is our endeavor."
Infosys, which has traditionally worked on outsourced IT projects by deploying armies of developers, will use software to automate redundant processes. It will go beyond the basic automation around the BPO and lower-level IT support type automation towards high-value kinds of automation in application maintenance, which requires more sophisticated artificial intelligence technology, the CEO said.
"That shift to automation is inevitable. There is no doubt that it is going to happen," Sikka. "There is a huge force behind that is powering this change in numbers and that force is automation… It is not to make the horses run faster and faster, or to feed them better, or to give them better scheduling, but it is to turn the horse cart into an automobile." Drawing a parallel to India's Green Revolution that turned India into a food grain surplus country within the span of a generation, Sikka said the same is bound to happen with automation and the IT industry.
"It's the same thing. Getting technology, getting automation, getting software, to power the people to make them more productive, the basic underlying equation of my company, of my industry, whether other companies realize it or not, is that the people-only model-conducting a project with only people and tools from the client or that they have installed-has to be replaced by people plus software," Sikka told analysts. The "people plus software" approach ensures that the margins go up because less number of people work on a project. Using software further increases the margins.
This also means that the cost of the project goes down benefiting the company and the client. Also, employee efficiency and utilization increases for the better. The transformation into digitization and automation has to happen even as the company focuses on existing business or "yesterday's business", said Sikka. If the old and the new are not consistent with each other, "you will have a cultural conflict in the company," he said, referring to the theory propagated by novelist Arthur Koestler in his book The Act of Creation.