Pricing pressure to continue, says Infosys
Makes investment in TidalScale, a Silicon Valley firm that helps clients draw insights from Big Data
Infosys chief executive Vishal Sikka has said the company continues to see pricing pressure from customers as they see their businesses undergo structural changes and emergence of digital technologies.
“Downward pricing pressure you see across the sector is a result of structural change. If you look at the fixed price, there is no doubt that across the sector there is a very significant shift. The expectation that customers have is prices will come down because they are under pressure,” Sikka said at the Wells Fargo analysts’ conference in New York on Thursday.
The sector has seen a structural change in information technology (IT) services with automation, he said.
Indian IT sector is facing its biggest crisis in a decade as demand for traditional technology services has gone down significantly. The sector is expected to grow in single digit this year even as Indian firms struggle to offset decline in traditional services with new opportunities in cloud and digital services. Infosys and Cognizant both have cut their revenue forecast twice this year. Accenture cut its full-year outlook, citing pricing pressure. Wipro forecast a flat Q3. The Indian IT sector body Nasscom has also sounded concerns and might further reduce growth forecast.
Experts say most of the technology spending by companies would be driven by digital technologies like cloudbased applications, analytics, mobile systems, social media, and cyber security. Consistent pressure on pricing from businesses and changing demand have forced Infosys and peers to bring in automation and to focus on digital services.
Among many other measures to remain profitable, Sikka said the company would continue to look at people who have the ability to innovate and execute new things.
“Infosys is going through a transformation from a costbased model to an innovationbased one,” he said.
On Friday, Infosys said it had invested in start-up TidalScale. TidalScale helps organisations draw insights from Big Data (extremely large data sets that may be analysed computationally to reveal patterns, trends).
Sikka pointed out that the cash-cow business is under margin pressure and transformation is much more difficult.