Infosys shares may have plunged nearly 4 per cent following its financial results for the fourth quarter of the last financial year, but the company is already rallying and talking about a "transformative journey". At the analyst meeting held in Mumbai yesterday, CEO Salil Parekh laid out a three-year roadmap for the company to drive it towards future growth.
According to The Business Standard, Parekh said that 2018-19 is going to be a "year of stabilisation" for the company, which is just coming out of the turbulence of some of the management decisions and changes that occurred during the past 18 months. He added that in "the second year we will start to build momentum and the third year we will start to accelerate so that we can have more and more share of our client's revenue and that will obviously translate overall to a better Infosys."
According to the CEO, the company's new strategy rests on four pillars: Scaling up digital, energising the "core" using automation and AI, reskilling the workforce and expanding localisation. The company also made it amply clear that protecting margins at the cost of growth is not something it will look at, at least in the short to medium term. However, Parekh consciously stayed away from giving out any specific quantifiable numbers - unlike his predecessor Vishal Sikka.
According to the daily, Infosys told analysts that it is looking at digital to accelerate growth and has already made strong inroads. The company closed 2017-18 with a revenue of $2.79 billion from this segment, which was 25.5 per cent of the company's overall revenue. Parekh said there is huge potential to grow it further as the overall opportunities in the digital space stand at around $160 billion, but growing at a rate of 15 per cent year-on-year, much higher than growth in traditional IT services.
"So for us it is an exciting market and that is why the first pillar for us is to scale our digital business...This is a business where all of our clients are moving knowing that the core is the key to driving digital change," said Parekh. "So for us, the real definition of digital is a fast-growing market where we ourselves are growing very well, and we want to invest in this pillar to make sure we become more and more relevant for our client's future," he added. At the end of 2017-18, Infosys boasted 1,204 active clients.
Parekh reportedly added that the company is focused on growing five different dimensions in the digital space, including experience, insight, innovate, accelerate and assure. "These five elements comprise all the digital activity that we are doing today and reflects how we are thinking of our company and what our client's journey is as we look at digital," said Parekh.
Infosys plans to invest most of its dollars in human resources, both onshore and offshore, and in driving localisation. The report added that it would also look at acquiring niche technology companies while at the same time ensuring that shareholders are rewarded adequately, for which it has spelt out a disciplined capital allocation policy.
Emphasising the need for hiring local talent in every market that Infosys operated in, President and COO UB Pravin Rao said the company has now revamped its talent sourcing strategy by hiring freshers in the US. The company last year hired around 800 graduates in the US through campus recruitment and the report added that the plan is to now replicate the model in Europe and the UK.
That apart, Infosys said that the sales team will be a major focus area in the near term. According to Mohit Joshi, President and Head of Banking, Financial Services & Insurance (BFSI), Healthcare and Life Sciences at Infosys, the company is investing to build a team of 'deal directors', 'multi-tier architects' and 'client partners' whose focus would be on ensuring better (deal) originations and better win rates.
"Large deals are a very important engine of growth for us and we have identified six specific areas where we are going to invest our dollars," he added. The company thrust in this area is understandable when you consider that Infosys won large deals worth about $3 billion in 2017-18, while its closest rival TCS reportedly bagged deals worth over $6 billion.
The analyst meeting seems to have been successful in convincing participants about Infosys' bright future. According to media reports, a majority of brokerages in attendance see up to 20 per cent upside from the current Infosys share price. For the record, a higher upside means that the stock has more value than is currently reflected in its price.