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Why Vishal Sikka needs to make some big acquisitions

But beyond the quarterly gyrations, it is clear that the days of go-go growth are over. If Infosys is to realize its stated goal of $20 billion in revenues by 2020 (being stated as 'stretch goal') the current anaemic 8-9 per cent annual growth is unlikely to get the company there.

twitter-logo Venkatesha Babu        Last Updated: January 13, 2017  | 16:06 IST
Infosys CEO and MD Vishal Sikka
Infosys CEO and MD Vishal Sikka

Deputy editor Venkatesha Babu
The quarterly numbers are in and Infosys, India's second largest software services exporter has reported its numbers.

But beyond the quarterly gyrations, it is clear that the days of go-go growth are over. If Infosys is to realize its stated goal of $20 billion in revenues by 2020 (being stated as 'stretch goal') the current anaemic 8-9 per cent annual growth is unlikely to get the company there.

ALSO READ: Infosys Q3 profit up 7% to Rs 3,708 crore

Essentially this means that the company needs to double in size in the next 3 years from the current revenue of $10 billion, if it has to achieve its self-stated goal.

While it tweaks 'levers' for improving efficiency (which in the current quarter helped it improve margins and cut expenditure), there is only so much it can do on that front. Infosys needs growth if it is to be anywhere close to its stated ambition.

Vishal Sikka took over as the CEO and MD in June 2014 and since then has overseen nearly 10 quarters of operations at the company.

He has been complaining to analysts at close door conference about his unhappiness at the pace of change within the company.

Admittedly turning a ship with 2 lakh employees is no easy task. However, even as internal changes work out, Sikka lead Infosys needs to make more bold external bets.

Infosys has made quite a few 'niche' acquisitions under his leadership at a pace faster than in the past.

After he took over, Infosys acquired Panaya for $230 million, Kallidus for about $120 million, Skava for $120 million and Noah Consulting for $70 million.

In 2016, however, the company did not make any significant acquisition at all. With cash of Rs 35,697 crore in hand, however, Sikka needs to be bolder.

In areas of AI, automation and digital services, Infosys needs to make a few bold inorganic moves. If the company is serious of trying to achieve the goal it has set for itself, then acquisitions are a must. The next few quarters will be crucial to see whether Sikka can really make those big bets.


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