We recently attended Infosys’ EMEA CONFLUENCE flagship client event and found the company quietly bullish about recent and projected performance in the region.

Europe remains a growth market for Infosys

Salil Parekh made it clear some years ago that he wanted to grow Infosys’ business in Europe, and the results are there to see.

Europe now accounts for 25% of Infosys’ global revenues and continues to be a growth market for the company, delivering substantially higher CC growth than North America:

N.B. Softness of European currencies against the U.S. dollar has meant that this has not translated into higher reported growth than N. America.

Sectorially, the business mix is significantly different from North America. Over two-thirds of revenues in Europe come from three vertical groups:

• Manufacturing: by far the largest, accounting for 28% of the region’s revenues (compared with under 13% globally). To take one sector, automotive, clients include Daimler (a top 3 account globally), Volvo Cars, and Mercedes Benz
• Financial services: at 21%, significantly less than the U.S. Clients include BNP Paribas and Deutsche Bank
• E&U, Resources and Services: 19% (compared with 12% globally). Clients include E.ON and Uniper.

Recent expansion of localization

The region is served by 19.4k personnel, of whom 71% (nearly 13.8k) are based locally (including those on visas). While it was mentioned as a priority when Salil Parekh arrived as CEO nearly four years ago, momentum to increase localization in key European geographies has been more recent.

In France, for example, the proportion of personnel who are local hires has increased from just 25% in FY20 to 47% in FY22 and should hit 50% this year. In support of this, Infosys has introduced new internship programs in France and grad recruitment programs in selected universities.

Infosys is now looking for new growth opportunities in Europe in 2023 to come from:

• Expansion in the Nordics
• Expansion in the region of its creative, branding, and experience design business, leveraging the recent acquisition of oddity
• Large deals, account expansion, and new account openings.

The Nordics

Infosys already has some marquee clients headquartered in the Nordics, for example, KONE, Telenet, and Posti, and is looking for faster growth in the region.

In Sweden, it has just opened a new proximity center in Gothenburg, its sixth in Europe.

Its recent acquisition of BASE life science, a LS sector technology consultancy headquartered in Denmark, brings expertise in medical, digital marketing, clinical, regulatory, and quality and data science (focused on data and AI in clinical trials and drug development). Infosys intends for BASE to expand its expertise into the consumer health, animal health, MedTech, and genomics segments. BASE has partnerships with Veeva, IQVIA, and Salesforce and enjoyed strong growth in recent years. The acquisition, for around €110m including earnouts, augments Infosys’ life sciences expertise, a sector where it has arguably been under represented and which continues to enjoy strong growth.

Its acquisition four years ago of Fluido brought in substantial local Salesforce capabilities: as well as a Platinum consulting partner, Fluido is a Salesforce training delivery partner in the Nordics. Fluido brought in ~240 employees and offices across Finland (Espoo); Sweden (Stockholm & Gothenburg); Norway (Oslo); Denmark (Copenhagen); and Slovakia (Banská Bystrica).

Expect to see more bolt-on acquisition activity by Infosys of specialists in the region, and some larger-scale personnel transfer outsourcing deals.

Internationalizing oddity

Infosys’ recent acquisition (for up to €50m including earnouts, etc.) of oddity, a Germany-based digital marketing, experience, and commerce agency, strengthens its creative, branding, and experience design capabilities in central Europe. As part of Infosys’ digital experience and design offering, oddity will become part of WONGDOODY. This is a sizeable acquisition by Infosys to expand WONGDOODY into Central Europe. oddity, which will rebrand as WONGDOODY, comprises four specialist units in Germany (plus a 40-person operation in Taipei and Shanghai and a software development team). As well as bringing an onshore presence in Germany to WONGDOODY, it beefs up WONGDOODY’s capabilities in branding, and the oddity waves unit adds some 3D/CGI production capabilities.

While WONGDOODY in Europe has worked for Infosys IT services clients such as Telenet and BPost, there remain significant opportunities for Infosys to leverage WONGDOODY to expand its relationships with clients outside the CIO function in supporting their digital transformation initiatives.

Sales: large deals/account expansion/new account openings

Large deal wins have played a major part in fuelling Infosys’ topline growth since 2018, with Europe having some significant recent deal wins with the likes of Telenor, Deutsche Bank, Volvo Cars, and Curry’s. Infosys claims its current pipeline for large deals in Europe is particularly strong.  

Infosys’ TITAN account expansion program has yielded results in the increased number of $50-100m accounts globally, from 26 at end FY22 to 38 at end H1 FY23 (the number of $100m+ accounts staying stable at 39). With enterprises being more cautious in awarding huge multi-year transformational contracts, the focus is now on expansion within high-potential accounts in the $10-50m revenue range and getting them closer to that $50m area.

With sales hunting initiatives, there has been considerable success in winning new marquee accounts in Europe: of the 52 new clients landed over the last 18 months that each have revenues of $10bn+, Europe accounts for 21 (over 40%). Many of these are $10m+ TCV deals. Infosys claims its pipeline of $10m+ deals from new accounts remains strong. Some of these are potential vendor consolidation initiatives: initiatives that we expect to see more of as attrition levels continue to fall.

Unsurprisingly, current demand is dominated by cost take-out themes such as infrastructure modernization and Tech & Ops deals. Looking ahead, Infosys is interested in captive acquisitions and is also likely to benefit when vendor consolidation initiatives increase.

Planned technology investments in Europe reflect the focus on manufacturing sectors; areas of interest include private 5G for IIoT use cases and smart factories. At the moment, Infosys has two innovation centers in Europe (in Dusseldorf and Bucharest, which is also a cyber defense center) and two design studios (Dusseldorf again and London). Expect to see a few more opening over the next 24 months, with perhaps more of an industry emphasis in some of these.