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Infosys Event Note: “Renew the core business, innovate into new businesses”

NelsonHall recently attended Infosys’ European analyst and adviser summit held in advance of its “Confluence” customer event.

Dr. Vishal Sikka has been in place as CEO for less than two months. During this time he has met with several dozen key clients, held senior exec meetings in Stanford University (his alma mater), visited nearshore delivery centers, including a BPO site in Poland and launched an employee initiative called “Murmuration” which involves crowd-sourcing and peer-rating of innovative ideas. And of course, worked on fine tuning strategy.

Sikka will start sharing details about his plans on October 10, when Q2 FY 2015 results are out. And in April, Infosys will start spelling out intentions on things like capital allocation for M&A and share buy-back policy. Also, the analyst event was held in Infosys’ quiet period.

In short, it is “too early to tell” what we might expect to see from Infosys in the short term that is different. Nevertheless, it is already apparent that there is a sea change at Infosys.

The keynote by Dr. Sikka (or Vishal, as he likes to be called by his colleagues) was essentially about his longer term vision. Unsurprisingly AI (in which he conducted research at Stanford University, along with Data and Information Management) featured highly.

Meanwhile, he indicated that there will be an increased drive to apply automation to:

  • Both “renew the core business” across all service offerings, from BPO through the applications services portfolio through to infrastructure services. This is perhaps an acceleration of various efforts in the last few years to reduce the cost to serve in the BITS parts of the portfolio
  • And also “innovate into new businesses”. He reminded the audience of the announcement last month of a $100m pot to invest in tech start-ups: we can only expect to see this increase. And it is “innovation” where Infosys will seek to differentiate over the next few years, both in its offerings portfolio and also in the nature of its client relationships.

Supporting the innovation agenda we should expect to see at Infosys:

  • A greater focus on partnerships: indeed the day after the event, Infosys announced a range of partnerships with Huawei, Microsoft, and Hitachi Data Systems (details of each of these are covered in our Tracking Service)
  • A significantly greater appetite for M&A. Infosys is likely to become less risk averse in its approach to inorganic growth. Sikka did comment at one point that he is not interested in “yesterday’s technology”, so we are not likely to see large-scale acquisitions of established software providers that would bring in industry-specific platform capabilities, nor of large captives
  • Increased level of investment in portfolio development.

Evident focus on employee engagement: we have already noted that morale at Infosys is improved, both from what clients are telling us and also from our own interactions with Infoscions. And this is clearly a strong focus. Training is dear to Sikka’s heart: he spoke of his desire for an even greater focus on ongoing training and development for Infoscions. So in addition to the existing initial 6-month training, they might, for example, have annual return visits to Infosys Mysore; reenergizing opportunities such as for this will surely be attractive to current and future employees. TTM attrition reached an all-time high of 19.5% last quarter, but Sikka has reached out to people who have left Infosys recently - and we heard a significant number have already chosen to rejoin. We also note that any vacuum from recent departures has already been filled by promotion of internal talent (for example, 12 SVPs have been promoted to EVPs): the average age of senior execs has probably gone down by several years. Will we see less hierarchy at Infosys? The culture will certainly be more collegiate.

This was certainly evident from our meeting with Sanjay Purohit, CEO of the new EdgeVerve subsidiary (the former PPS business, recently hived off). Showing a high level of confidence, Sanjay talked about EdgeVerve’s standalone status, the working environment for its currently 600 employees, the culture, comp. package, and management structure, all of which can be very different from the parent company. The organization is operating in a startup-like environment.

Last month, Sikka commented that “we are one year into the three year transformation (started by Murthy last year) - -  - and my coming here and the new team being here is a part of that”. Does this mean it will take another two years before we see results? We think not.

(NelsonHall will be updating its comprehensive Key Vendor Assessment on Infosys in October, following Q2 results)

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