Tag

Infosys

HCL vs. Wipro Soccer Matchup & the Digital Services Hullabaloo | Sherpas in Blue Shirts

By | Sherpas in Blue Shirts

In the last 10 days, analysts tracking digital services across the world woke up to highly savvy India-heritage service providers lapping up marquee digital deals in the world of sports. These new partnerships include HCL and Manchester United (soccer), Wipro and Chelsea (also soccer), and Infosys and the ATP World Tour (this one in tennis.)

These deals are prized because of the impact they create.

  • Strong digital services pedigree for these service providers: Because of their brand association with offshoring, labor arbitrage, and pure-play services focus, the India-heritage providers have traditionally been frowned upon when they entered the discourse on digital and technology products and platforms. Such deals will go a long way in changing this pedigree and association
  • Brand recall and stakeholder connect: Digital services are a different ball game. As you are not necessarily selling to the CIO, you need to reach stakeholders unreachable through the traditional sales route. These deals are excellent in that regard. For instance, Manchester United has 659 million followers across the world, second only to Facebook. Imagine the kind of global reach and exposure the deal creates for the HCL brand!

Sponsorship deals under the garb of services?

As an industry analyst, I am used to analyzing deals for their profitability and total contract value, i.e., the impact they create on the books in upcoming quarters. Looking at the above deals through this lens, I immediately saw that these are not traditional services deals. In fact, something tells me they will not figure similarly on the accounts as other services deals do. Indeed, Infosys candidly called out that it will be a “Global Technology Services Partner and Platinum Sponsor” of the ATP World Tour. Hence, it does not take a Sherlock Holmes to deduce that these three deals are essentially sponsorship arrangements (with an inbuilt services component) that the service providers have entered into under the garb of a services construct. A very easy way to decipher this is to compare the positioning of HCL’s and Wipro’s logos on the Manchester United and Chelsea websites, respectively. It makes it very clear which provider “spent” more on their “sponsorship.”

Take a look at the Manchester United website and you’ll see HCL’s logo is at the top of the page, right on top of ManU’s.

Manchester United

But when you check Chelsea’s website, you have to scroll all the way down to discover Wipro’s logo sitting in a corner sulking with Singha Beer for company.

Chelsea FC

So what?

Am I contemptuous of this sponsorship-deals-under-the-garb-of-services construct? Not at all! In fact, I am pleasantly surprised by the gumption shown by HCL, Infosys, and Wipro in taking this leap of faith to build a strong brand connect and pedigree. It shows they are willing to challenge the traditional constructs and meet the digital market head on. In a highly consumer-oriented world, new business will not come by just being efficient nerds. India-heritage companies are up against the likes of VC-funded start-ups, reforming technology majors (Google, IBM, Microsoft) and niche enterprise software firms (NetSuite, Workday, etc.,) all of which have stronger credentials in digital constructs. Given the buzz these deals have created, there is enough market validation for the tactical approach taken by these service providers. What is even better is that these are not typical paid sponsorship deals – these service providers will actually be providing services that will be touch and feel for millions of fans of these sporting giants. If they successfully manage it, this will create an exponentially stronger brand recall compared to what they have achieved in decades – being efficient service providers to enterprises, working in black boxes.

Hence, do not be surprised if TCS, which sponsors the New York Marathon (and many other races), turns around tomorrow and says that it is sponsoring managing all IoT (health sensors, speed sensors), platforms, and analytics of the race.

Keep watching this space for more on these developments!


Photo credit: Flickr

Yet Another Healthcare Blog on Cognizant and Trizetto. Not! | Sherpas in Blue Shirts

By | Sherpas in Blue Shirts

As much has already been written about Cognizant and its Trizetto acquisition – including Everest Group’s take: The New “Big Blue” of Healthcare IT? – it is time for us to do a post-facto check on Cognizant’s healthcare IT services business, and ruminate on the state of the healthcare IT market.

What’s up with Cognizant’s healthcare business?

  • Healthcare@Cognizant officially crossed the 30 percent revenue share mark (just behind BFSI at 39.9 percent) in the first quarter of this calendar year
  • Cognizant is the only WITCH (Wipro, Infosys, TCS, Cognizant, and HCL) company with healthcare among its top three industry verticals by revenue
  • In fact, after its Trizetto acquisition, Cognizant’s annual healthcare revenue (in the range of US$3.2 billion) will be more or less equivalent to the sum of the healthcare revenues of WITH combined
  • Per Healthcare Informatics’ Top 100 Healthcare IT providers: Cognizant’s 2013 healthcare revenues, if added to Trizetto’s (a sum of US$2.94 billion) make it the second largest healthcare IT vendor on the list. It is behind only McKesson, and ahead of technology and services behemoths such as Cerner, Dell, Optum, Epic, and Allscripts
  • For the quarter ending March 2015, Cognizant’s healthcare topline grew 42.7 percent year on year, obviously driven by Trizetto’s numbers. Given the growth outlook company has shared with the market, Healthcare@Cognizant is headed toward becoming a US$4 billion unit in the next 18 months – which is huge.

Is healthcare IT a great market to be in?

Let’s put Cognizant’s numbers into perspective with our growth estimates for the overall healthcare IT industry. With the healthcare industry set to grow at a CAGR of 12 percent through 2020, and given what we have seen since we published the following in 2013, the market size projections for healthcare appear well on track to humble the pessimists among analysts.

Global healthcare ITO market

Healthcare – why so serious?

While services spending growth has been steady, especially for the payer and provider markets, the innovation side of healthcare IT has been sulking for a while. Yes, “sulky” is the word that comes to mind when you sit listening to a panel discussion on digital innovation at #AHIPInstitute2015 and not one panelist cites an example of innovation from the healthcare space. They either talk Uber or Airbnb. This is unfortunate.

Despite the huge numbers up for the taking, a big spike in the booming healthcare IT market will not come by unless there is a dawn of new and nimble technology start-ups that change the game of healthcare enterprises looking to move away from bespoke solutions to as-a-service models that reduce their time-to-value exponentially. For good or bad, the healthcare industry in the U.S. has always had an umbilical cord connection closer to Washington D.C. than to Silicon Valley. That is probably what curbs innovation in this industry from breaking out of its shackles to produce its own Ubers and Airbnbs. In my opinion, except for a few fitness/therapeutic/diagnostic wearable-focused investments, little causes titillation in the healthcare technology start-up space. Despite all the brouhaha on the B2C shift, consumer-focused investments are coming more from the enterprise IT side than from third-party innovation. Frankly, do we want to be in a world where Ford not only makes the cars but also drives the cabs? Hence, the question is – in a world dominated by technology vendors (Epic, GE, McKesson, and Philips) are we ready to declutch third-party innovation and let it bloom?

Is this a blog on Cognizant?

There was a reason we titled our blog about Cognizant’s acquisition of Trizetto, “The New Big Blue of Healthcare IT?” The simile was not to herald the dawn of a new behemoth, but to provoke the sort of nimbleness and courage in healthcare IT industry that IBM (the original Big Blue) has shown over the last many decades to stay relevant in the overall technology industry. In an industry with a muffled voice of innovation (few exciting start-ups), a few big bullies (large technology vendors, EMRs, etc.), and well-meaning presiding deities (government and legislatures), the push for change will have to come from outside.

  • Will it be the venture funds and geeks sitting in Silicon Valley who will do the trick?
  • Will it be the EMRs who open up their platforms for an integrated and interoperable healthcare world?
  • Will it be IBM’s Watson that will change the game?
  • Will a recently gone private Dell up the ante toward innovation?
  • Will Cognizant take up the mantle of being an angel integrator for healthcare innovators?
  • Will it be Infosys’ Vishal Sikka, whose US$500 million investment fund will drive traction?
  • Will Google or Microsoft provide the platforms that will gamify technology innovation?

Why did I harp on Cognizant while writing this blog? It was a rank outsider in the healthcare technology industry (well, almost, given its offshoring, pure play service legacy). Even if it becomes a US$4 billion healthcare enterprise, it will still be a fraction of the market. Via its investments, growth, and outlook, what it has given the industry is a peek into the kind of bravado that can make this market rock. We require more of this bravado. But, if it is going to be just once in a blue (pun unintended) moon, it will be rank boring. So, as the Joker would have said, let’s put a smile on that face!

This is the first in a series of blogs Everest Group is publishing on exciting opportunities and implications to watch out for in the healthcare IT services market.

Why Everest Group Changed its Point of View on Infosys | Sherpas in Blue Shirts

By | Sherpas in Blue Shirts

Since publishing our two most recent blogs about the business situation at Infosys (Connecting All the Dots and Silicon Valley company) and comparing those perspectives to our blogs over the past two years, people have asked us: “Why did you change your point of view about Infosys?” Here’s why – it’s because most of what we predicted about Infosys came true.

We have a relentlessly objective point of view, and our blogs over the past couple of years pointed out the internal problems we observed at Infosys. We called the firm out early on its arrogance and hubris in the marketplace, evidenced in its commitment to premium pricing despite the unsustainability of its pricing vis a vis the marketplace, along with its inward-looking focus instead of focusing on customer intimacy.

Because of these actions, in the midst of the maturing AO market and changing customer expectations, we predicted a slow down at Infosys. And it happened.

As the board at Infosys started to understand the same things that we called out, they made some interesting moves; and we’re largely supportive of the moves. If they want Infosys to be a leading high-tech firm, they need to bring in different leadership. They did that by bringing in an external executive as the new CEO in 2014. And it’s clear that the firm’s leadership is now deploying a customer-facing strategy rather than continuing to be inward-looking. This isn’t just a story line; Infosys is backing up its statements with investments in new leadership talent over the past two months as well as in other actions.

Before, we saw a once-proud firm with internal problems, which talked the talk but didn’t walk the walk. We increasingly see Infosys pivot strongly to next-generation leadership, taking steps to give the firm a chance at success again.

It’s too early to say whether the recent moves and strategy will work. And as I said in my earlier blog, execution eats strategy. But the next step in strategy is putting their money where their mouth is, and there is every sign that Infosys is starting to do that. As such, we applaud Infosys’ progress.

As we called out Infosys when we saw problems, we now comment on it as it moves forward. To date, history validated our point of view. Now that Infosys is dealing with its issues and taking consistent actions to move the firm forward, we’ve acknowledged their progress and amended our point of view accordingly.


Photo credit: Infosys

 

Is Infosys Repositioning as a Silicon Valley Company? | Sherpas in Blue Shirts

By | Sherpas in Blue Shirts

At Everest Group, we’ve heard industry rumors that Infosys CEO Vishal Sikka – formerly on SAP’s Executive Board and global lead for products and innovation – recently hired two former SAP executives based in Silicon Valley. This move comes on the heels of Sikka planning to invest in startups in Silicon Valley. What does all this mean for Infosys and for the rest of the services industry?

Upon hiring Sikka from SAP, we knew Infosys was changing its direction to become an IP company, and we expected him to make significant changes. In addition to his former exec role at SAP, he earlier worked in Xerox’s research lab in Palo Alto in the Valley. He is a well-known figure in the American software world, and he continues to be based out of Silicon Valley.

As I predicted in a blog three months ago, Sikka had begun the transformation and I thought his next step would be to build on the Infosys talent pool by bringing in selected additional talent. Now he has done that and is using his relationships at SAP in Silicon Valley to recruit other executives to join him at Infosys.

This move means a number of things. Most importantly, it means that Infosys drinks its own champagne. Following Cognizant’s example, Infosys is establishing North American headquarters – but going one better. Rather than basing its business in New Jersey as Cognizant did, Infosys is building on its next-generation theme and basing its American business in Silicon Valley. This strategy has a number of potentially positive attributes for Infosys.

Commitment to disruptive technology wave 

First, it helps reinforce the brand that Infosys is committing to the “leading technology” aspect of its new-and-renew strategy. And lining up Silicon Valley executives to supplement the Infosys leadership team is another clear demonstration of its strategy.

Significantly, having North American headquarters in the middle of the Silicon Valley ecosystem allows Infosys to tap into the Valley’s rich innovation talent pool as Infosys moves from its traditional labor arbitrage-based model to an IP-based model. It also places Infosys close to its customer base. Soon to be gone are the days of the factory control from Bangalore dictating to customers how to use services.

I think this speaks volumes around the provider’s commitment and willingness to stay the course and pace as the services industry evolves with the digital world’s new technologies and new business models. Infosys is trying to catch that wave of next-generation digital disruptive technology that emanates from Silicon Valley’s ecosystem.

Sikka talks about Design Thinking, which puts him right into the heart of how Silicon Valley thinks and tries to behave. Infosys is making a commitment to be at the heart of the Valley’s ecosystem to better leverage that thinking. Bangalore is a long way from that ecosystem. New Jersey is closer, but Infosys chose to be in the heart of it, right in the Valley.

Will Infosys succeed in these new moves? 

I think this starts to ask hard questions of the rest of the industry, and I believe the rest of the industry will watch Infosys intently to gauge its success. In the event that Infosys succeeds in making this pivot, I think we can expect other Indian pure-plays to follow suit quickly.


Photo credit: Flickr

Infosys’ New Strategy Connects all the Dots | Sherpas in Blue Shirts

By | Sherpas in Blue Shirts

I recently had a chance to sit down with Infosys’ CEO and his team, and they shared with me their new/renew strategy. From what I understand, it resonates with where the market is heading. This is remarkable as it addresses the vexing problems and risks service providers now face in trying to change their business to address new models, new technologies and new customer expectations. It is always easy to drink the Kool-Aid, and I am definitely experiencing a sugar high. However, the Infosys strategy is one to watch as it appears to connect all the dots in a quickly evolving marketplace.

There are a number of things I find attractive about this new/renew strategy. First is the simplicity of its messaging. It’s easy to understand where they’re coming from and that they are focusing on their customers, not on Infosys like their past strategies. That in itself is powerful for customers’ understanding of what Infosys stands for and where they are heading. And it’s also powerful for the Infosys team to be able to understand what to focus on and what not to focus on. That resonates.

The new aspect

Second, I find the direction compelling. Clearly there is much in the market that is new. New technologies and new business models are driving the market and, when combined, are extremely powerful.

Digital changes how companies interact with their customers, and there’s nothing more powerful than that. Cloud changes the speed and agility and price at which companies can move. The consumption-based and as-a-service models allow companies to align services closely with business outcomes and only pay for services as they consume them. Taken together, these new technologies and business models are very relevant to where customers are headed with their business, and these new areas are capturing the growth in the services segment.

Infosys aligning itself with this direction makes perfect sense as they move to redesign their growth and maintain their leadership position in the services industry.

The renew aspect 

This aspect of Infy’s strategy is equally powerful. There is a second set of technologies that allows providers to change the way they deliver services. I’ve blogged often about four of these technologies: automation, analytics, robotics and artificial intelligence. Providers such as Infosys are looking to harness these technologies transform their environment, lowering costs and making their existing services far more responsive than they’ve been before.

Customers are more demanding

So Infosys is tapping into the big themes in the marketplace. They’re leveraging new technologies and new models to connect the dots to new opportunities for growth. And they’re renewing their existing business by harnessing new technologies and capabilities to optimize their service delivery.

Underpinning the strategy is a sea shift in customer expectations. Enterprises are increasingly more demanding of their existing services and at the same time impatient to take advantage of new technologies and business models.

I like Infy’s new/renew strategy because I believe it is directly in concert with where we at Everest Group see the market moving – taking advantage of new technologies and rethinking how to optimize existing services. And it embraces the “old wine in old wineskins” concept I recently blogged about.

I think this strategy will position Infosys well. A word of caution: as an often-quoted lines goes, “Execution eats strategy for breakfast.” So we look forward to seeing how they execute in this marketplace.


Photo credit: Flickr

Infosys is Different | Sherpas in Blue Shirts

By | Sherpas in Blue Shirts

What a difference a few months with a new CEO makes. Things are different at Infosys today. When we talk with them, it’s clear that it’s a different organization than it was a few months ago because of Vishal Sikka, the new CEO. On one level, very little has changed; but on another level, there are significant changes.

Their strategy remains the same. They are leaning into the future by focusing on platforms, intellectual property and software. This is the same strategy they have used for engaging with clients for several years.

It’s the same organization, other than the new CEO. He has yet to bring a large cohort of new executives in. And the firm has the same clients and employees.

So what’s different?

Inside of Infosys, morale is clearly better. There is a renewed sense of optimism in their strategy. We observe renewed vigor and enthusiasm in talking with their clients and in the marketplace. The result is improved execution across the board, from engaging with clients to delivery. Across the board we see improved execution.

We also see a change in customers’ attitudes. They are interested in the new CEO. They are giving Infosys a second chance, and Infosys is finding doors easier to open and audiences more receptive than they were a few months ago.

The moral

Here’s the moral of the Infosys story: in the services industry where client relationships and delivery execution means everything, vision and morale matter. Those factors alone can account for improved performance.

It’s not everything, but it’s a powerful ingredient in improving performance. We look forward to seeing what Vishal Sikka will do in reshaping Infosys’ strategy, organization and people. So far we’re seeing an effective start.

A Modest Proposal for Infosys | Sherpas in Blue Shirts

By | Sherpas in Blue Shirts

Much like Jonathan Swift proposed an outrageous, over-the-top suggestion that the Irish eat their children as a way to accommodate themselves in famine and over-population, I have a modest proposal for Infosys. It’s over the top, but it’s intended to highlight an issue.

My modest proposal is that Infosys keep its platform IP business, sell its labor arbitrage business and use the proceeds to buy IP and software and further develop it.

I understand that this sounds beyond the pale that Infosys would ever sell its arbitrage business. But think about this: they already split the company into two. They recognized that the arbitrage outsourcing business is maturing and is going to be in a mature state.

They already clearly bet the future of Infosys on its ability to jump on the next S curve in terms of IP. I say go ahead and go whole hog. In the words of the country and western song, sell the truck while it’s still running.

Why not sell it while they can get a huge premium? The Infosys arbitrage business is the jewel of the industry. Great people, great clients and extremely high-quality work. It would fetch a very high multiple. Any competitor would be proud to own it.

Infosys could then deploy its capital into its IP business. The strategy goes along with already having hired a CEO from SAP who understands products and IP, and it would free management from the complications of having to manage two business models at the same time.

My modest proposal illustrates the underlying issue that faces the offshore services industry. It contemplates the maturing of the space and the complications of jumping to a new high-growth market segment. If you want to look at other similar situations, consider IBM, which recently sold its transactional BPO and voice BPO services.

It would be a breathtaking move. But, with my apologies to Jonathan Swift, it’s certainly food for thought.


Photo credit: “Jonathan Swift by Charles Jervas detail” by Charles Jervas

Infosys Divides in Two — a Bold Move | Sherpas in Blue Shirts

By | Sherpas in Blue Shirts

Infosys made headlines recently, announcing the separation of its products, platforms and solutions (PPS) business into a subsidiary called Edgeverve Systems. It’s a bold move, but in many respects it makes sense. Here’s my take on the implications and potential net result of the spinout strategy.

As I explained in an article in The Times of India, Infosys’ PPS business — platforms, cloud products, and other digital services — are fundamentally a different kind of business than the firm’s historical labor arbitrage, skills-based business. The two models have different value propositions, selling maneuvers, adoption patterns and investment profiles.

Separating the two kinds of business allows Infosys management to keep the focus unconfused and allows Infosys to become masters of both business models. It allows them time and investment to develop its Edge series digital products in anticipation of demand, rather than focusing on revenue from the PPS business (historically only 5.2 percent of Infosys’ business).

It also allows management to continue focusing on the labor arbitrage business while revenue grows over time from the new-generation offerings of the Edgeverve subsidiary. Cognizant, TCS and other providers have demonstrated that there is still plenty of room left for growth in the labor arbitrage model. Although the growth is slowing, it is growing faster than the overall services industry.

Infosys recognizes that growth in its labor arbitrage business will be harder and not like the good old days; but at the same time, they recognize that they can do better. By separating the two business models of Infosys, Infosys acknowledges that they can and should go faster in the labor arbitrage, skills-based space. And this is coupled with a focus on going after larger transactions.

Two notable potential outcomes

If Infosys executes this spinout strategy successfully, I think it will result in better growth than they would otherwise get. The net result hopefully will be faster growth in both areas and more focused and nuanced value propositions for serving their clients.

As I said at the beginning of this blog: it’s a bold move, but it makes a lot of sense. So if it’s successful, I think it could lead the way for other service providers to separate their historical businesses and new-generation digital businesses.

Infosys Appoints Dr. Vishal Sikka as CEO, Making a Brilliant Pilot a Swimming Coach | Sherpas in Blue Shirts

By | Sherpas in Blue Shirts

In a landmark move with far-reaching implications, Infosys appointed ex-SAP CTO Dr. Vishal Sikka as its new CEO and managing director, making him the first non-founder at the helm in the firm’s 33-year history. Accompanying this change, the founders are getting out of the new chief’s way. Current CEO and co-founder SD Shibulal will leave by end of July, while NR Narayana Murthy will vacate his role as executive chairman on 14 June, continuing in a non-executive board role until 10 October to ensure a smooth transition.

The fact that Infosys engaged an executive recruiter to look for a successor reflects a dramatic shift in ethos for the firm. It represents the strategic decision to bust up a certain inward-looking culture that has come to represent Infosys. That Infosys reacted to market and customer expectations by bringing in an external technology visionary bodes well for the critical imperative to change to a customer-centric culture, rather than firm-centric. 

What Works 

The Gujarat-born Dr. Sikka holds a Ph.D. in artificial intelligence. He spearheaded the development and marketing of HANA, SAP’s flagship analytics product. His experience in these areas could give Infosys a sizable edge as service providers look to establish credentials in next-generation technology avenues such as big data, analytics, cloud, robotics, and artificial intelligence.

He seems to have been given a wide mandate, per the large-scale changes in senior management that are accompanying his appointment. This will allow him to exercise a free hand as he attempts to reshape the beleaguered company. Infosys’ long-standing strategic imperative to let the founders control the firm has been widely criticized.

He joins a long list of industry outsiders taking charge of IT majors. Louis Gerstner was unanimously credited with turning around IBM’s fortunes when he took over in 1993, after previously leading RJR Nabisco and American Express. Closer to the Indian IT services landscape, Vivek Paul, a GE-alumnus transformed Wipro, fast tracking growth from a US$150 million company in 1999 to over US$1 billion in sales in five years. Last year, Apple announced UK fashion chain Burberry’s CEO as the head of its retail and online business.

Appointing an outsider tends to bring fresh perspective to inherent legacy issues plaguing companies. Free from the baggage and expectations associated with firm veterans, Dr. Sikka can look to usher new life into Infosys. 

What May Not

Since he comes from primarily a products-driven business, it will be interesting to see how he adapts to the IT services industry, which has inherently different business dynamics and challenges. The focus will be on streamlining project management, client delivery, and sales efforts. Dr. Sikka’s experience in driving sales and marketing at SAP will be a crucial asset in this regard. Being a CTO of a products-based company is an entirely different ball game than leading a global services behemoth, as product-driven businesses rely primarily on the strength of intellectual assets, while services businesses are an amalgamation of resource management, delivery, and expectations handling.

In spite of the large-scale management changes, Dr. Sikka has his work cut out as he navigates disgruntled senior management. How he soothes frayed nerves and reassures them will be essential for stability. A cultural shift he will seek to implement will revolve around Infosys’ limited risk appetite for investments. Infosys needs to invest significantly in boosting its expertise in next-generation solutions through alliances and possibly acquisitions. Although it has made some notable acquisitions such as Lodestone, the firm has generally been fairly risk-averse in exercising its significant cash pile.

The role that NRN Murthy assumes will also determine the efficacy of Dr. Sikka’s roadmap for revival. If Murthy remains strictly in a mentorship role overseeing the transition, without overriding Dr. Sikka’s strategic decisions, the sailing should be smooth. However, if those lines blur, it could create a vicious cycle of conflict, decisions embargo, and execution paralysis.

Another important but often ignored challenge of such senior-level changes is the risk of culture mismatches outweighing the business positives. Echoing Peter Drucker’s “Culture eats strategy for breakfast,” bringing in a rank outsider can have controversial implications. For example, John Sculley joined Apple from PepsiCo, and during his time had long-standing disagreements with Steve Jobs due to divergent management styles and priorities, ultimately resulting in Jobs’ exit in 1985. The entry of a new top-level entrant is not easily accepted by the old guard, leaving open the possibility of wilful sabotage. Dr. Sikka will need to build bridges with senior stakeholders to avoid stepping on toes.

Swimming in Choppy Waters Ahead 

Essentially, whether or not Dr. Sikka manages to snap the once industry bellwether out of its funk will depend on his ability to make the transition from a technology visionary to an empathetic business leader combining technical expertise, client management, and people development, while maintaining the focus on innovation and thought leadership. He will try to take Infosys out its comfort zone, bridge service gaps with more nimble rivals, and ultimately reassure clients that their business is in sound hands. He needs to show that a brilliant pilot can be a swimming coach as well.

Infosys Makes a Turnaround, but Has Miles to Go Before It Sleeps | Sherpas in Blue Shirts

By | Sherpas in Blue Shirts

INFY’s December 2013 quarterly report demonstrates that Murthy’s back-to-basics strategy is starting to show fruit with Infosys upping its guidance for both revenue and earnings. Its year-over-year revenue growth of 9.8 percent is encouraging; however, when we compare it to the performance of industry leaders TCS and Cognizant, it is clear that there is still much to do. Put another way, the faster growth of the industry leaders shows that INFY is still losing market share and is far from out of the woods.

Thorny issues

At 9.8 percent, INFY’s growth pace is slower than the market leaders and dramatically far from the growth of Cognizant (21.9 percent) and TCS (17 percent). Why the large gap? INFY’s earnings are a bright spot; but once again, when we look more closely, it’s apparent that rupee appreciation — rather than improved efficiencies — is the biggest factor.

Although it’s good to see Murthy’s turnaround strategies showing early returns, we believe they may be short lived and even shift to a disadvantage over time.  Here’s why. Murthy’s strategy focuses on investing more in offshore relationships, especially in the commoditized application outsourcing space. It’s likely to bring short-term financial gains, but we believe this move could result in Infosys losing client intimacy. It’s not likely a winning strategy in the face of competition — especially from the leading duo, Cognizant and TCS, which are investing in enriching their onshore client relationships and their consulting expertise.

Losing market share and profits propped up by currency changes … short-term gains but long-term challenges — with apologies to Robert Frost, Infosys has miles to go before it sleeps.


Photo credit: ATiwolf