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