The Infosys board of directors recently received a whistleblower’s letter making a set of claims. The substantive claim is that Infosys may be inappropriately recognizing revenue in some of its large deals. The whistleblower’s accusation is causing a fair amount of excitement in the press. I want to put this situation in context and explain the implications for Infosys’ customers, employees, and shareholders.
Research EVP and distinguished analyst Sarah Burnett will chair a panel at the 2018 Infosys EMEA Confluence held on October 23-24 in Rome, Italy. The panel will focus the impact of digital transformation on business process management and customer experience.
Digital transformation with deep domain, process and the latest technology, can create robust and innovative solutions to provide the ultimate customer experience. How can the next generation BPM get amplified in this new era of digital revolution? You’ll hear perspectives from some of the very best in the business.
Confluence is all about helping enterprises navigate from where they are to where they aspire to be. The digital revolution, cascading across every industry, is redefining our expectations as consumers, and enabling disruptive market offerings. And by extension, traditional business models are giving way to digital business models. Enterprises need new and intelligent systems to be built with next-generation technologies. And they need the right talent, the right partner to help them through that journey.
October 24, 2018
Sarah Burnett, Executive Vice President and Distinguished Analyst, Everest Group
Infosys appears to have just concluded one of its best quarters in a long time, and coming as it does after the previous relatively good three months, it indicates that the company is getting its positive rhythm back under CEO Salil Parekh.
Peter Bendor-Samuel, CEO of IT advisory Everest Group,said Infosys’s improved performance is due to two factors — the first, a favourable economic environment in which digital transformation is unlocking large amounts of capital for IT projects, and the second, improved execution from Infosys.
Infosys’ digital deals remain small at $20-35 million as large contracts such as those won by Tata Consultancy Services and Wipro remain elusive, say analysts, attributing this primarily to smaller gains from its new technology platforms.
The company won $1.1 billion worth of deals in the fiscal first quarter ended June, but a majority of these were to build and maintain applications for clients, an area in which Infosys has built expertise over three decades. Infosys has not disclosed the sizes of its digital deals. TCS won its first $50 millionplus digital deal in the October-December quarter. Overall, the company secured five long-term deals worth more than $5.5 billion early this year, with nearly half of the work involving digital-technology based services.
“What we are seeing, to a large extent, is that Infosys is focusing on digital implementation deals that tend to be in the $25-40 million range,” said Peter Bendor-Samuel, chief executive of Everest Group, a global IT research firm and advisory. “They do not seem to be landing the mega deals… they don’t have the (intellectual property) platforms that TCS has and they are not leveraging their balance sheets as HCL (Technologies) and Wipro do.”
Bangalore-based tech major Infosys is embroiled in a fresh lawsuit in the US. Anuj Kapoor, a former Infosys employee of the company, who worked on a project for CVS Health Corporation, a retail pharmacy and healthcare company based in Rhode Island, filed a suit against Infosys in June, alleging the company made him work more than 1,000 hours of overtime without any remuneration.
As per Peter Bendor-Samuel CEO of Everest Group, “Overtime is paid for hourly workers, salaried workers do not get overtime. Most of the employees of lead IT firms would qualify as salaried and hence not qualify for overtime. The type of hours described here makes me think that this and the other roles were in programing or system integration. Typically these roles are seen as salaried. There has been some move by labour unions to characterise these as hourly, but to date it has achieved little traction. I would note that in this case the Indian firms are well inside generally accepted industry practices and any change by the courts to this would impact all US firms.’’
Infosys CFO MD Ranganath’s recent resignation took almost all by surprise — employees, clients and investors. The impact was such that the stock fell by over 3 per cent on the first day of trading after the news broke.
This led to conjecture — some wild, some prosaic – on what could have triggered the exit. The man in question is not speaking and neither is the company. The official position is that it is an amicable separation with the CFO staying for three months to help with transition and with ‘Ranga’, as he’s popularly called, quitting to pursue other opportunities, having been with Infosys for 18 years.
Everest Group CEO Peter Bendor-Samuel said, Infosys is on the horns of a dilemma with market and internal expectations to maintain their extraordinary margins while leading the industry in growth.