Companies around the world are struggling to position
themselves in todays economic environment. Bottom lines
may be strong, but uncertainty about everything from the
outcome of Europes debt crisis to the final shape of
financial regulatory reform is inducing caution. Most CEOs are
wary of making big investments and determined to keep a tight
grip on costs.
Few corporations feel those trends more directly than
Infosys. The Bangalore, India-based outfit is a leader in
providing information technology services to big banks and
multinational companies, a role that puts it at the heart of
the global economy. Annual revenue exploded from
$400 million to $7 billion over the past decade.
Lately, the pulse has slowed, though. Infosys high
market penetration and the cagey attitude of many corporate
clients such as Bank of America Corp., which accounts
for 5 percent of revenue, analysts estimate have
throttled back its once-torrid growth pace. Competition from
fast-expanding rivals like Teaneck, New Jerseybased
Cognizant Technology Solutions Corp. adds to the pressure.
On January 12, Infosys lowered its estimate of revenue
growth for the financial year ending March 31 to 16 percent
from a range of 17 to 19 percent, causing its share price to
plummet 8.4 percent that day. The stock has since recovered.
Infosys Nasdaq Stock Marketlisted American
depositary receipts were trading at $60.10 late last month, up
from a 12-month low of $46.12 back in September but well below
the peak of $77.53 set at the start of 2011.
Sarojini Damodaran Shibulal, a company veteran who stepped
up to the CEO post last April after four years as COO, thinks
going up-market is the way to restore growth. Under a strategic
program called Building Tomorrows Enterprise, hes
focusing on several priority areas, from emerging markets and
digitally savvy consumers to ways of using IT to lower health
care costs and energy use.
Shibulal has reorganized Infosys along its four target
industry sectors financial services and insurance;
energy, utilities and communications; manufacturing; and
retail, consumer goods, logistics and life sciences
rather than along IT product lines. Hes ramping up a new
consulting and systems integration division and seeking to
promote the companys proprietary technology, such as its
Finacle IT platform for the banking industry. The aim is to
make Infosys more of a technology partner to global companies
an Accenture with an Indian accent than a mere
provider of IT outsourcing services, which Shibulal fears are
Will the strategy work? Some signs are encouraging. Although
70 percent of Infosys 145,000-strong labor force is in
India, the 30 percent that works on-site at companies around
the world generates half of the companys revenue. Infosys
plans to hire at least 2,000 IT specialists in the U.S. and 500
in Europe over the next six to nine months to accelerate the
growth of consulting. Still, shifting from an India-centric
outsourcing business to a global consulting profile wont
happen quickly or cheaply.
For Infosys to move up the food chain, theyre
going to have to invest more aggressively, and thats
going to put pressure on their margins, says Rod
Bourgeois, an analyst who follows the company at research firm
Sanford C. Bernstein & Co. in New York.
If anyone can meet the challenge, analysts say, its
Shibu, as colleagues call him. The 56-year-old native of
Indias southern state of Kerala got the technology bug as
a high school student poring over diagrams in Science Student
magazine and building motion and sound sensors for turning on
lights and fans. He later earned a masters degree in
computer science at Boston University, where he now serves as a
trustee. In 1981, Shibulal joined six colleagues to found
Infosys with a mere $250 in capital. He helped pioneer the
companys outsourcing model and has run just about every
major division. Shibulal spoke with International Editor Tom
Buerkle at the World Economic Forum in Davos, Switzerland.
Institutional Investor: You recently lowered your
revenue forecast. Whats going on out there?
Shibulal: It is important to see what we did in Q3 [of
2011]. We had 49 new clients, one of the largest increases in
our history. We also closed two $500 million deals
one in Europe and one in the U.S. which is substantial.
But when you look at the future, you can see economic
instability. This makes our clients lives quite hard.
They find it hard to make decisions, which results in the
velocity of business coming down marginally.
Is this a market issue or an Infosys
Look at some of the things we have done over the past five
or six years. We have gone from $1 billion to
$7 billion [in annual revenue]. We launched our new
strategic action, called Building Tomorrows Enterprise,
about 18 months back. It is very much in line with the Davos
theme of creating new models of business. We believe that while
there are all these challenges, there is still opportunity for
growth and differentiation. And that requires corporations to
identify a clear framework for innovation, for creating new
products and services a clear framework through which
they can actually sense the future. Building Tomorrows
Enterprise allows our clients to do that.
The financial sector is crucial for you. How is
Even in the 200809 downturn, when there was
serious turmoil in the industry, our revenue from financial
services never dipped below 33 percent. That means that our
relationships are very strong, very strategic. The work we do
is mission-critical. And clients really see it.
Is Basel III driving revenue growth in large
Every financial industry is dealing with regulations in
various parts of the world. Cross-border regulations as well as
national regulations are being rolled out. So I think that is
one of the key focus areas for financial industries, to become
regulatory-compliant. The second most important piece we see is
The talk here at Davos is all about emerging
markets, but you still get 87 percent of your revenue from the
U.S. and Europe. Is that too much?
Our long-term aspiration five to seven years
is to achieve something like 40-40-20. That is, 40 percent of
revenue in the U.S., 40 percent in Europe, 20 percent in the
rest of the world. Today that [last] figure is about 10 to 11
percent. That doesnt mean that we will not grow in the
U.S. or Europe, but the emerging markets will grow faster. We
never operated in India on the service side until about three
or four years back. Next year our revenue in India will cross
$100 million, possibly. We did the income tax automation
program for India. We are growing in China.
Even if the growth is faster in those markets,
isnt Infosys implanted in large multinationals, which
still remain largely based in Europe and the U.S.?
Our client base is predominantly [Forbes] Global 2000
companies; 130 to 140 of our clients are in the Fortune 500.
Our latest transformation trend is to become more and more
relevant to our clients. One major aspect of that relevancy is
being global. So we operate with them in Brazil and in China
and in Singapore.
Is this part of a broader shift to be closer to
where your clients are?
We aspire to do more and more consulting and systems
integration work for our clients. If you want to do that kind
of work, you need local talent that understands the local
market, local business, local language, local culture.
Youre the last one of the founders running the
company. Does this pose a challenge for Infosys?
I dont think I am sitting here because Im a
founder. That was 31 years back. Im sitting here because
Im a qualified professional. So I see the transition
being from one set of professionals to another set of
professionals. We have a very well-planned leadership program
in place. We have well-planned interventions which will get
people ready for various roles. We have no dearth of
leadership. We inducted three people into the board in
There are plenty of examples of companies in the
tech industry that have lost their way when theyve moved
beyond the initial generation.
You need to hold on to the value system that made the
company what it is; it is not held by the founders alone. It is
well documented, well articulated, well institutionalized. We
have a core business model, which we call the PSPD:
predictability, sustainability, profitability and de-risked.
That has been pretty well institutionalized in the system. We
are not a personality-based organization. Its a
platform-based organization. That platform is built on
execution excellence. It gives stability to the
Have you been surprised by anything thats come
across your desk since youve been the CEO?
In my case it was a gradual transition. I was chief
operating officer for three or four years, so 80 percent of the
organization was reporting to me. It is always surprising to
see that the buck stops with you. As a CEO you need to focus on
performance; thats your responsibility. Then you make
choices between long-term and short-term, between whether to
invest in China or go to Vietnam.