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Infosys sees rise in outsourcing deals

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Mr Nandan M. Nilekani, Chief Executive Officer, Infosys Technologies Ltd, at a press conference to announce the second quarter results in Bangalore on Thursday.


THE second largest software exporter Infosys Technologies Ltd said that it is witnessing interest in larger outsourcing deals.

The company is competing globally with the Big Five consulting firms for deals ranging from $50 million-$100 million, the head of global sales, Mr. Basab Pradhan said. Infosys plans to increase its run rate for million-dollar customers, expecting its top 10 clients to grow in line with overall corporate growth, the Managing Director and Chief Executive Officer, Mr. Nandan Nilekani, told analysts over post-earnings call. The company earned 24 per cent of its revenue in the past quarter from its top five clients.

Referring to increasing visibility of Infosys in initial stages of large outsourcing deals along with the Big Five global consulting companies, Mr. Pradhan said that "it is a evolutionary process". "We are now invited to the parties and someday we will be crowned", he said. Some of the project starts initiated in the last quarter were total outsourcing deals.

Infosys said that though prices seems to be "stabilising", pressure on the margins are likely to continue as the firm hires aggressively and writes off some of its investments. The company reported a 4.4 per cent increase in blended rate for its September quarter, a rise in rates after several quarters of intense pricing pressure. However, operating margins fell by almost three per cent, cramped by increase in staff cost, write-downs and project starts. The company reported 260 new projects in the September quarter. Since most of the new projects involve fair amount of onsite engagement initially, it impacts on the margins. "We will focus more on offshore to maintain margins", Mr. Nilekani said. "Offshore outsourcing is becoming mainstream as customers are getting risk averse. Customers would like to work with a company which has good infrastructure and track record. We do see `Flight to quality'," he said.

However, the Chief Operating Officer, Mr. S. Gopalakrihnan said that it was `difficult" to predict onsite-offshore mix going forward in near term. "Onsite will slow down in future and there will be no material change on the onsite component", he added.

The company is witnessing good growth in banking, financial and insurance services segment, "fair growth" in manufacturing, while retail vertical stayed "on par", and telecom efforts have shrunk. Infosys is using discretion to add on new telecom clients based on their financial health, Mr Pradhan said.

Telecom engagements accounted for nearly 14.6 per cent to the September quarter's revenues down from 15.2 per cent in the previous quarter.

Revenues from consulting engagements have registered a growth and accounted for 9.7 per cent (8.1 per cent in previous quarter) of the overall revenues, said the head of delivery, Mr S.D. Shibulal.

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