The Hindu Business Line : Infosys plans hiking billing rates on rising Re, staff costs

Analysing trends: Mr S. Gopalakrishnan (left), CEO & MD, Infosys Technologies Ltd, and Mr Amitabh Chaudhry, CEO & MD, Infosys BPO Ltd, at a press conference in Mumbai on Wednesday. —

Our Bureau

Mumbai, Aug. 29 Infosys Technologies plans to raise its billing rates by 3-4 per cent for new contracts, and by 2-3 per cent on existing contracts upon their renewal.

This is keeping in view of the scenario in which the rupee is rising and employee costs are increasing, said Mr S. Gopalakrishnan, CEO and Managing Director, Infosys Technologies, at a news briefing here on Wednesday.

Temporary Pause

The company has not seen any slowdown in business coming from the US, but even in the event of a slowdown, the IT industry eventually stands to benefit as clients like to cut costs and maximise offshoring.

“In the past we have seen that during such times there may be a temporary pause, but after that business picks up. The IT services industry benefits eventually from this,” he said.

Global clients have not taken as well as expected to the company’s China activities, said Mr Gopalakrishnan.

But in view of the fact that China produces 6,50,000 engineers annually compared with India and the US producing 4,50,000 and 1,00,000 respectively, it is an opportunity that cannot be ignored, he said.

“We will continue to invest and recruit in China.”

An ideal geographical revenue mix will “probably” be 50:30:20 for Infosys, said Mr Gopalakrishnan. Fifty per cent of revenue is coming from the US, 30 per cent from Europe and 20 per cent from the rest of the world.

“This is just a guideline and not a hard and fast target,” he said. Currently, the US accounts for 63 per cent of the company’s revenues.

The impact on the company’s business process outsourcing business arising from the US mortgage crisis cannot be more than $1 million, said Mr Amitabh Chaudhry, CEO and Managing Director of Infosys BPO Ltd.

BPO business

Infosys’ BPO business, whose margins fell to 19 per cent in the last quarter (from 24 per cent in the year-ago quarter) may see margins dip again as it integrates Philips’ finance and administration global BPO centres that it acquired a few weeks ago.

“But we want to see it eventually go back to the 23-24 per cent range,” said Mr Chaudhry.

The integration of Philips’ BPO units will be effective from October 1, he said.

There will be more global opportunities to takeover captive centres as companies find that costs are rising, and that only someone who has scale and technology can take up such businesses.

The company is moving into value-added platform-based BPO services. Innovative pricing will help maximise revenues, said Mr Chaudhry.

The pricing could be based on a risk/reward mechanism, on a fixed fee-plus-bonus basis, and so on. Infosys is developing platforms and is likely to make an announcement in six months, he said.