The Hindu Business Line : Infosys looks for new ways to increase revenue productivity

Different strokes
Looks to enhance services like consulting, enterprise solutions
Also focusing on more fixed price contracts.
Has introduced new pricing model in BPO biz.

Mr V. Balakrishanan, Chief Financial Officer, Infosys (file photo).

Shamik Paul

Bangalore, July 25 While negative sentiments in the market keep customers from increasing IT spends, Infosys Technologies Ltd is using newer business models to enhance revenue productivity.

Rather than just Fixed Price and Time and Material contracts, India’s second largest IT services provider is looking at creating more industry-specific solutions where it can sell the Intellectual Property Rights based on transaction or use.

In this type of contract, the company charges the client based on transaction, said Mr V. Balakrishnan, Chief Financial Officer, Infosys. He said the revenue productivity would be higher in these kinds of deals.

Infosys has developed solutions for different verticals like retail and financial services. In each vertical, the company is trying to develop solutions that are domain specific, Mr Balakrishnan, said.

He said the company has already won a couple of such deals. The aim is to increase the proportion so that Infosys can boost the overall revenue productivity, he added. These contracts are transaction based, rather than effort based, Mr Balakrishnan added.

In the BPO business, Infosys has introduced the Platform BPO concept that allows customers to follow the pay-as-you-go pricing model. In April, Mr Radhakrishnan A., Head (Strategic Platforms, Solutions and Alliances) had told Business Line the adoption of the new model would be higher during the recession because of its flexible cost structure.

The company is also trying other means to increase revenue productivity. “We are looking at enhancing services like consulting and enterprise solutions, which has better revenue productivity,” said Mr Balakrishnan.

Fixed price contracts

Infosys is also focussing on more fixed price contracts, he said. “We want to do more of fixed price, because in fixed price, the productivity gains accrue to us,” Mr Balakrishnan said. “If the customers are clear about what they want to do, then you can go for fixed price because you can do the estimates better,” he said.

If the customers are not very clear about what they want, it is better to go for time and material, he added.

The company said its clients in the US have made changes to their off-shoring strategy because of the slowdown. Mr Balakrishnan said most of their clients who have big captive units are trying to outsource that captive unit or sell it out.

variable cost pegs

Also, there are clients who have a large in-house IT department, which they want to outsource because every customer wants to convert fixed costs to variable costs, he said.

Clients are also looking at some transformational deals. They want to bundle several solutions together and give it to one vendor so that the entire IT operations can be handled by the vendor, he added.

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