Companies

Investments in digital, cloud will accelerate: Infy CEO

K Giriprakash Bengaluru | Updated on January 21, 2021

Infosys has been having a dream run mopping up multi-billion dollar deals at a time when businesses in other sectors are finding it difficult to stay afloat. In an interview with BusinessLine, Infosys CEO and MD Salil Parekh talks about how push towards digital transformation is helping clients sustain and grow their organisations. In turn, it has provided a massive opportunity for Infosys. Excerpts:

Multi-billion-dollar deals, quarter-on-quarter double-digit growth in net profits...Such a scenario was unimaginable when the pandemic hit the world. Did it catch global IT services’ majors like yours by surprise?

During the last quarter, our growth was quite strong as you can see from the results. When the pandemic hit us around March, we were able to mobilise our workforce quickly within a matter of days to work from home. Over the years, we have built a very efficient infrastructure where people could work very efficiently both from home and from the office. But this time, it was tested for the first time where everyone was working from home.

First, our clients were extremely comfortable with our employees working from home. Many large enterprises are looking to use the digital, and cloud to further accelerate their journeys as they saw the best way to connect with their end customers and employees was through digital mean. This has created the acceleration and resulted in many large partnerships Infosys has had and of course the growth in the last quarter, which is the fastest among our peers.

What begs the question is whether such a scenario will last once normalcy returns. Analysts believe that there will be a reversion of traffic from digital to physical channels once economies and industries revert to pre-Covid baseline levels.

In the third quarter, we had a growth of 6.6 per cent year-on-year and we increased our guidance for this financial year and have already given an indication of double-digit growth for the next year as well. We believe there will be a mixed environment when the pandemic goes away. But the way large enterprises are creating the capabilities and create their own framework which is part digital and part physical, the investments and scaling in cloud and digital will continue. The reason is they want to make sure that the new way of connecting is part of the hybrid environment of the future and hence they will need all of thee capabilities as they go ahead.

Will the legacy spends go down over a period of time?

There are largely two trends out here: For the global enterprises, the focus to use automation and create efficiencies in all their technology landscape and the second is to build digital and cloud digital and cloud capabilities to enhance growth with their end customers. Both of these trends will continue. One of them is based on what is the cost of technology and another is much more based on this is an investment we are making to drive more connects and more growth and this will have much more runway.

Will the business model change as clients spend more on digital?

We believe that the spend on digital will continue to increase. Our business model will not change but we are reskilling our employees all the time which gives a lot of assurance for the clients. Our idea is not to simply to change things but to reskill our employees into the new technologies. There are two parts to this discussion, one is what the clients are doing and what are employees are doing. The model won’t change but there will be a new type of work.

Will more work shift towards offsite rather than onsite? One assumes that going forward, any changes in visa norm will be neutral for Infosys.

In the last few quarters, the onsite mix has already gone down. When travel curbs go away, there will be more onsite work. But there will also be a realisation, more work will be done remotely and in digital locations across Europe and India as well. As far as the visa rules are concerned, it will be neutral. We are building a distributed model where work can be done in different locations in nearshore and offshore.

The current situation lends itself to a huge opportunity for Infosys to acquire companies in the digital space because of lower valuations. Will that happen in the near future?

The acquisitions are always on the radar of the company, Infosys has a clear capital return plan where essentially, 80 per cent of the free cash flow will be returned to the shareholders. The rest of the money can be used for acquisitions. We are in active discussions with companies and will zero in on those which supports our digital initiatives.

Some of the deals that Infosys has won of late are people-takeover deals, with Infosys alone integrating more than 16,000 employees. Will such type of deals happen more often now? What does this trend indicate?

We don’t see any particular trend here. There are some large partnerships that need such traction. As long as it makes sense for our partners, it is positive for us. We will do whatever our clients want us to engage with them. Not every large deal has that component.

The deal with Daimler is considered the biggest Infosys has landed so far. The $7.13-billion deal wins during the quarter was also the highest in Infosys’ history. Can you please elaborate on that and how was Infosys able to acquire these businesses and how were these deals bagged?

We have built a lot of capability, scale and credentials in the digital and cloud space. This partnership is about moving into the cloud world where we have built a new ecosystem around Cobalt which has a 14,000-cloud asset, public, software as a service platform. Inside Infosys, all the tools, we have made them completely digital. All this has made a difference when the clients engage with us. We are working much more as one Infosys whether it is the support team or the sales plus the guidance we constantly receive from our chairman, Nandan Nilekani and the board.

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Published on January 21, 2021
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