Info-tech

Vision 2021: will Infosys, Wipro make it?

Venkatesh Ganesh Bengaluru | Updated on January 20, 2018 Published on May 10, 2016

IT majors have chalked out plans, but implementation may prove a challenge

The vision plans laid out by Infosys and Wipro, which involves doubling their revenue in five years, face several challenges — from employees having to think differently, to achieving scale in new business areas.

Sometime in early 2008, TCS laid out its vision of achieving $10 billion by 2009-10. However, due to the global economic crisis, India’s largest software exporter achieved this milestone only in 2011-12.

Flash forward now, and Infosys, followed by Wipro, has laid out similar such targets.

For Infosys and Wipro the task ahead is truly arduous.

Infosys, which closed 2016 fiscal with around $9.3 billion, has to double its revenues by the end of fiscal 2021. While Infosys CEO Vishal Sikka has asserted that this is “aspirational”, and seems to have started off on a strong note, industry watchers opine that looking at the mix of existing revenues, coupled with change in outsourcing strategies, the possibility of achieving this target is rather remote.

“If you look at where both of them are right now, in the changing outsourcing scenario, radical change is needed,” said the head of digital practice at a multinational outsourcing major.

Exponential growth

Analysts agree. “If you look at the Intellctual Property (IP) component on revenues, it is negligible. And, if they have any hope of getting there, this and software business has to grow exponentially,” said Sanchit Vir Gogia, analyst at Greyhound Research.

To be fair, both of them are working on the IP part.

Infosys acquired Panaya recently, which Sikka says is playing a key role in deals. Similarly, Wipro CEO Abidali Neemuchwala, in the recent Q4 results, pointed to the fact that it filed for 24 new patents on Holmes (its AI technology) and, for the 2016 fiscal, the company filed 514 patents.

But analysts are not convinced. According to Peter Schumacher, CEO of Value Leadership Group, the articulated targets are incredibly ambitious and most likely neither firm knows how to achieve them.

“Clearly management’s intent is to challenge their organisations to think differently and find new ways to grow the business,” he added. Analysts like Urmil Shah of IDBI Capital point out that consistent growth, along with acquisitions, can help both of them.

Others like Ashish Agarwal, Managing Director at Digital Harbor, a US-based company in the healthcare fraud prevention space, believe that there is a need to redefine themselves, beyond IT outsourcing and Global Delivery Models, towards future value creation for customers by way of IP and R&D.

While IP is one part of the puzzle, both companies are making efforts to get their organisations to think in newer ways.

This new approach is necessary in most of their existing service lines. For example, infrastructure management — industry terminology for maintaining IT systems — is an area of focus for both, since automation gains are more evident in this. “Infra must remain as the core foundation business at least for the next three-five years, which when aligned through digital services can make a difference,” said Sanjoy Sen, Doctoral Research Scholar, Aston Business School. Non linearity in business, something that the companies harp about, are reasonable but not sufficient, said Greyhound’s Gogia.

Then there is the aspect of having to deal with higher costs at a time when H1-B visas have become expensive and there is an increasing push towards higher wage for H1-B visa holders in states like California. “Costs will go up but it will have to be baked in the project,” said Rajkamal Rao, an immigration expert.

While such goals sound good, there are risks too. “Companies that have set themselves very ambitious growth targets will often pursue riskier strategies, and the negative implications often outweigh the intended benefits and can even be destructive,” warned Value Leadership’s Schumacher.

History is replete with examples like the Enron collapse and rash lending practices of Fannie Mae and Freddie Mac, as instances of ambitious goals clouding people’s judgment.

Published on May 10, 2016
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