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Infosys back in the good books of analysts

Our Bureau Bengaluru | Updated on December 26, 2019 Published on December 26, 2019

File photo   -  Reuters

After months of turmoil, Infosys is back in the good books of analysts based on better visibility in terms of growth and stable margins, which were big pain points earlier.

Analysts at HDFC Securities, in a note to its investors, said there has been a greater focus on large deals, recovery in the top 25 and large account mining and the completion of accelerated investment phase. This is in spite of the recent whistleblower complaints that hit the Infosys management.

Analysts said Infosys has sharpened focus to increase its share within large accounts supported by the hiring of deal directors and increased engagement with deal advisers and consultants. The IT major is also chasing large public sector deals in the APAC and European region. Its partnership with Temasek and with Hitachi, Panasonic and Pasona in Japan are creating larger deal opportunities for the company in the APAC region. “Senior leadership bandwidth has increased around large deals from a deal inception stage,” the analysts said.

They said Infosys’ cost optimisation is expected to yield $100-150 million benefits in FY20. “Despite the onsite hiring push, the onsite effort-mix has been steady and further offshoring scope exists on higher offshoring in core services,” the analysts at HDFC Securities said.

Infosys has also hired 1,700 college graduate engineers overseas over the past year and has increased its localisation initiatives by launching digital centres across the US and Europe (Romania).

Investments in innovation

Investments in innovation hubs and greater client proximity are supporting the non-RFP based deals and having a positive impact on the traditional RFP-based deals. In one of its recent deal wins, Infosys announced that it had won a five-year technology services contract from Telenet, a European telecom and broadband internet major. Infosys will drive simplification of the existing landscape of Telenet by building new digital and data capabilities and extracting relevant insights from data.

Nirmal Bang, in a note to investors, said that while in some initiatives there appears to be a catch-up with its leading Indian peer — on distributed agile (similar to ‘location-independent agile’ of TCS) or on extreme automation (‘machine first delivery’ of TCS) — in other areas, Infosys seems to have developed a slight edge (large deal strategy, Azure cloud implementation).

“But, as has been seen in the past, players at best have a lead of 6-12 months on initiatives before they are copied by their peers. Hence the constant need to reshape strategies/tactics,” said the Nirmal Bang note.

Published on December 26, 2019
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