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You need to have a war room to cut down excess cost: L&T Infotech’s Sanjay Jalona

Vivek Ananth | Updated on August 09, 2020

Q1 was a trough; from Q2, growth will be flat with a positive bias: L&T Infotech CEO and MD

As the Covid-19 pandemic spread and clients reprioritised their information technology spends, many IT services companies’ revenues took a hit in the April-June 2020 quarter. Sanjay Jalona, CEO and Managing Director of L&T Infotech, spoke to BusinessLine on how the company dealt with the impact of the pandemic on its business, and the outlook. Excerpts:

Clients seem to be reprioritising IT spends, and some verticals have been impacted across Indian IT companies. How do you see this trend panning out? What has been the impact on your business?

Certain verticals like travel, hospitality, manufacturing and, to a certain degree, retail are having an existential problem right now. We dodged a bullet or two because we do not have much exposure to travel, hospitality and retail.

In retail, our exposure is a lot more on the CPG (consumer packaged goods) side.

Manufacturing, including oil and gas, accounts for around 30 per cent of our business.

The priority of manufacturing companies is to make sure their facilities are up and running. Manufacturing had grown 30 per cent last year for us.

This year, the growth has been impacted significantly.

Q1 was a trough for us, and from Q2 onwards, growth is going to be flat with a positive bias.

We also have a healthy pipeline. We are working closely on some large deals as well, and we do not expect revenue decline to happen in the future.

How are you managing your employees whom you had earlier earmarked for certain projects, considering there has been a dip in demand?

If you look at our utilisation levels of employees, it continues to remain high. Obviously, we were expecting to grow a lot more this year.

But because of the pandemic, we would probably not see that happening. The important point is that we will continue to see positive revenue momentum going forward.

Cost savings has been a theme for all IT services players in the recently concluded quarter. This has helped support margins as well. How do you see this playing out for you?

We have taken a holistic view on this. We have a 3X3 strategy.

First is customer-first thinking, then resilience in operations, and the third is protecting the balance sheet and using it to drive growth. In each of these, we have short- and long-term elements.

As your operations grow, there are excess costs that come into the system.

We have got to make sure we find ways to identify them and also reduce them. For that, you need to have a war room to make sure you are cutting down on every excess cost.

One of the themes this pandemic has brought to the fore is work from home. IT companies are adopting a distributed operating model to adapt to the crisis. Are you leaning more towards that in the future?

We are not in an individual sport. We are in a team sport. IT is not an individual job, but that does not mean they need to be physically together all the time.

There are people who have talked about 100 per cent work from home. I do not know what the right model is.

When the pandemic broke out, within a few days, we were able to get 99 per cent of our people operating from home and making it work. And productivity is extremely high, probably higher than what it was when people were working from offices.

But the fact is that it takes a toll. People are working longer hours.

I think it will be a hybrid model in the future, where at times, people will work from home.

Is offshoring of deals going to get accelerated due to the pandemic?

Yes, there will be an opportunity. We have the lowest on-site ratio — 21 per cent; we do hope that with this movement, we will be able to push it even stronger.

We can give a lot better economies of scale to the customer as well.

Do you think digitalisation will get a further push because the pandemic is pushing businesses across industries to adapt to the new normal?

In these extraordinary times, one should never broad-brush any theme.

Apart from digital, we see cloud adoption as one theme which is very strong across the board in the market.

Those companies that hadn’t adopted digital technologies rapidly in the past, are doing so now.

Companies that have had a higher degree of adoption of digital technologies in the past, look at digital (spends) as discretionary in nature.

They are taking a call on reducing (their spends) a little bit to reprioritise.

Published on August 09, 2020

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