Infosys Ltd.’s CEO Vishal Sikka and his team set about impressing an influential audience on Wednesday as the company pitched its plan of becoming a more product-centric technology services provider to some 100 analysts at a meeting in Orlando, Florida. At the venue, the company also announced it would create hundreds of jobs in the U.S.
Sikka himself will complete his first 100 days as head of the Bangalore-based IT giant later this week. Infosys talked about how the company is changing the way its customers tapped technology even as it changes itself to “do more with less for more,” the Stanford computer science Ph.D.’s mantra. Sikka's belief in artificial intelligence, automation and design thinking -- jargon for solving problems without being beholden to specific technologies or tools -- have led him to emphasise training the company’s 160,000-strong staff on these lines, and is engaging with startups to benefit from their creative abilities to solve business problems. The company may even acquire some startups.
“A new Infosys is forming, with a lot of potential to transform itself into a player with significant more product IP (intellectual property) than ever before,” Holger Mueller, principal analyst and vice president at Constellation Research, who attended the analyst meeting, wrote in a blog post on Wednesday.
Software will play a central role in increasing Infosys' appeal to clients, wrote Forrester Research Vice President Frederic Giron, in an email to IBTimes. This will be both in terms of automation and platforms, on top of which the company can help clients' business, including but not limited to finding new avenues for sales and even directly boosting profitability.
Infosys has been focused on building its own intellectual property before, something that critics said cost the company its bellwether status in the aftermath of the financial crisis. Breaking, or at least substantially reducing, the link between revenue and increasing staff size remains the holy grail of large Indian IT companies.
Infosys started implementing its strategy for this, called Infosys 3.0, about three years ago, but in the process took its eyes off of the large plain-vanilla outsourcing contracts that still contributed over two-thirds of its revenues, as its biggest customers sought to cut costs after the financial crisis.
Tata Consultancy Services Ltd., which is India's No. 1 IT provider by revenue, and smaller rival HCL Technologies Ltd. cashed in on many of those contracts, as did U.S. rival Cognizant Technology Solutions Corp. Infosys’s revenue growth faltered to well below the industry average and its prized operating margin toppled in the roughly two-year period ended Mar. 31, 2013.
This prompted angry investor calls for changes at the top, precipitating a return from retirement of the company’s iconic founder Narayana Murthy in June 2013. Murthy ruthlessly cut costs, vowed to refocus on large contracts, forced senior staff taking million-dollar salaries to deliver or leave, and swiftly set in motion the process that ended in Sikka being named to the top job in June.
Sikka took over on Aug. 1 and Murthy and three fellow founders still with jobs with the company retired, leaving Infosys in the hands of its first non-founder CEO in the three-decade history of the company.
Product Focus Returns
Under Sikka, formerly the chief technology officer at business software giant SAP SE, “there can be no doubt that the product focus has been renewed and re-enforced,” Mueller wrote.
According to Mueller, Infosys would focus on five areas: First, a new software platform using open source programs that could run on Amazon Inc.’s web services cloud computing network as well as on Microsoft Corp.’s Azure. The rest were artificial-intelligence-led tweaks to business processes and IT services, new data analytics services and investments into startups.
— Frederic Giron (@fredgiron) November 5, 2014
In parallel, the company would train thousands of its staff on design thinking and in ways to get everyone to speak the same language while developing products. Infosys also said on Wednesday that it would recruit 2,100 people in the U.S., including 1,500 experienced professionals in the current financial year that ends Mar. 31, 2015 and 600 university graduates over the next 12 months.
Talk about speed and scale! Infosys to train 30k employees on design thinking by end of year #infosysanalystmeet
— Rachael Stormonth (@rstormonth) November 5, 2014
A return to the product focus would include digital marketing, commerce, customer service, distribution, ecosystem management and procurement, Sanjay Purohit, head of EdgeVerve, the Infosys subsidiary focused on products and platforms, told analysts at the meeting.
This effort is “a remarkable example of the creation of significant product IP by what was a traditional system integrator not long back,” Mueller said. System integrator refers to a service provider that loads a third-party software package, such as SAP’s business management software, onto a client’s computers and then customizes, maintains and manages it.
Tough Ask: Mindset Change
The received wisdom is that building products requires a very different mindset. It’s fraught with risk, upfront investments and no guarantees of success. This could also be Sikka’s greatest challenge, as Gartner analyst Susan Tan tweeted, citing Sikka.
â€” Susan Tan (@SusanSJTan) November 5, 2014
“The vision is right and energy is palpable. Infosys is off to a good start,” Forrester’s Giron wrote in his email. “Execution will be key, with emphasis on design thinking training of the entire workforce to change the mindset from order taker to trusted advisor,” he added.
While this is an interesting idea, and Infosys has the infrastructure and processes to train 160,000 employees on such techniques, “it will be far from enough to actually change the mindset and culture,” he said.
Perhaps the biggest achievement for Infosys in the one-day event was that Sikka seemed to have established a genuine personal connection with analysts, as Constellation's Ray Wang tweeted:
â€” R Ray Wang (王瑞光) (@rwang0) November 5, 2014