the company could unleash more value by hiving off the PPS business as a separate company and the scale of operations would also be much higher.
“The DNA of products business is much different of the services, it is very difficult for both to co-exist.”
Analysts said that the product story in many Indian IT companies has always been subservient to services because of unpredictable revenue cycles and long gestation periods.
From a strategy perspective, one major area where the firms have failed was in ensuring separate, dedicated organisations for the products and services businesses. Senior management support, product business unit branding and its leadership have also not been consistent with the rest of the organisation.
The revenue from the product and platform business is typically spread over a longer term and margins are often higher than services.
The margins in licensing out products and platforms can be as high as 40-50%. Infosys spends about 2.1% of its revenue on product research and development (R&D).
The focus on products and solutions has increasingly sharpened also for other peers of Infosys such as TCS, Wipro, Cognizant. TCS has consistently spoken about an all encompassing digital strategy where their entire gamut of services are based on this platform.
Cognizant has been in the forefront of evangelising the concept of SMAC - social, mobility, analytics and cloud – which has become the core part of its strategy, generating $500 million in revenue.
In the case of Wipro, it has gone ahead and picked up minority stakes in companies operating in niche or advanced technology areas. It will be investing $30 million in Opera Solutions, a US headquartered big data analytics company and aims to combines their technology expertise with its service offerings.