To pump up its products, platforms and solutions (PPS) space, Infosys, India?s second-largest software exporter, has set aside $100 million as innovation fund as part of its strategy of securing a third of its revenues from this segment.
Besides this investment, Infosys will scout for acquisitions in the PPS space to rapidly increase the revenue stream from the segment. At the end of the fourth quarter, the PPS segment contributes 5.7% of the overall revenue.
SD Shibulal, Infosys CEO & MD, said that ?the business is not going to move up overnight and it requires an inorganic approach. There will be double-digit growth rate with acquisitions.?
However, Shibulal said that the tricky thing will be to find the right candidate in specific areas of interest. ?Unless we do the acquisition it will not move the needle.?
The over $7-billion firm, globally renowned for its IT services, is betting on high margin businesses such as products and consulting services to aligning its business model to fit into the current environment.
?We are making all the investments necessary to differentiate ourselves in the market place,? said Shibulal. The company pointed out that during the January-March stretch it had 12 wins across industries and geographies in the products and platforms space. At present, Infosys has over 75 clients in this space.
On the $100-million innovation fund, the company is very clear that it will not be restricted within the organisation. Infosys said that it would also be interested in investing in entities or individuals outside the company who have innovative technologies.
During the fourth quarter, Infosys applied for 21 unique patent applications in India and the US. With this, the company has 532 patent applications undergoing various stages of patent prosecution in India, the US and other jurisdictions. Infosys has been granted 84 patents by the United State Patent and Trademark Office and three patents by the Luxembourg patent office.
Experts point out that the Indian IT services industry has very clearly recognised that products and platforms as a vertical is the way ahead as the current way of doing business involving time and material contracts, addition of headcount in a linear fashion and other mundane tasks are increasingly getting commoditised.
According to industry observers, 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.