Infosys Ltd's Narayan Murthy may go back to basics

Written by P P Thimmaya | Debojyoti Ghosh | Debojyoti Ghosh | Bangalore | Updated: Jun 19 2013, 22:18pm hrs
Narayana murthyNarayana Murthy. (Reuters)
Infosys Ltd executive chairman NR Narayana Murthy is all set to sideline the company's much-touted 3.0 strategy, instead preferring to stick to its core services like application development, maintenance (ADM), testing, BPO and infrastructure management.

In his second innings, Murthy wants Infosys to focus immediately on commoditised offerings, which he believes will serve it better on a quarter-on-quarter basis.

Murthy has already admitted that its focus had blurred on the traditional line of business, which the company insiders refer to as the `third stream'.

The first two streams include areas such as end-to-end solutions, consulting, software products and platforms, non-linearity etc, which were core to Infosys' 3.0 strategy driven by CEO SD Shibulal. Over the last two years, the company aggressively communicated the 3.0 strategy, where it spoke about reorienting itself to tap future business potential and considered its below par financial performance as minor blips. It was more worried about its long term goal of becoming a next generation enterprise. But with Murthy's return, all that is about to change, according to sources.

Murthy has enough reasons to focus back on the `third stream'. While market leader Tata Consultancy Services (TCS) grew its ADM business by over 23% in FY13, that for Infosys grew only by 14%. Infosys was clearly seen as its losing market share in the traditional line of IT outsourcing and offshoring businesses with its closest competitors such as TCS, Cognizant and HCL Technologies gaining traction. In his recent AGM speech, Murthy said the company is committed to refocusing on the third stream to enhance its win ratio in large outsourcing deals, in a bid to close down the gap with industry leaders. The $76-billion Indian IT export industry generates around 55-60% of its revenue from traditional outsourcing activitiesy and has formed as bedrock for the sector.

Sanjay Dhawan, leader technology, PwC India told FE that most Indian IT companies still generate substantial amount of revenue from the traditional outsourcing and offshoring segment with Infosys indicating where its focus would lie in the short term. Services like ADM, testing, IMS are core for the Indian IT industry as there is high degree of offshoring unlike other segments, said Gaurav Gupta, partner, ATKearney.

A senior Infosys official admitted that entire messaging of the company gave an impression that it was only focused on high end stuff leaving the traditional business aside. He, however, said that Infosys remained committed to this segment and has been able to bag certain large deals ranging in the size of $100-500 million.

Pradeep Mukherji, president and managing partner, Avasant, an IT-BPO advisory firm, said that application maintenance is one area where all IT vendors have been focusing on from the beginning, however, it is also a small pie in the overall outsourcing chart. It is important for Infosys to focus on areas like infrastructure management and do a better job and get a leadership position. Murthy has to bring an innovative approach to the services to get back the company on track, he remarked.