India?s second largest IT services exporter Infosys Technologies is appointing a business innovation head for each of its four verticals to scout for product opportunities within the sectors and build business plans. Part of a larger realignment within the company, the Innovation group would attempt to de-link the firm?s revenue growth from people growth, also called non-linearity.
The four innovation heads would have a dual reporting structure: they would be accountable to their respective vertical heads as well as Subhash Dhar, the new head of innovations. Infosys recently conducted interviews for the positions and Dhar said the firm was more open to getting people from outside the company when it came to innovations.
?The job of business innovation heads will be to spot market opportunities and build business plans. They will come back with ideas and their respective verticals will fund the development of the products,? Dhar said. ?There will be a federated structure. A central innovation group will help engineer a product. We would like to keep the engineering centralised while product management and sales can be decentralised,? he added. Infosys wants products, platforms and new engagement models or what it buckets under innovation, to contribute upto a third of its revenues, from about 5% now and differentiate from the low-margin commodity business of traditional IT services.
Products are also becoming strategic tools to gain entry into big accounts and create larger services business around it. The firm?s core banking product Finacle has been a huge success, inspiring the firm to look for more product opportunities in other verticals. Finacle currently runs across 47,000 branches worldwide and raked in $295 million in FY 11, growing 42% over the previous year. Infosys recently reorganised itself into four super verticals ? BFSI, manufacturing, energy-utilities-telecom and retail-logistics. It would have three horizontals. Besides innovation, there is operations and transformation.
?The piece on innovation is small at this point but it is also where we have the highest potential to grow. Innovation, and to a large extent, transformation, will give us the next level of differentiation that we need in the market,? Dhar noted. Equity analysts seem to agree. In a research note published on June 1, Motilal Oswal said it believes Infosys is far ahead of the curve and competition in terms of positioning for the future. ?The strategy of having one-third of revenue from each of transformation and innovation, and just one-third of revenue from operations is the right one, even if it may entail some investments and some sacrifice on the margins in the near term.
Eventually, if Infosys is successful, its margin profile will be far better than it is currently. Margins on initiatives like Cloud, Analytics, Social Media, Products and IP would be 50% higher than the margins on traditional IT services,? the note said.
Infosys, meanwhile, said it would also continue to look for horizontal product opportunities that can play across many verticals. The firm had developed Flypp, a mobile applications platform and iEngage, which is powering social media marketing and employee engagement for five global 500 companies.