Utilisation is up, but pricing, productivity can improve

Written by P P Thimmaya | Darlington Jose Hector | Darlington Jose Hector | Updated: Jul 13 2013, 10:54am hrs
After many quarters of heartburn, Infosys seems to have regained some of the lost ground in the first quarter. CEO SD Shibulal appeared a bit more relaxed this time around, confident in the knowledge that the founder chairman was only an arms length away. In an interview with FE's PP Thimmaya and Darlington Jose Hector, Shibulal said there are many large deals in incubation and that the company was confident of achieving its revenue guidance.

Executive chairman NR Narayana Murthy has been around for over two months now. What changes are NRN and you trying to bring about

NRN's focus has always been on superior financial performance, which is high-quality growth with greater margins. The discussions always revolve around it and he wants to bring renewed focus to it. As he understands the organisation very well, he brought to the table solutions around creating high-quality growth, improving margins, delivering better value to clients, controlling costs and addressing the challenges of the US immigration Bill etc.

What steps would Infosys take to improve profitability

Our margin is a reflection of many things, such as pricing, operating environment, onsite-offsite ratio and the utilisation level. We have not done very well on some of these parameters for instance, utilisation dropping to 71% while it should optimally be around 80%. Our onsite ratio of people can be brought down further. However, for now, utilisation has started moving up, which is a reflection of growth. We need improvement in pricing and productivity.

What organisational changes can we expect at Infosys in the short term There is talk about reshuffling roles, such as those of V Balakrishnan and others.

We are a large organisation, and there is a constant change in people's roles. If there are any changes, you will be the first to know (laughs).

Did you ever feel that Infosys hired excess people

We did hire too many people, and that resulted in a fall in utilisation. One must remember that the hiring cycle is spread over 18 months while realising revenues takes about 24 months. Sometimes you end up hiring more, but if one looks at our guidance of 6-10%, we would require these people.

Will Infosys now beef up its

sales force

We could always do better on this front as our large deal wins have slowed down. The large deals are primarily present in the traditional segments of IT services, such as application development and maintenance, and testing and infrastructure management, which we call BITS .

In the second half of the last fiscal, we won about $1 billion in contracts and, this quarter, it is about $600 million. One must remember that for every $1-billion deal, the additional revenue generated is $200 million, so we have to create newer channels of growth.

We are definitely focused on the BITS space as there are many large deals in incubation, but if they are rebids they could be price-sensitive.

How will the Immigration Bill impact Infosys

This is a industry-wide issue. If the Bill becomes a law as passed by the Senate, at least hypothetically, we will have implications on operations. However, there are many uncertainities.

Right now, we are looking at ensuring how our services do not get interrupted and we are talking to clients. However, all our plans will depend on how the Bill evolves. Our biggest fear is the kind of impact it would have on our costs, usage of people and outplacement.

Will Infosys now look at upping the revenue guidance

We have not changed our guidance and are confident of achieving this target. If we grow by 1.5% in the next three quarters, we would be able to beat the lower end of the guidance. On profitability, we have not given any guidance. And nor have we issued an earnings per share (EPS) target.

How active are you on the inorganic front

After acquiring Lodestone in Europe, we are now looking at US and Latin America for buyouts.