"Digital now contributes nearly 41% of our business, and we are confident that the demand for exponential technologies will continue to grow, even in stronger pace, in the post-pandemic world," says Sanjay Jalona, LTI’s CEO and MD.
By Srinath Srinivasan
Larsen & Toubro Infotech (LTI) made news in FY20 for a number of new deals and acquisitions. The last quarter of the financial year was disrupted by the onset of the Covid-19 crisis. LTI’s CEO and MD Sanjay Jalona talks about tech, business and recovery strategies in the light of the crisis to FE’s Srinath Srinivasan. Excerpts:
How do you think the two new deals closed in Q4 FY20 will pan out in Q1 FY21? Which are the business segments under which the deals fall?
When the crisis struck, we moved rapidly to the work-from-home model. ‘Everything from Home’ is the approach we are also deploying for the large deals we have won in Q4 FY20. We have already started ramping up these deals and expect them to go as per the plan. These two large deals have a net-new TCV in excess of $100 million, and have helped us close the entire year with eight large deal wins.
The first one is a multi-year, multi-million engagement for digital transformation, enhancing productivity and quality of service of a key government ministry. The other large deal is with an energy retail company providing end-to-end managed services for IT applications and infrastructure operations. With these deals, we hope to be able to better confront near-term challenges and emerge stronger.
Gartner predicts that there maybe a decline of 8% in IT spending in 2020. How are you positioned to tackle the crisis? What are some business segments you think will gain the most and will get hit the most? What’s your strategy for the next two quarters?
Some industries are hit harder than others and will take longer to recover. With lockdowns and global mobility coming to absolute stand-still, sectors like travel, airlines, hotels, hospitality and retail have taken a major hit. Oil & gas is facing a double-dip problem — there is low consumer and industrial demand and excess supply due to historically low crude pricing. We have negligible presence in sectors like travel and hospitality, however, we are impacted in others like manufacturing and oil & gas. We do expect a drop in discretionary spend across the board as companies reprioritise their spend areas and cut costs to improve resilience and have better ability to operate in the new normal.
Overall, there are still a lot of unknowns in terms of when we would see recovery and so, we remain focused on employee safety and on keeping our promises to our customers. In terms of strategy over the next two quarter, our priorities have shifted from just enabling work from home to improving productivity in a distributed environment, engaging a dispersed workforce and creating growth opportunities in the new world.
In FY20, Lymbyc was the latest company you acquired. How has this added up to your overall performance? With an uncertain market, will you continue your strategy of acquiring companies?
As a strategy, LTI pursues M&As with the main objectives of enhancing capabilities. Last year has been heartening with four acquisitions that have helped us enhance our capabilities in the cloud, analytics, automation and core banking domains. Lymbyc, specifically, has helped us further strengthen our fast-growing analytics and AI offerings. The core of Lymbyc’s capabilities are centred around Leni, which solves for the entire spectrum of descriptive to predictive business insights, leveraging deep learning, natural language processing, data visualisation and predictive analytics. We believe self-service capabilities for AI and advanced analytics will be the next wave of disruption in the marketplace. We continue to look at interesting capabilities assets.
When do you see recovery beginning across various business segments? Due to the strain, will it lead to furloughs or layoffs in LTI?
There are many uncertainties and I do not want to predict a time for recovery. We are bracing for a tough economic climate through cost-control initiatives. We would definitely see an impact on our utilisation and thus margins, Q1 onwards, as customers reprioritise their focus areas and IT spend. Our focus is on cost savings through operational effectiveness, delaying planned capital investments, and renegotiating with vendors along with several other initiatives. We do expect business to bounce back and are not looking at layoffs but would continue to focus on operating frugally.
How has the conversation dynamic about digital transformation with CIOs changed? What are some key areas you’ve asked them to focus during the recovery period? How will the existing R&D activities change?
Now more than ever, enterprises need digital leadership and innovation to support growth. In our conversation with CIOs and business leaders, they are primarily talking about four top challenges they want us to solve. First, reducing spend and improving cash flow; second, enhancing customer loyalty; third, engaging employees productively; and finally, gaining speed and agility.
Digital now contributes nearly 41% of our business, and we are confident that the demand for exponential technologies will continue to grow, even in stronger pace, in the post-pandemic world. As companies adopt to new normal, there will be more demand for cloud-based services and automation. We will also witness democratizing of data analytics functions with concept of virtual analysts taking centrestage that will not only offer a cost effective proposition but will also shrink the time for data analytics projects/tasks. We will continue to invest in these areas.