Infosys CEO Vishal Sikka, who completes one year in office in August, has delivered a stellar performance for the first quarter of FY16 which took the markets by surprise.
The first non-founder CEO of Infosys, Vishal Sikka, who completes one year in office in August, has delivered a stellar performance for the first quarter of FY16 which took the markets by surprise. Sikka believes these are early results of initiatives taken by Infosys in the last one year and things are going to get better and bigger. He spoke of the road ahead for Infosys on various business parameters in a media interaction on Tuesday. Edited excerpts.
How do you view Infosys’ first quarter performance?
The best revenue growth in the last 15 quarters and best volume growth in the last 19 quarters. I believe this is the result of the initiatives we have taken: deep client focus that we have brought, given the organisational realignment we made in delivery, sales and consulting. We have been working hard to rethink our customer experience to redesign the way that we engage and that has resulted in the success we have seen in large deals. This quarter also saw deep operational focus as well as widespread adoption of innovation and technologies that has started to bear results now. Both innovation at the grassroots level and breakthrough innovation we have been working on. And I feel good the results give us good momentum. We are confident in our abilities to achieve 10-12% revenue guidance in constant currency. However, we are still early in our journey towards becoming a next generation services company as I have laid out.
What were the reasons for drop in operating profit margins?
We expected margins to fall in the first quarter by about 250-300 basis points. That is how it has been for many years. The first quarter typically witnesses lower margins and as the year goes by, the employee pyramid structure helps us keep costs down. The margins will start improving.
How is the pricing environment?
Across the board there is tremendous focus on cost takeout as clients are looking at investing these savings in newer areas. There is a clear upfront expectation from the client in terms of pricing and it is something structurally happening in the industry. I do not think we can resist it and it is something we have to accept. However, internally we need to figure out how we can be more productive and efficient. On the newer stuff, there is no pressure on pricing as it is driven more by capability.
Has Infosys scripted a turnaround with first quarter performance?
These are still early results but beginning to gain momentum. For example, we have trained over 40,000 of employees in design thinking and this has shown results in sales process. It is building momentum in a nonlinear model. In terms of our near term revenue contribution, it was the result of our big operational focus and innovative initiatives. Clearly there is a sense that strategic intiatives are starting to throw up results.
Will Infosys be able to maintain the current momentum?
Historically, the second half has performed worse compared to the first. So we are cautiously optimistic. The intiatives we are employing will pick up steam and the impact will become bigger. However, we are watching carefully to see that the second half of this year is not like the usual decline we typically see every year.
How is the deal pipeline looking?
In the first quarter we had six large deals win. The idea is to carry the momentum in the second half. We are now looking at every customer and see how we can mine more from the account. In every project we do a lot of incremental things which bring newer ideas to our clients. This helps us in getting incremental revenues.
Is Infosys on track to achieve $80,000 revenue/employee by 2020?
$80,000 revenue per employee is our aspiration to be achieved by 2020. We want to get there through better automation, productivity and use of more software and technology. Currently, it is around $51,700 and our expectation is to increase. The first signs of that have already become visible. For example, Infosys sold 15 deals through our Panaya acquisition in the last quarter. Given the adoption of software, I feel that $80,000 target is achievable.