Form is temporary, class is permanent,’ is an adage often used by cricket fans. Yet, in the real economy, some companies have reinforced it more than a few times. For Infosys, in its 35th year, any dip in form re-ignites fresh passion to prove itself on the long-term test.
The company is ranked second in the overall list of ‘Most Respected Companies’ behind Google India, and ahead of Tata Consultancy Services. Infosys was perceived to be No. 2 in terms of quality and depth of top management, people practices and talent management in overall rankings among 55 companies. The key to its global success is its ability to think ahead and do the right things even if they don’t seem right then. That cements its status as a visionary and leader.
Infosys witnessed a churn at the top level last year when founder N.R. Narayana Murthy brought in SAP’s Vishal Sikka as the first non-promoter to lead Infosys as soon as a perception began to take root that the company was wavering in its growth path.
For Sikka, the biggest initial challenge was to lift the sagging confidence and bring about excitement and innovation as part of the software giant’s daily routine. The company’s fortunes turned soon after; its earnings growth improved and new acquisitions were made to lift up the sagging morale. Infosys’ revenue grew to Rs 53, 319 crore in the financial year ending 31 March 2015 from Rs 50, 133 crore a year earlier. As per accepted accounting principles, revenues have doubled since 2010-11.
Sikka made a $200-million acquisition of automation start-up Panaya in February and vowed to make more acquisitions that would help Infosys gain cutting-edge technology such as automation and artificial intelligence. The company has a $500 million start-up fund and $2 billion in cash for such actions.
In April, it bought Kallidus Inc, a provider of digital experience solutions, including mobile-commerce and in-store shopping experiences at large retail stores for $120 million. It also became a strategic partner of Allied Irish Banks, setting aside $10 million for global innovation fund and Irish start-ups. In October, it acquired Noah Consulting LLC, a provider of advanced information management consulting services for oil and gas industry for $70 million, and in December, it invested $3 million in Whoop, an early stage company helping professional sports teams.
With Sikka at the helm, the company has bounced back and appears to be on the course it set for itself to achieve $20 billion in revenue by 2020, from $8.7 billion now. Of the $20 billion, about $16.5 billion is targeted to come from renewal of existing services, $2 billion from new areas and $1.5 billion from inorganic acquisitions and investments. It also aspires to take operational margins to 30 per cent and revenue productivity per employee to $80,000 per year.
Key elements to realising its objective are renewal of existing services, launch of new kinds of services and acquisitions to bolster capabilities even though core focus will remain on organic growth, the company says.
In the last six months, 85 per cent of its specialised workforce has done something innovative; it now proudly flaunts its capability to train 15,000 people at any point of time.
“More than one-fifth of humanity banks on Infosys systems,’’ CEO and managing director Vishal Sikka said at a TMT conference on 9 December. “Every airplane you have ever flown has had parts designed by Infosys. All major payment processers have had some role of Infosys. Three-fourths of retailers, e-commerce systems, have some role played by Infosys.’’
“We see a good future ahead of us, one that is largely in our hands. Top 15 accounts grew faster than the company. Attrition rate has slowed from a high of 20 per cent to 14 per cent, which is among the lowest in the industry,” he said.
“As we focus on growth, it is essential for us to ensure that we are constantly innovating to differentiate ourselves in a commoditised market,’’ Sikka said while describing the company’s mantra for growth. “To address this challenge and for driving client-centric innovation, we have started several new initiatives — both structural as well as at the grassroots of the organisation to make ourselves more relevant to our clients.’’
The company encourages its employees to foster a ‘zero distance’ initiative with clients. “Zero-distance framework has been instrumental in amplifying our potential, widening our knowledge, and helping us use it to innovate constantly for our clients, along with adopting the design thinking approach to problem-solving. About 85 per cent of our delivery organisations have done something innovative in the past few months, beyond the statement of work” said the CEO.
“The success of Infosys lies in its ability to consistently innovate and adapt to the dynamic operating environment without compromising on customer satisfaction, employee growth, profitability and high standards of corporate governance,’’ says Rajiv Mehta, a research analyst at brokerage firm IIFL.
Belief in self and passion for excellence seems to come from its roots. Way back in 1993, it had the confidence to list its shares, even though in the year before the Sensex had collapsed to less than half, soon after rising to a historic high. Harshad Mehta-led securities scandal had paralysed the financial system, demoralised capital markets and disheartened investors. Plus, in 1993 BSE became a victim of serial bomb blasts. But nothing deterred its confidence, not even the fact that the company was unknown to most and that software was only beginning to be recognised; technology then was for techies working in a huddle in a backroom full of wires and machines.
Little wonder then that in the given circumstances, the IPO didn’t do well, leaving its lead merchant bank Enam Securities and promoters to acquire the unsubscribed shares. And what a blessing in disguise it turned out to be for them; they hit a jackpot — only because the promoters believed in what they were doing.
From Rs 30 crore of revenues in March 1993 the company has grown into a Rs 53,319-crore company, earning a net profit of Rs 12,372 crore in the year ending March 2015, compared with Rs 8 crore in 1993.
Yet, 97.6 per cent of its revenue came from existing clients as of September underscoring its reliability and strong relationship with companies it serves. From less than 3,700 employees at the turn of the century, the company today employs 1,87,000 employees and 100 development centres.
Its financial performance has much to do with its quality of top management as also its values. It was a top pick for overseas investors when India initially opened its markets to foreigners. The quality of its management, the reliability of its accounts and its attitude towards shareholders were among key reasons. The company has regularly featured on BW’s list of ‘Most Respected Companies’.
Over the years, the company has dropped several businesses as it couldn’t stand up to the competition’s sharp practices. Today, in order to improve competitiveness and win large deals in application maintenance, software testing, infrastructure management and business process outsourcing, the company said it has realigned its organisational structure to increase focus on expanding client relationships.
Infosys is injecting new ideas and processes into the existing platform offerings and adopting new problem-solving techniques. The company has been using design thinking as a problem-finding methodology which has led to applying some of the advances in technology to business outcomes.
This gives the company an opportunity to strengthen the platforms and provide differentiation.
Maintaining credibility and respect is a constant and relentless effort that’s ingrained in the system. Infosys, more than any other Indian company, has strived hard not to lose sight of its reason to exist as espoused by its founders.
sumit@businessworld.in; @mediasumit
(This story was published in BW | Businessworld Issue Dated 11-01-2016)
