He is principal analyst & CEO of Offshore Insights Research and Solutions. He has been tracking the Indian IT industry and Infosys for 15 years.
There was a time when every reference to Infosys was about how well the company was doing. Over the last two-three years, the narrative has changed. All eyes are now on the new CEO SD Shibulal and his new strategy.
To answer your question specifically, I think during the first half of 2012 they (Infosys) will continue working on establishing their new strategy and hence will see limited success from that.
There are still some unresolved puzzles. Decision-making is slow, pricing and margins are still very important to them and they haven't done anything in the market that gives us reason to believe that they have taken corrective steps to free some of those points.
They have been talking of a lot of interesting things, like creation of a new platform, IP, cloud, mobility. But the number of clients for each of these solutions is very less. So no sustained market for them and no threshold achieved. That makes me nervous. Are clients not buying this story or are they not able to sell effectively?
But if they execute on this well, two or three years down the line, there is a good possibility that they will regain the position they used to enjoy in the last decade.
Take the top five or ten companies in India, their capability of delivery, strategy or solution is not very different from each other. They recruit from the same pool, have similar infrastructure; the only differentiator was their quality of client relationships.
In 25 years, this is the first time this industry is being tested on something other than cost and engineering.
The battle lines have shifted from offshore to client facing roles, so how you manage your relationships has become even more important than in the past. Exactly at that time, unfortunately for Infosys, some of that strength is going away. That is like a double jeopardy.
In the last two or three years, their strength over other companies — superior account management, client relationships, account mining — is fading.
The ability to open Fortune 500 boardrooms has dropped because some of the charismatic leaders are no longer with the company. It's not the five or six people at the top, I am talking at a company level. They had an army of smart account managers which has depleted. They have to win that edge back. The key is, are they energising the corporation? Are they cranking the engine? TCS is cranking that engine. They are connecting with the client much better.
(Infosys' stand) of not diluting their margins is only part of the problem. We have just conducted a survey with 40 Infosys clients and found that they are under servicing the account. If you see the number of FTEs (full-time equivalent) that their counterparts put on the account vis-a-vis Infosys, their team sizes are much smaller. There are open positions on the account teams which are not being filled. They are a little defensive with RFPs (request for proposal) and account proposals, which was never there in this company three-four years ago.
They spend less on S&M (sales and marketing) compared to all other competitors. You can't sleep under the banana tree waiting for the banana to fall. S&M has a direct correlation to revenue and must not be curtailed. Infosys net margins are 50 percent of what they used to be 10 years ago. In a competitive situation, margins will come down for everyone. When the world gets flat, it gets flatter from all sides. It can't be selectively flat.
(As told to Mitu Jayashankar)