News: Infosys alive to domestic market potential

(BL 23/04/2007) Bangalore - The CEO-designate of Infosys Technologies, S. Gopalakrishnan, said recently that his focus would be to make the company more competitive, increase productivity, enhance brand equity and attract the best global talent. Business Line spoke to `Kris' as he is better known, to get his perspective on the company and industry in general. Excerpts. There is a feeling that you have not rewarded the equity holders adequately this year. Since you are sitting on large cash surpluses and the markets are down, do you have any idea of deployment/rewarding shareholders? We have already declared dividends for the year. This cash is for strategic reason. In the event of a downturn we should be able to reengineer. We have set certain benchmarks on the return on investments and return on capital employed. If these benchmarks are met, we may look at returning cash. With the rising telecom/computer penetration in the country, projects such as data linking for financial inclusion and national information grid are all being done by large international companies. Infosys does not appear be there at all. Any plans to increase your presence in the domestic markets? Yes. We do have plans for the domestic market. In some sense, we are already present in the domestic market as 70 per cent of the large banks use our software product — Finacle. We are looking at other sectors too. But, we have not come out publicly with our plans like in the case of Finacle. We are definitely looking at the market here. We have certain expectations on the margins front. We may look at only those projects that have some strategy or rationale — a profit advantage in doing things. Logic and profit are some of the crucial decisions for executing some projects. We did sign up some projects, which we have not yet announced. Do you think the recent acquisitions by MNCs in India such as the EDS-Mphasis, Cap Gemini - Kanbay or Caritor-Keane are changing the dynamics of the game? The deals clearly say that mergers and acquisitions are the model for future. Players who feel to catch up through acquisitions or who want to significantly increase their presence here are doing the deals. It is a clear acceptance as a change, clearly demonstrating model for the long-term and everybody agrees to that. We, at Infosys, have never said no to M&A. If we find the right opportunity, we will go ahead. Large MNCs such as IBM, Accenture & EDS are scaling up their India centres pretty aggressively. Do you think it will have an impact on the business dynamics? Of course ,there will be an impact. There will be a significant competition for resources on the market side. Their ramp-up here is the acceptance of the fact that this (offshore) is the long-term model. In that sense, there is a kind of endorsement that this is the way to be done. Have you factored large deals in your guidance? Is the large deal cell at Infy active? No. We have not factored the large deals in our guidance. This is because the large deals are not yet predictable. You haven't won the sufficient number of large deals in the right frequency. Only when such wins are repeatable, you factor them. Our Strategic Global Sourcing team, formed especially to track large deals, is very active and pursuing several opportunities at this point. Are you comfortable with the proportion of wins as they used to be in the past three years? We have one of the best growth rates in the industry. Am I satisfied with this? Of course not and we would love to grow faster. As CEO, what are the variables that you would look up to on a consistent basis to figure out that US is slowing down? Firstly, a set of analysts, thought leaders and economists who talk about the developments. Then look at indicators to monitor growth rates. Then, you have your own set of customers. Most relevant are when customers tell you that they are not seeing any slowdown. Moreover, the global delivery model, which we operate, is recession proof. While the IT budgets are flat, the amount of money spent offshore by the companies is on the rise. Companies are reapportioning IT budgets in the GDM model. Do you see any new set of challenges emerging, apart the usual labour shortage, wage inflation or rupee appreciation? For any business there are relevant sets of challenges both on the technology side and on the market side. Keeping pace with emerging technology trends such as the convergence in the ICT space, mobile technology, Service Oriented Architecture or SaaS (software as a service) are the current challenges. On the business side, challenges are to keep pace with flattening of the world, globalisation among others. What's your take on the lottery system for H1-B visa allotment this year? What would be your strategy if in case you don't get the required visas? We need to wait and understand the results. This year we have visas required for the business. We would be looking at onsite recruitment to compensate if any shortfall. Onsite recruitment is going up in absolute numbers and the proportion is also increasing. Are you exploring other low-cost destinations? Mexico and Manila is where we are setting up our new operations.