Davos: 2023: See a great opportunity for tech business overall

Amid worries of grey clouds over the IT services industry, Infosys Chief Executive Officer Salil Parekh said that his discussions with clients at the World Economic Forum in Davos have been quite positive.

Speaking to Moneycontrol’s Chandra R Srikanth on the sidelines, Parekh said he is having two types of discussions with clients — one focusing on digital change in industries such as energy, utilities and manufacturing, and the other on cost automation and efficiency, which is across industries including financial services, tech and telco.

“A lot of good discussions coming on right now, we see a great opportunity for the tech business overall. We will see how the next year comes about,” he said.

When asked if the optimism varied between clients in different geographical areas such as America and Europe, Parekh said the difference is more apparent depending on the industry they belong to.

“One of the things that’s clear is the talk of where the economy is more than what you see in reality on the ground. So what people are saying, for example, is consumer behaviour is still quite robust,” he said.

Slowing demand?
However, Infosys did see a small increase in its net headcount addition, which has been an industry-wide phenomenon. This is in stark contrast to the robust hiring done by IT services companies in recent years, and a slowing net addition number is seen as an indicator of slowing demand.

Parekh maintained that they have had large recruitment for the last several quarters, and they want to moderate hiring with where they see expectations going forward.

“We had growth last year of about 20 percent. This year we increased our guidance to 16-16.5 percent…For us, Q3 and Q4 are also seasonally weak quarters. Having said that, overall, our growth in the quarter was nearly 14 percent, whereas the past year was 20 percent. We do see that growth is less than last year, but it’s still a good level of growth for us,” he said.

Commenting on the outlook for the next fiscal year, he said that there is traction in cost automation, but that digital grew as well.

“Our core services which are focused on cost automation also grew in Q3 and that is going to give us resilience in whatever environment that shows up,” he said.

A recent report stated that growth beyond FY24 could be modest due to the lack of new disruptive tech drivers. Parekh, however, said that cloud players he has had a discussion with remain optimistic about their growth outlook.

“We see from our client base, different by different industry, still a lot of opportunity in the cloud space. Cloud really is both infra as a service, software as a service, and Platform as a service. So anything new that is being built, is also being built cloud first. And that’s where we see all the opportunities,” he said.

ChatGPT
Infosys was one of the first backers of OpenAI, the makers of ChatGPT, and had supported the initiative with a donation. Parekh previously said that Infosys was using ChatGPT with client situations which is starting to further increase productivity and automation.

Elaborating on this, the Infosys CEO said that generative AI is typically very supportive of what the company can do to enhance productivity, and enhance what the company can do with traditional automation efforts.

“We’ve been using generative AI in many of the areas in automation already. There are of course tools which help you to do some element of coding — what we’re seeing are some benefits. There’s different levels of productivity improvement, from about 5 percent, sometimes as much as 15 percent. We are seeing more and more of that enhancement and there we are able to then bring in more work that can be done within teams who are using the generative AI,” he said. Moneycontrol