Infosys back on track under Parekh

It has been a little over three years since Salil Parekh, CEO of Infosys, unveiled his strategic review and came out with a strategy that had four core focus areas: Agile Digital Business, Energise the core, Reskilling and Localisation. Take any of the parameters, since Parekh took over, all have improved and brought the company back to a position where it is bagging large deals.

In the fourth quarter of FY18, when he rolled out his strategy, the digital business was 26.8 per cent of revenue. For the full year, digital’s contribution was 25.5 per cent of revenue. At the end of the Q4 of FY21, digital was 51.5 per cent. Similarly, when he said he would focus on energising the core, the company was back at winning some of the largest deals that the industry saw in FY21. Infosys won a $3.2-billion deal from the German automaker Daimler AG and a reported $1.5 billion deal from US-based Vanguard.

The large deal momentum, too, has gained pace. For FY18 Infosys signed a total contract value (TCV) of $3 billion; at the end of FY21, the company’s TCV has touched $14 billion. Of this, 66 per cent were net new, which will be a significant growth driver going ahead.

The company, which was giving growth guidance of 6-8 per cent for FY19, has guided for a revenue growth of 12-14 per cent in constant currency for FY22.

Parekh when recently asked about his take on the past three years, had said: “We think we had an extremely successful three-year journey, some of the elements are how we really reshaped and became a digital services company. Today, digital is more than 50 per cent of our business. The large deals are at $14 billion, but there is also a tremendous amount of work we have done in reskilling our employees, in looking at automation, and a variety of steps within the company, the way we transformed to a live enterprise, are a complete change in the way Infosys is working with clients and with employees today. We feel quite comfortable in the path we have taken and how we are looking ahead in partnering with our clients on their digital transformation journeys.”

An analyst from a domestic brokerage firm said, requesting anonymity, “The key to Infosys coming back on track is the way Parekh had articulated the journey and how he remained focused on it. Infosys was back on its growth track in FY20; it outgrew all its peers. Also, the deal wins it reported for FY20 at $9 billion were significantly higher than in FY19. They wanted to fire up the large-deal win engine, which they did. They changed the go-to-market strategy, which was piggybacked on digital, automation, AI. All this helped them get the market share.”

Analysts across the segment agree that Parekh’s presence and focus on recharging the company has worked. Peter Bendor-Samuel, CEO of Everest Group, said, “His performance has exceeded expectations across any reasonable set of metrics and has returned the confidence and swagger to what was before his tenure a low-morale organisation. As Infosys moves forward, Salil needs to keep the focus on moving into the digital transformation and modernisation markets and continue to broaden the number of departments and stakeholders it serves for its clients. He must continue to work behind the scenes to keep the organisation focused on client issues and away from internal disputes.”

Bendor-Samuel was referring to the whistleblower complaints and differences with founder-promoters that eventually led to the departure of Vishal Sikka, Infosys’ first non-promoter CEO.
Having created momentum for growth, Parekh wants to build on it. At a media briefing after the Q4 results, he said, “On a five-year horizon, one of the biggest opportunities is the cloud opportunity… Another area I would really focus on is data and analytics. It is something that is becoming more critical, and how that is being developed with our clients in mind is an integral part of what we are doing in our digital transformation work with our clients. So, that will become large.”

One of the big pushes for cloud has been the launch of Cobalt, which aims to give enterprise clients a seamless experience in their journey to public or private cloud. This was also one of the significant offerings from Infosys based on organic investments. Before this, Infosys has been acquiring niche players that gives it capability in the cloud and digital space.
Of course, there are challenges. The immediate one Parekh needs to tackle head-on is attrition. Though the company says that the 13 per cent attrition in the Q4 FY21 is something it can deal with, the demand cycle makes it imperative that Infosys reduce this. Peers like TCS have managed to keep it at a low of 7.2 per cent; so has Wipro and HCL Technologies.
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