BENGALURU: Since the first quarter of 2019-20, Infosys has been, once again, the growth leader among the big Indian IT services companies. CEO Salil Parekh, who completed three years at the helm this month, looks to have transformed the company that had been roiled by the controversies under his predecessor, Vishal Sikka. He’s ensured stability. And under him, Infosys has won several massive deals, from the likes of Verizon, Vanguard and Daimler. In an exclusive interaction with TOI, Parekh talks about what has changed. Excerpts:
You took over three years ago during a turbulent phase at Infosys. Today Infosys is the fastest growing among the large IT services companies. How did you accomplish this turnaround?
It’s multiple things. Our focus on clients, employee reskilling, the One Infosys concept. Large enterprises globally are strongly driving digital and cloud transformations. And we have built tremendous capability in that area over the last few years. That’s giving us a nice runway for growth. For employees, we put in place a huge reskilling programme some years ago. So many have now been reskilled to support this digital and cloud approach. We have also put in place a comprehensive change of every element within Infosys.
Everything that employees touch and feel, every way that we interact, our internal architecture, infrastructure, is based on digital. So anyone who interacts with us, sees a digital Infosys. And then there are some things that are a little softer. A colleague of mine was sharing this with me last week that Infosys is working as one team. All of us are united in focusing on clients, in focusing on employees. And the power of that is phenomenal. Finally, there’s tremendous support coming from our chairman Nandan (Nilekani), and the entire board. That makes a huge difference.
You’ve revved up the large deals’ portfolio. Mohit Joshi (president) was instrumental in the Vanguard deal, Jasmeet Singh (EVP and global head of manufacturing) in Daimler. Did you structurally change things that enabled you to win these bigger deals, become more aggressive?
These building blocks I just described have come together. What tends to happen is, when a large global enterprise is going through a transformation, someone like a Daimler or Vanguard, we are working with them, giving them ideas and bringing together the teams. Our intense focus on clients and capability-building to ensure that clients don’t just see it as words, but it’s backed up by action, whether it’s the work we have done or with the employees and their skills, that is what is allowing this to happen. The One Infosys approach where when a client transformation idea or opportunity is identified, everyone in the company is rallying to support how to make that possible given our skill sets and capabilities. In that sense, the structure of the company is the same. We haven’t had a reorganisation. It’s really the focus on people working together, that’s one of the main drivers.
Nandan Nilekani and you are seen to be working together as a great team, going after large deals, building a disciplined strategy around it. Nilekani is said to be meeting chairmen of the boards of prospective customers.
Nandan’s vision as to how the industry works or shapes the technology ideas are remarkable. Being a cofounder with a great value both within the company and to the outside world, that support and guidance makes a huge difference.
Do you think (US president Joe) Biden will give you some breathing space?
The approach we have taken is to drive localisation, where we build digital skill sets and recruit in the US, Europe and Australia. That has helped us build a business model which is more resilient for the future. And of course, with the new administration, whichever policy and direction they take, we will support them.
What’s the trend in client IT budgets, are they growing?
There’s a huge focus on automation and cost efficiency. It was happening pre-Covid, it got a little accelerated during Covid. The second trend is investing in digital and cloud transformation. This latter is not just for process improvement or cost saving, but for them to increase their connect with the end customer, with their own employees, and improve their supply chains with their partners. So IT has become a business driver, not just a cost budget. This is part of the reason why our digital business grew 30%, and digital is now 50% of our business. So imagine, half our company is growing by 30% because of this investment approach that clients are taking.
Infosys is said to have an internal blueprint with a 25/25 goal – to achieve $25 billion in revenue by 2025.
I have no such number to share with you. Genuinely, our focus is much more on things that are relevant to our clients, helping them navigate the next. The numbers will follow. As we have seen in the past three years, our focus was doing what’s relevant to the clients and fortunately the growth has come and margins have, and the company is doing well.
How do you see margins going forward? In large deals, you seem to have taken a forward call on margins – accepting lower margins initially, but hoping to improve it later through efficiencies.
In the last few quarters, we have had very strong margin performance. In the last quarter, it was 25.4% and in the results discussion, we have shared that some travel and some spending which had been cutback will start to come back over the next few quarters. We have also had a salary increase that came into effect on January 1. Equally, there are several strategic levers we had identified – such as reducing the usage of subcontractors – that would help us be more efficient. Our ambition for margins continue to remain high.
The digital disruption has accelerated the collective ability to create the next new normal. What will the next unfold?
For Infosys, my objective is to continue to remain relevant to our clients and be their journey of digital and cloud transformation. That area has a huge opportunity for the future. What we are seeing in cloud and data analytics and cybersecurity is, there is a huge amount of work that our clients are looking for. What that will translate to if you remain true to that focus will be good growth, good careers for employees and a good future for Infosys.
What is the contribution of Infosys’s subsidiaries? While BPM has done well, the products business hasn’t taken off as expected. Will you take a hard call on some of the businesses that aren’t performing well?
Many of those businesses are doing very well. BPM has done well and it’s the leading BPM business in the industry today in the way it has driven growth and also the way it has integrated with all of the work we do on technology. If you look at the other businesses, Finacle is a leading player in terms of core banking solutions, and it has seen phenomenal growth and a very good profile in terms of its margins. And we are transforming Finacle to be cloud-first and digital, and we are working with digital-only banks. Like these, many of the businesses working within the Infosys family are transforming themselves to be ready for the new world and they are at different stages in their transformation journey.
How are you benefitting from the growth of hyperscalers?
There the focus has been Infosys Cobalt, which is really all the work that we do in the cloud. It has about 200 industry templates and has 14,000 cloud assets that any client who is leveraging the cloud can use to grow faster and to reduce their risks on how they leverage the cloud. We have built capabilities in the private cloud and that’s become a value to others where they build a hybrid solution between a public cloud and private cloud.
You said Infosys internally is now a lot more digital. Can you give some examples of what you have done?
Everything within the company is agile. We have a variety of apps for services that employees use. The way we do sharing across the entire company is in a new distributed infrastructure that we have built. We are reimagining everything that works internally.
How will the delivery structure evolve with UB Pravin Rao retiring this year?
It’s still one year away. One of the core strengths of Infosys is delivery. This is something that Infosys has built over so many years that the large enterprises have a tremendous trust in Infosys. Delivery is core to Infosys and it starts from the training and paying attention to everyone involved in the loop. It’s also got to do with a stable structure that is not changing every day. There is a tremendous amount of capability in experiential knowledge, tools, templates and methodologies that exist within the company. We are the best in the industry in delivery and that’s very difficult for anyone to replicate.
Is the hybrid work model the new reality?
Our clients have appreciated our ability to deliver exceptionally while working remotely. That’s a paradigm shift in the way we think about how work will be delivered and that gives us the confidence for a hybrid model. What we are very clear about is there is a need to build social capital and do some work which is more joined up – in-person and being in a colocation environment. We feel social capital is going to be important as we come out of Covid. When all of this is behind us, we have to rebuild social capital and come to a natural balance and then we will find what the true percentage is.
Apple has linked executive bonus to ESG (environmental, social and governance) goals. Infosys has turned carbon neutral. Do you think you will tweak bonus payouts to link it to ESG goals?
We have rolled out a comprehensive ESG approach for 2030. We are extremely delighted that we have become carbon neutral last year which is several years ahead of global guidelines. ESG is one part of what senior executives will look at among many other things and it will certainly be one part of how we look at the future of the company.