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The worst seems to be behind us: Infy CEO

January 13, 2010 09:35 IST
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Anticipating an economic recovery and renewed client demand in 2010, Infosys Technologies has stepped up hiring during the third quarter (October-December) of 2009-10. In an interview with Mahesh Kulkarni and Ravi Menon at the Infosys campus in Mysore, chief executive officer and managing director Kris S Gopalakrishnan says the BFSI (banking, financial services and insurance) sector is leading the recovery for the company and the demand is positive. Excerpts:

Are you satisfied with your margin growth during the third quarter?

We improved our operating margins 0.8 per cent, despite a negative impact of 1.8 per cent due to rupee appreciation. We expect to sustain operating margins within a narrow band despite the impact of additional recruitments, as well as rupee appreciation, which will be felt into the fourth quarter.

How would you rate the demand from your top 10 clients?

Overall, we saw clients who are far more confident about their businesses and how they have managed to steer their ships during the downturn. Client confidence is borne out by the clarity of their decisions, especially in the context of larger deals, which many clients have been pushing in the third quarter. In fact, larger deals are back. We have actually concluded a $200-million (Rs 913-crore) deal in the third quarter.

I would like to say the worst seems to be behind us. Offshore services are expected to grow in 2010. Even Nasscom feels the IT industry will benefit from the upcoming economic recovery. The year 2010 will be better than 2009. Our top 10 clients grew by 12.2 per cent this quarter and our clients are taking decisions much faster.

Do you see discretionary spending increasing in the next quarter?

Discretionary spending should increase as the recovery picks up. We won four large transformational deals in the third quarter and this trend should continue.

Budgets have been largely flat in the current financial year. What will be the situation after April this year?

Aasscom is predicting double-digit growth next year. We are optimistic about growth next fiscal and a rebound on the outsourcing front. I feel that the shift to growth is very good for the industry and job creation and overall exports from India.

What impact will an economic recovery have on your manpower costs?

With growth, we are still able to absorb salary increases and other manpower costs. There are two reasons for this - first, we continue to expand our sales teams in new markets. Second, relations are becoming larger and complex. As we grow, we are also delivering multiple services that require more engagement levels. More people are being taken in at consultant levels.

Analysts say demand in the BFSI sector has picked up...

Our share of BFSI is about 35 per cent. The sector is leading the recovery and the demand for us is very positive. Out of 32 clients, 14 are from the BFSI sector in this quarter.

How soon will the recovery come to other verticals?

Most of the verticals are seeing a recovery, except manufacturing, which will take more time. There is a lot more confidence about the recovery right now.

What happens to your US consulting subsidiary business?

Our consulting has been growing to touch 25 per cent of our revenues. Our transformational deals are led by consulting. This quarter, the consulting business won four multi-million dollar deals. We are looking at new areas like energy, healthcare, utility, public and the private sector, besides expanding in Germany, France, Australia and China.

With more offshore delivery happening, onsite revenues could come down. You had only 440 H1B visas in 2009 as against 1,000-plus for Wipro...

That was as a function of the decline in growth in the last 12 months. Second, we are recruiting a lot more people locally. So, if you look at the onshore-offshore mix, the shift has been only 2 per cent. And, we have always had a bench, which is strategic to us.

Our utilisation is 76 per cent, excluding trainees. Normally, we target 78 per cent. We do have the requisite bench to accelerate the growth whenever required.

Any new client retention strategies that you have adopted?

We have focused on building stronger relationships with clients, meeting their requirements better. They wanted more fixed price work. We have done that. We have to deliver quality, value to the services we provide. That was our focus during the third quarter.

Is your training budget likely to increase towards the end of 2009-10? Will you be able to meet your fresher/trainee hiring target this year?

Yes, we will spend more on training new recruits in the first quarter of the next year (starting April 1) than in the remaining months of the current year. We have so far hired 18,500 in the first nine months of the current year. During the third quarter, we recruited 8,700 people, while net addition was 4,429.

In the fourth quarter, we will add another 6,000 persons to take the total addition this year to 24,000, compared with 28,231 in the last financial year.

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