But there's a big difference between impossible' and hard toimagine'. The first is about it; the second is about you!
Marvin Minsky the father of Artificial Intelligence
Three years ago when I met the Board of Infosys for the first time I articulated ourlong-term strategy for 'the second-third' a vision for the next 33 years of ouriconic globally respected company. It was a crucial time in the history of our companyand a turning point in the IT services industry as we knew it. The technology- ledtransformation of our world and indeed our every experience was becoming strikinglyclear. Our company was already facing the challenges that come with lower differentiationand subdued growth relative to peers.
The second-third had to be not only about addressing near-term challenges butespecially about charting a new path that keeps us resilient and relevant in this age ofsoftware-driven business innovation; a path into higher-value work that leveragesautomation and transcends it a path into entrepreneurship where problem-finding comesfrom our uniquely human ingenuity. We articulated this strategy as Renew' andNew' on a foundation of creativity and education software and servicescoming together in a culture of innovation to deliver unprecedented value to our clientsour stakeholders and the world around us. The next 33 years had to be and have to beabout being more about helping clients transform themselves for their digital futuresembracing artificial intelligence (Al) and becoming the masters and orchestrators oftechnology disruption rather than the victims of it. Our confidence for a successfultransformation of Infosys would be steeped in the intellect learnability and strong valuesystem of our company of every Infoscion.
As I write this letter three years into this exciting journey this transformation hasstarted to reveal itself. In fiscal 2017 the results of our client survey showedsatisfaction levels at their highest in the 12-year history of the survey with asignificant improvement in CXO satisfaction scores. Industry analysts have endorsed thedifferentiation of our offerings including NelsonHall for our services offerings bothrenewed and new; IDC HfS and Forrester for Infosys NiaTM our new AI platform.Revenue from software-related services including Infosys Nia Edge Panaya and Skavagrew by 42% in fiscal 2017 at a much higher Revenue Per Employee (RPE) than the rest ofthe company. New services such as mainframe modernization cloud applications andinfrastructure enabling the API economy Internet of Things cybersecurity digitalexperiences and complex analytics showed rapid momentum with clients. We have been able toattract excite and retain high-quality talent as evidenced in the addition of top talentand the decline in employee attrition. When I started our attrition was quite high;standalone attrition was at 23.4% in Q1 of fiscal 2015 and 18.9% in fiscal 2015; in Q1 offiscal 2017
it was 15.8% and 15.0% overall in fiscal 2017. Attrition among top performers themost important metric we track in evaluating attrition is now in single digits.
All this resulted in us crossing the US $10 billion revenue milestone. In fiscal 2017revenue grew 8.3% in constant currency and for the second year in a row our growth hasbeen in line with industry peers. We won US $3.5 billion in large deals includingcommitted value deals as well as framework deals in fiscal 2017 and added five more US$100 million client accounts in fiscal 2017 bringing the total number of US $100 millionclients to 19. Operating margins have remained stable within our stated band of 24%-25%despite pricing headwinds and employee wage increases. Revenue per Fulltime Employee (FTE)increased by 1.2% as a result of automation utilization and productivity improvements.Automation itself released about 11000 FTE worth of effort through the year a cleardemonstration of how software is going to play a crucial role in our business model.
At the same time we relentlessly focused on optimizing traditional operating leversand costs.
Employee utilization excluding trainees reached high levels of 81.7%. We realized thehighest levels of net operating cash flow at US $2.1 billion for the year. We approved acomprehensive Capital Allocation Policy after taking into consideration the strategic andoperational cash requirements of the company in the medium term.
We continued to strengthen our management team with internal promotions to create fourpresidents including the appointment of Ravi Kumar S. as our Deputy COO and the additionof Pervinder Johar as the CEO of EdgeVerve. We strengthened our organizational structureby establishing industry sub-segments for agility in the market and for creating moremanagement bandwidth. There is now more ownership and accountability across theorganization at the middle and senior management levels in contributing toward key companypriorities.
Fiscal 2017 also brought with it environmental challenges such as rising protectionismaccelerating commoditization elevated client expectations and new competition.Internally we had challenges to bring stability to our consulting business and growth toour Finacle and BPO businesses. But amidst all of this it behooves us to stay focused onour longer-term mission to drive rapid growth in software-led offerings to capture demandin newer service lines and to renew our core services a mission to deliverconsistent profitable growth for the benefit of all our stakeholders.
Renewing our core services and growing new services
During the last fiscal we grew multiple new services in the areas of cloudapplications and infrastructure mainframe modernization to cloud cybersecuritydeveloping new digital end-user experiences advanced analytics and data scienceengineering services and Internet of Things and many more. These services represent arapidly growing portion of our incremental revenue each year demonstrating our continuedrelevance to the transformation of our clients' businesses.
We continued to renew our core service offerings largely work in maintenanceoperations and run areas by driving automation agility and innovation into every serviceline.
In March 2017 we celebrated two years of our Zero Distance program which continues todrive grassroots innovation in every project finding new value for clients. The programhas generated more than 15000 ideas and implementation of more than 2000 innovationideas for clients. Our focus now is on further elevating our innovations includingturning these into scalable intellectual property for us.
In May 2017 we announced our plans to hire 10000 American technology professionals asInfoscions over the next two years. Indiana is the first of four hubs where we will builda strong local presence with a focus on education and innovation in areas such as AI BigData and more. This journey to increase our local hiring efforts first started in thefall of 2014 with our endeavor to hire 2000+ visa-independent talent into our workforce.It was further elevated by the inspiring work being done by the Infosys Foundation USA tohelp bring Computer Science education to the masses and close the gaps with the skills ofthe future. In its first two years more than 134000 students over 2500 teachers andalmost 2500 schools across America have benefited from high quality computer sciencetraining and classroom equipment funded by the Infosys Foundation USA.
Driving rapid growth in software-led offerings
On April 26 2017 we launched our next-generation AI platform Infosys Nia converging the Big Data / analytics machine learning knowledge management and cognitivecapabilities of our first-generation AI platform; the end-to-end robotic processautomation (RPA) capabilities of AssistEdge; advanced machine learning capabilities ofSkytree; and optical character recognition (OCR) natural language processing (NLP)capabilities and infrastructure management services. Infosys Nia builds on the strongadoption of our AI and automation capabilities over the last year with more than 130client engagements and strong analyst endorsements.
With Infosys Nia we have the ability to deliver both IT operational efficienciesthrough automation and drive breakthrough business scenarios bringing the power of AI ina purposeful way to our clients' most complex business challenges. For example helpingclients keep pace with increasingly more sophisticated fraud and enabling agility inaddressing new regulatory compliance requirements.
Our other software offerings Skava Edge and Panaya are all seeing strong tractionand we continue to invest in expanding their capabilities. We have brought all of oursoftware offerings under Pervinder's leadership to leverage knowledge and synergies tohelp scale this new frontier for us to great new heights.
In fiscal 2017 we made six new investments in startup companies working in AIautonomous unmanned vehicles data insights cloud and more all areas relevant toour and our clients' futures thus extending the innovation we bring to our clients.
Building a culture of learning creativity and purpose
To strengthen the bedrock on which all of these initiatives can thrive we continued tofocus on the most important aspect of our transformation our culture. To move fromsolving the defined problems to finding the unknown problems requires a deep sense of ourown abilities both in the things we know and the things we are yet to learn and thebelief that we can learn anything. Design Thinking training now at more than 135000Infoscions helps give Infoscions the creative confidence as well as the tools to goafter our clients' big problems in agile and tangible ways.
In learning and education we continued to work towards empowering employees in thecritical skills of our future such as AI and Machine Learning and developed completelynew programs in these technologies that have now been delivered to more than 1300employees with several thousand more to be trained in the year ahead. We have made ourcurriculum immersive through our 'flight simulator' and other experiential trainings withover 20% higher engagement levels. We have instituted a program to train all new hires inthree programming languages (17000+ employees have already gone through this program)giving individual employees confidence in their 'learnability' and giving Infosys a muchmore agile way of looking at the talent pool of the company. We have created new learningplatforms to meet the varying needs of Infoscions including the Digital Tutor sociallearning platform and the Infosys Learning Platform.
In employee engagement we continued to revamp our employee rewards programs to focusmuch more on performance. In a modern innovation-driven company every employee must bemeasured on performance. In fact the best and most talented employees want to be measuredon performance not role maturity or tenure or other factors.
It is about performance and rewarding those with the passion entrepreneurship and theimagination to help drive our transformation. As part of this In fiscal 2017 weintroduced our stock incentive plan for top performers covering approximately 25% of mid-to senior-level employees. It has been my personal endeavor since joining Infosys toenable all employees to share in the successes of the company and In fiscal 2017 we madethe first step of this a reality. In addition we restructured the compensation of seniorleaders to be more performance-based with a significant portion of their compensation nowcoming through stock incentives creating a more direct alignment with the interest ofshareholders.
Finally we continued to be a purposeful contributor in our communities particularlyin India and in the U.S. In fiscal 2017 the Infosys Foundation continued its great workin the areas of eradication of hunger and malnutrition promoting education art andculture healthcare destitute care and rehabilitation disaster relief and ruraldevelopment projects with a focus on solving social challenges and accelerating economicgrowth. Key projects included initiation of the construction of an Akshaya Patra high-techkitchen at Hyderabad sanitation and water storage projects in Chennai donation ofmedical equipment to the Vittala International Institute of Ophthalmology support ofcomputer education in schools in multiple states pan-India relief support to martyrs andex-servicemen and contribution to the Swachh Bharat project among many other impactfulinitiatives. In the U.S. we have had a tremendous impact on our communities in helping toempower and enable teachers and students alike as I mentioned earlier.
As we look ahead to the next 33 years I deeply believe that we have the ability tocreate and shape the technology disruption that is in front of us. And why not? Infosyshas always been a technology company with the best and brightest talent from India andfrom around the world. The very people who over the last 35+ years have built managedand maintained the mainstream systems that we see today. We are exactly the people who canlearn the technologies that will transform the world around us the people who can learnto be the innovators not the bystanders not the order-takers not the ones optimizingthe past but the ones who find and deliver the great breakthroughs for the next 33years. The ones who leverage technology to fulfill our own unlimited potential and helpothers find theirs as well to shape a better world at a time of pervasive global anxietyabout the future of jobs and indeed the future of our humanity. We can be thenext-generation services company as differentiated and iconic as we once were a companythat admires its past and builds on it or we can be a somewhat improved but dyingprevious- generation company that is mired in that past. It is within us to embrace thetough choices and to move headlong unabashedly into creating great new futures. Our workin these early years of our transformation is leading us along this path. It will continueto be a challenging Journey but it is one worth fighting for.
| ||Dr. Vishal Sikka |
|Palo Alto ||Chief Executive Officer and |
|May 19 2017 ||Managing Director |