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| Infy's US strategy caught between aspiration and reality |
| Bibhu Ranjan Mishra / Bangalore Sep 05, 2010, 15:49 IST |
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Company plans to keep US revenue at 40% as against present 66%; but US growing faster than others post slowdown
Infosys has time and again expressed its desire for reducing exposure to the US market. But each time it vows to do so, the US market grows even more stronger.
CEO and MD S (Kris) Gopalakrishnan recently trotted out the same old cliche, but with a specific figure. “We are proactively investing in increasing our non-US business. Today, about 65 per cent of our business comes from the US, but we want to get a ratio of 40 per cent. This is not by reducing the US business, but by growing other geographies faster,” says Gopalakrishnan.
But it is not as easy as it sounds. And Kris himself knows that. While talking to analysts after its earnings call in January 2008, Infosys’ top management had announced that the plan was to bring down the US contribution to its total revenue to around 50 per cent. But the slowdown of 2008-09 changed everything. While it was the first among global economies to show signs of recovery, the US’ contribution to the country’s second-largest information technology (IT) service provider’s overall revenue went up further after the downturn.
“It’s a challenge before us. That’s why we have not set a time frame for this – it’s directional,” says Kris. “It (to keep US revenue contribution at 40 per cent) is difficult because the US is the best and the most dynamic market. In this recovery itself, US has done better than other geographies,” adds the Infosys co-founder.
Before the downturn, the contribution of the US to the Bangalore-based company’s overall revenue was 60 per cent and now, it stands at close to 66 per cent. But the share of Europe has further come down, though the company attributes it to a weak euro. Infosys’ Europe revenue share in the last quarter came down to 20 per cent from 29 per cent earlier.
“Europe is expected to grow much slower than the US in next few years, and it’s because of the way they reacted to this downturn. The US has reacted more aggressively, so they are starting to recover much faster,” explains Kris.
Infosys agrees that the US market continues to remain at the centre stage for most Indian IT service providers, despite the new wave of protectionism measures. There are still a lot more untapped opportunities in the US market for Indian IT services providers. Infosys, for example, serves about 130-odd Fortune 500 companies in the US. “So, there is still lot of opportunities to grow in the US market,” says Kris.
“US continues to be the best market for technology-related services. US also adopts new practices fast. When offshore was introduced, US was the first to adopt that and use that model. That’s the reason why US will continue to be the largest and one of the important markets for us,” he ends.
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