 "Infosys conference call transcript")
Overall, the company continues to show signs of recovery at the operational level.
In a conference call with analysts, the Infosys management answers questions.
Implied guidance implies revenue decline; is that conservative?
S D Shibulal: It is not about being conservative, it is what we see today. Q4 is a weak quarter and client budgets have to close and translate into orders. We will be in the range of guidance.
Over the last two months we are driving efficiency and achieving higher growth and margin. We felt that a wider set of people participate in deliberations, as a result we appointed the executive council. Now we have presidents and they will put in place their governance teams.
Why was the Executive Council disbanded after appointing it a few months ago?
N R Narayaana Murthy: We have had several intitiatives on the anvil to make Infosys a better company. A few of them completed their seclusion. As a man in a hurry I wanted to get on with the job and when the recommendation on expanding executive council came I said let's do it. When the recommendation on the two presidents came, our review demonstrated that this new structure with the kind of governance structure they will put in place would render the executive council redundant. We had to take the tough decision to disband'the executive council.
Offshore shift and cost efficiency measures, could you give details.
Shibulal: We have made some progress and will continue in this journey. New automation, customer comes first etc. On the specific industry verticals as far as shift to offshore from onsite is concerned, all of them have seen improvement.
What are the reasons for negative headcount additions and comfort with lateral addition?
Over the last six months we have done many things to ensure our employees are happy. We will continue to work on it. We are looking at the next cycle of promotions.
Details on large deals signed? Revenue per clients has been falling, what is the reason for that?
Large deal pipeline is decent and we have not seen any shift either way, we have had good wins. Three in Europe and a couple in the US as well. Two US deals in vendor consolidation and we grabbed them. Looking forward, we continue to see momentum in large deal wins. This is driven by client focus on efficiency and cost optimisation. The other area we see activity is digital transformation.
We are broadbasing our clients. We added 112 new clients in the last year. We are broadbasing clients. Most of the other parameters are stable. We are broadbasing clients which is what is resulting in falling revenues per client.
Are you open to review the process of two president structure?
Shibulal: We believe this will allow to create market velocity. BG will focus on global market and Praveen will focus on delivery.
NRN: We had considerable deliberations and consulted stakeholders. We arrived at the conclusion that having two presidents -- one on markets and other on delivery -- is a good option. We will study this and give this structure time to prove. We will change it if it is not working. Our priority is to make this a high performing organisation. This will create an opportunity for nominations committee to consider internal cadre of people along with external candidate for selection of CEO when Shibulal retires. It has created platform where it will be easy for nomination committee to consider internal candidates.
String of high level exits and also at other exits at the critical level
NRN: Infosys was the first Indian company to set up a leadership institute. We have a three-tier programme and these three tiers have developed approximately 600 leaders. If you look at this room, I see a set of extraordinary people most of them in in their 40s. We have a large number of enthusistic and energetic people who report to people in this room. As far as the future of this organisation is concerned, that future will not be compromisedfor leadership.
As far as the exits are concerned, let me make a cryptic comment -- It is good for them and good for the company and we wish them the best as they have added value to the organisation.
At this point, the third lever of cost optimistion working well. When do you think, delivery and sales effectiveess will kick in?
NRN: In my AGM speech I did say cost optimisation is one of the initiatives that will yield results earlier (6-18 months) than the two. Sales effectiveness will take 9-21 months but delivery effectiveness will take 12-36 months.
When can Infosys reclaim leadership position? How can margins move?
NRN: We give our guidance once a year and then revise it every quarter. I cannot make any statement on specific margin movement. I can say that I see can-do spirit and joyful faces. We have been working on several initiatives both in area of sales and delivery effectiveness.
Rajiv Bansal, CFO, Infosys: I expect long term operating margins at 25-26%. A lot of changes are happening in technology space and in the medium term 25-26% OPM is good till we need to invest in the business again.
Will you revert wage hikes to the April cycle?
NRN: We all believe we would like to move back to the April cyle. Our desire is to move back to the old cycle as far as wages are concerned.
How were large deals in Q3 and how is the traction?
In the last many quarters, we have driven productivity and automation. This has helped us as far as large deals are concerned.
What was the TCV (total contract value) in Q3?
The TCV in Q3 was $500 million.
And budgets?
Budgets are expected to be flat even though environment is improving. Clients are however focused on cost optimisation, which helps us. The softness in US revenues is not a secular trend.