Infy tries to offshore more work to woo large clients

CFO Rajiv Bansal says as pricing under pressure, cost rationalisation to help winning large clients

Infosys, the country’s second largest information technology services company, is looking at ways to reduce onsite cost burdens.

The Bangalore-based company, striving to return to sustained growth, is looking at different ways to reduce the cost structure, aiming to win large clients, said Rajiv Bansal, chief financial officer (CFO).

“If you compare us with competition, we were always 10-15 per cent more expensive, and the client gave us that pricing premium because of the quality that we delivered. With a lot of procurement decisions now moving from the CIOs (chief investment officers) to the CFOs, pricing is becoming critical. Our cost structure today is based on the pricing premium we used to get, so we have to relook at it,” he said at the Wells Fargo Investor Conference in New York on Wednesday.

He said their cost optimisation drive was aimed not only at improving prfits but to also make them more cost-competitive, to win large deals.

After his return to the company in June, as executive chairman, N R Narayana Murthy has taken a number of initiatives, including this drive on costs. This initiative is directly driven out of the chairman’s office.

Bansal said a number of steps were being taken in this regard. Among others, the company was going to relook its staffing model, the onsite-offshore mix, quality and productivity improvements with increased automation.

“Today, our onsite effort mix is 30-31 per cent. Around eight to 10 years ago, this used to be 35-38 per cent. There is potential to reduce it further to 25-26 per cent, reducing costs further,” he added.

<b>Infosys 3.0</b>
Murthy had said the company’s focus would be to position itself as a high-value consulting entity (the Infosys 3.0 strategy) but this was a long-term goal. It has to now focus on the bread and butter application, development and maintenance (ADM) business. This accounts for a little more than half of Infosys’ overall revenue and is price-sensitive as well.

“We somehow were not as aggressive on the ADM business. There were a lot of large opportunities in that space,” said Bansal. “After the financial crisis, this business became more competitive. The price points started coming down, price became the key point for decision making, and somewhere we didn't adapt ourselves to this. That's where we missed the bus.”

He said Infosys 3.0 was the right strategy in the long run to reposition the company. “If the discretionary spends start coming back, I think we would be in a very strong wicket to move up the journey very fast in our revenue profile.”