Infosys to redraft strategy, structure

India’s second largest information technology services company, Infosys, will enter the next financial year (2011-2012) with a renewed strategy and a new company structure.

The aim is to help the company address the changing global business environment and customer needs.

“We are seriously looking at a strategy shift. We are also thinking if this strategy change also requires a structural change. The new year is upon us and it will be a good time for us to start the new year with a new approach. We are definitely looking at a very important change that will address our go-to-market strategy,” said Subhash Dhar, executive council member and senior vice president and head of communications, media and marketing.

He said the change was a reflection of new global realities like downturn, emerging economies, use and acceptance of technology by average user and increasing adoption of mobiles, that in turn has impacted client priorities.

Earlier this month, market research firm CLSA gave a report that Infosys might need another restructuring of its business verticals and focus, not only to better address the customers but also take on competition from peers like Tata Consultancy Services and Cognizant. Industry officials had confirmed the company was looking at a three-part organisation to address issues such as large outsourcing deals, consulting & intellectual property, and innovation.

Shifts & scale
Other than changing market conditions Dhar said the need to review strategy also arose from the fact that this time the change was much larger. “It is not that customers were not talking about these trends. But now it is about delivery. Once you start talking about delivery, you need to re-organise yourself. From Infosys’ perspective, I need a group that can handle transformation work or a group that can improve their operations or handle innovation in process,” said Dhar.

The shift in customer demand is evident in the increased uptake that Infosys has seen in its ‘new engagement models’. Though this was launched two years before as an answer to the global meltdown, Dhar says this approach is getting good traction. “From 4.5-5 per cent revenue share two years back, this has now touched 11 per cent. In the last 12 months, we have seen acceptance of our model even in cases of large deals.”

There are two parts to the new engagement model proposed by Infosys. The first focuses on outcome-based pricing such as transactions, devices or trouble tickets that the company resolves. The second is pay-as-you-go and focuses on creating platforms using intellectual property. “There is an overall acceptance of the mode. In the past 12 months, we have signed five-six large deals contracted upwards of $40- 50 million under our outcome-based model. A couple of these are also in the $100-million range. The good news is that 50 per cent of our large deal pipeline have some component of our non-linear model,” said Dhar.

He said Infosys had been restructuring regularly. “Once in every three to four years, you need to relook at what the clients are talking about. And, see if only a strategy change is enough or a new structure is required to support that strategy. You also have to remember that we are a client-driven industry and any change in their strategy will make us also relook,” he added.

When asked if S D Shibulal, the current Chief Operating Officer, would take over as the next Chief Executiv e Officer, Dhar said: “Infosys has been transparent about management changes. As of now, the company is evaluating the Chairman’s position, for which we already have a committee. Murthy (Narayana-Murthy, founder-head) retires in August. As for the CEO’s post, I cannot comment. The current CEO will have to step down for any other person to take over.”