Infy to limit engaging high value clients

Infosys plans to limit revenue from any single client to a maximum of 10 per cent of the total revenue.

According to the company's annual report for FY 2005: "We rely on repeat business based on the strength of our client relationships and a major portion of our revenues come from key existing clients."

"As the size of the client increases, it limits our pricing flexibility, strengthens the client's negotiation capability and reduces the ability to govern the relationship for mutual advantage," it added.

Consequently, the company plans to actively seek new clients to reduce client concentration levels to enable growth. Last fiscal the company added 136 clients. Total clients as on March 31 was 438 (2004 -- 393 and 2003 -- 345). It added 119 in 2004 and 92 in 2003.

Clients accounting for over 5 per cent of its revenue has remained one for the last two years and was two in 2003.

Top clients' contribution to revenues has remained between 5.5 per cent and 5.8 per cent. Top five clients' contribution to revenues were 21 per cent in 2005, 22.6 per cent in 2004 and 23.4 per cent in 2003.

Top 10 clients' contribution to revenues were 33.60 per cent in 2005, 36 per cent in 2004 and 37.30 per cent in 2003.

Over the years, high-value client concentration shows a declining trend. For the financial year 2005, the number of clients with revenues of $1 million was 166 (2004, 131 and 2003, 115), $5 million, 71 (2004, 51 and 2003, 41), $10 million, 42 (2004, 25 and 2003, 16), $20 million, 19 (2004, 12 and 2003, 9), $30 million, 11 (2004, 6 and 2003, 3), $40 million 8 (2004, 4 and 2003, 2), $50 million, 5 (2004, 3 and 2003, 00), $60 million, 3 (2004 and 2003, none), $70 million, 1 (2004 and 2003, none) and over $80 million, 1 (2004 and 2003, none).

Also, the business growth of these large clients, their own profitability and changes in IT strategy have the potential to adversely impact the company's revenues and profitability and increase credit risk.

However, large clients and high repeat business lead to predictable revenue growth and lower marketing costs. "Therefore, to strike a balance, we have chosen to limit the revenue from any client to a maximum of 10 per cent of total revenue," the annual report said.

The revenue forecasting process were further honed by strengthening account-level focus. The company has made significant investment in developing competencies of engagement management roles through the Infosys-Trusted Advisor to Clients programme.