Moneycontrol
Jul 14, 2017 09:14 PM IST | Source: Moneycontrol.com

Infosys CEO arrives in a driverless cart, firm to bet big on AI

The point of building the autonomous vehicle at Infosys' Mysore facility, CEO said was to re-skill and up-skill employees with new emerging technologies such as Artificial Intelligence.

Infosys today emphasized its focus on Artificial Intelligence as the future revenue driver, and to stress the point further, CEO Vishal Sikka arrived at the quarterly media briefing at it's Bengaluru headquarters in a driver-less cart developed in-house.

The point of building the autonomous vehicle at Infosys' Mysore facility, Sikka said was to re-skill and up-skill employees with new emerging technologies like Artificial Intelligence.

The company has trained 3,000 of its employees on AI, till now.

The company, which introduced an AI platform Nia in April, attributed 8.3 percent of the total revenues to the new services.

Sikka said that the company has been working on products based on new technologies since last two years, but started to report revenues from them starting Q1 of this year.

These services include Cloud Ecosystem, Big Data and Analytics, Cyber Security, and IoT Engineering Services.

Sikka also mentioned that nearly 50 percent of incremental revenues came from these services in last two years.

“We expect strong growth in the new services. It is deeply aligned to the priorities of the client that have gradually shifted to emerging technologies such as AI, cloud, machine learning, and so on,” Sikka said.

On cost optimization

Infosys on Friday reported a better than expected Q1 results.

Its profits for the quarter grew 1.4 percent to Rs 3,483 crore and revenue grew 1.8 percent to Rs 17,078 crore. The growth was a result of better efficiency, better utilization, and improved operation controls, which helped the company remain stable even as business remained muted in its main markets, such as North America.

The US market accounts for 60 percent of business for Infosys.

Infosys had posted a profit of Rs 3,436 crore on a revenue of Rs 16,782 crore in the same quarter last year.

Sikka said, the surge in revenue per employee in the last six months, reflects the successful implementation of optimization efforts.

The revenue per employee for Infosys stood at about USD 52,000.

“That is something I am quite happy about and that is a result of much higher utilization, much higher adoption of automation and all of these factors kicking in,” he said at the media briefing.

India’s USD 150 billion IT industry has been at crossroads as the growing popularity of robotics and automation among its key clients has forced the legacy companies to reinvent themselves.

Muted market sentiment

In terms of verticals, the banking and financial sector remained muted, as clients remain wary of US president Trump’s visa policy.

But the Infosys management is expecting the spending to pick up during the second half of the financial year.

“The overall sentiment is the same overall. The growth is muted, but there is positivity. TCS result reflects the same,” Sikka said pointing to its bigger rival.

TCS on Thursday reported a 10.1 percent dip in consolidated net profit on a quarter-on-quarter basis to Rs 5,945 crore.

The IT major had reported a net profit of Rs 6,318 crore in the corresponding quarter of last fiscal.

TCS’s operating margins were also muted at 23.4 percent, after a drop of 230 basis points sequentially.

The operating margin for Infosys also dipped, although slightly, to 24.1 percent.

The dip could have been higher with variable compensation and visa costs eroding margins by 140 basis points, while rupee appreciation cost another 80 basis points.

But some of that loss was offset by improved utilization at 84 percent, compared to 80 percent last year.

Forward projections

For the next quarter, the company said the operating margins can be anywhere between 23 and 25 percent.

Sikka said the projections have taken in account the impact of a 6 percent increase in average compensation.

“We will announce compensation hikes and we are also ramping up the US talent model, the training content and style,” the Chief Financial Officer of Infosys, MD Ranganath said.

Ranganath is now moving to the US to execute the company’s plans to hire 10,000 people in the coming few years.

Infosys is also setting up two new hubs in the US, in addition to two existing ones in Indiana and North Carolina.

“Hiring in US is not a reaction to their visa rules; it is more from the standpoint of business. The dynamics of technology are changing and it is a strategic move,” Sikka said.

In India, Infosys has extended offers of appointments to 19,000 people, who will join the company in the course of the year, in line with the company’s statement in June this year.

However, the consolidated attrition rate of the company increased to 21% during the quarter, ending with a headcount of 198,553. The total number of new employees who joined the company during the quarter stood at 8,645.
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