With India’s IT sector facing strong, and what many analysts believe structural, headwinds, the odds are stacked against Infosys, currently the weakest of the Big IT firms, being able to successfully produce a turnaround in its fortunes, according to an analyst with research firm Gartner.
In an exclusive interaction with CNBC-TV18’s Kritika Saxena, Gartner’s Partha Iyengar said a new strategy implemented by CEO Vishal Sikka was a ‘bold bet’ but it cloud the firm’s near- to medium-term outlook even more as it “ignored its struggling core business”.
For fiscal year 2014-15, dollar revenues for Infosys grew 5.6 percent, way below the industry forecast of 13-15 percent and below the firm’s own target of 7-9 percent. The picture of struggle was similar for other firms as well.
Analysts blamed the larger slowdown in the IT sector on a combination of two factors: slowdown in key sectors (such as telecom, energy and insurance) led to clients tightening their IT budgets, and emergence of smaller, nimbler rivals willing to go beyond the routine work of application development and infrastructure maintenance made deals harder to crack. (Last year, the impact of currency movements impacted growth as well.)
To arrest the sharp slump in revenue growth, now a story several years old, the Bengaluru-based Infosys last year hired Sikka, a former SAP board member who has promised to turn around its staid culture focusing on doing bread-and-butter work to one based on innovation, automation, and emerging trends in technologies such as social media, analytics and cloud (SMAC).
But Iyengar told CNBC-TV18 “bets were against Sikka’s strategy” given the scale of its revenues from its core revenues and how far it has come down in terms of revenue growth,
Sikka, who has promised to bring Infosys back to industry-level growth by FY17 but has provided only a vague outline of how he plans to get there, has made several changes to Infosys’ culture.
These include introducing design thinking-based training programs for engineers, trying to move away from its formal-clothes-and-tie culture, allowing employees access to previously-blocked social media sites such as Facebook, as well as articulating a more aggressive inorganic strategy focused on startups.
But these may clearly not be enough to steer the 1.76 lakh-employee strong firm, according to Iyengar.
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