Making the Right Moves

Retaining its glory, the blue-chip company Infosys Technologies continued its growth run in the telecom vertical. Infosys made Rs 3,600 crore from its telecom business in FY 2007-08, a 34.3% growth over the Rs 2,681 crore in the previous fiscal. This can be attributed to the geographical focus of the company, thrust on several areas in the telecom vertical, and its ability to hedge against the weakening US dollar.

The increased thrust on telecom contributed 21% to the total revenue, way up from the 15% in FY 2003. In fact, telecom is the only vertical where contribution to the overall revenue has shot up substantially in the last five years. Looking at the break-up: 45% of the telecom revenue came from non-application development maintenance, IMS-testing, validation, and packaged implementation, while the remaining 55% came from core application development.

Infosys invested Rs 9 crore in OnMobile Systems, a US-based company, and Rs 2 crore in M-Commerce Ventures, based out of Singapore. The company made major changes in the top management effective June, 2007 with Nandan M Nilekani assuming the role of the co-chairman of the Board, S Gopalakrishnan becoming the chief executive officer and managing director, and SD Shibulal the COO.

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Infosys, which has 52 global development centers, has also reorganized its business units to anticipate changes in the global IT industry and differentiate vis-à-vis its competitors.

As per the reshuffle, Infosys business units were realigned, forming six vertical Industry Business Units and five Horizontal Business Units that cut across all the vertical units. The European business has been divided into industry verticals, which will be integrated within the proposed IBUs.

The restructuring helps Infosys broaden its customer base and strengthen its current portfolio through scale benefits. The new opportunities will leverage the strengths of the next generation of leaders at Infosys. The company also increased the participation of younger leaders in making company strategies. With this, the budding leaders below the age of 30 will be part of the management council of the business units.

The company has increased its focus on growth markets. A new growth engines (NGE) unit has been formed to expand businesses in Australia, China, Japan, the Middle East, Canada, South and Latin America. It has also formed a separate business unit to focus on India in order to tap the growing domestic market.

A whole revolution is taking place with digital content management

senior vice president and head of Communications Media and Entertainment (CME) Business Unit, Infosys Technologies

Subhash B Dhar

Address: Infosys Technologies, 44 Electronics City, Hosur Road, Bangalore 560100, India

Tel: +91-80-28520261 Fax: +91-80-28520362

Website: www.infosys.com

Highlights

Garnered Rs 3,600 crore from telecom business, a 34.3% growth
45% of the telecom revenue came from non-ADM, and 55% from core application development
Restructured business
Media and entertainment will be a focus area
Strengthened its India presence
Vendor consolidation is a key challenge

What were the trends and main orders that had impact on revenues coming from the telecom vertical during the last fiscal?

The communications services provider segment, as opposed to the equipment manufacturing sector, where we do R&D business as well, contributed to the growth of the telecom revenues. A small portion of the revenue came from the OEM business, and a majority from the communications services provider business. And, in terms of services that we offer to our clients, application development, enterprise solutions, packaged software solutions and infrastructure management services, and BPO would be the top contributors. In terms of geography, we have been relatively equally distributed across the world: 45% in the US, 40% in Europe, and 15% in the rest of the world.

Are you focusing on new markets, in terms of geography, and also increasing focus in India?

We formed an India Business Unit six months ago. Over the last couple of months we have been hiring people and putting together a small team. This business unit is looking at all industries and not just telecom-an area of interest-but it is too early to say what business and revenues we expect to see from this unit.

What would be the focus area in India?
In the rest of the world my unit drives the demand, but in India we are not driving the demand. We are taking care of the supply. The India Business Unit will go and drive the demand. We see a lot of interest from the Indian telecom industry as well for Infosys services.

What about significant trends in the global telecom market?
Some of the trends continue from last year-large network transformations from circuit switched to packet switched, something almost all large telecom operators are going through, and there is a lot of demand for technology equipment devices and applications.

The second is the explosion of devices thanks to wireless and broadband. Both heavy growth areas are driving the demand for devices such as handheld and set top devices.

The third trend is on the content side. Now that pipes are getting ready and networks are built, telcos are thinking about what to do. Unfortunately, content is not ready. Either it is not digitized in tapes or not available for distribution in the digital ecosystem. The whole digitization process has picked up across the world and a whole revolution with digital content management is taking place.

Media and entertainment is a focus since the latest reorganization.

What will be the impact of recession?
It is unlikely to affect the percentage of revenue from the telecom vertical. As to how recession has impacted us from a decision-making perspective, we are seeing that in the last few months decisions are happening slower than before. More approvals are required for the same decisions that took fewer approvals in the past. But we have not yet seen any cancellation of projects, or indications that we will see fewer projects. We have not seen any price reduction requests, so there is no need to panic. There are some requests for extending the payment terms, but that is coming from the credit squeeze situation.

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