While the road to recovery from a recession in the US, India’s top software market, is bumpy, the industry’s second largest player, Infosys Technologies, is changing gear in line with both the economic reality and fundamental shifts in technology.
Infosys Chief Executive Officer (CEO) S. “Kris” Gopalakrishnan told Hindustan Times in an interview that the company is gradually shifting focus from the traditional application, development, maintenance (ADM) model that has low profit margins to new engagement models that emphasise on scale and pay-as-you-use platforms that heralds a march to computing as a service on the Internet “cloud,” much like electricity that is billed by usage than project billed by the hour.
The company expects 33 per cent of its revenues to come from the new engagement models in the next 5 to 7 years, from a less than 5 per cent at present. Excerpts from the interview.
On recovery in the US market and IT spending
There is a clearly a signs of a recovery. But there are concerns about its sustainability and whether there are factors that would make this an up-and-down kind of a recovery. We have had this problem in Dubai and there have been concerns about its impact on institutions. It is better to be cautious.
If you look at the budgets, it would remain flat. Last year, the budgets were cut by 6 to 8 per cent and companies were scrambling around which ones to cut. This year some clients are already indicating that offshore costs should increase.
On whether the traditional software development model is waning
Companies that had built excess capacity and utilisation levels have come down. Therefore, there was some reaction to the downturn as companies were looking for volume growth. It may be too early to say it is getting commoditised. Application development is still a very sophisticated model.
On scalable models in new industry landscape
It has increased during the downturn. We do expect (demand for) platform and cloud (computing) based services to increase in the future and that is the reason why Infosys has created solutions around it. We have clients already engaged with us where we provide services using this model. We have about 84 clients on the new engagement model.
On hiring and salary increases
We are hiring and we will increase our hiring, that much I can tell you. We gave out an average salary hike of 8.5 per cent in October in India. This is a widespread salary increase. I do not know about next April. We have to wait and see.