The Hindu Business Line : ‘Infosys competes on value, not on price, to drive growth’

Coimbatore, April 18 One of the core strategies of Infosys Technologies Ltd is to reduce the dependence on US for revenue generation and the contribution of Europe to the turnover of Infosys is moving up.

But the company is not competing on price to drive its growth and it is not going behind all kinds of deals, the senior executives of Infosys have affirmed.

Speaking at the conference call with analysts after the fourth quarter results (2007-08) of Infosys were announced on April 15, the transcript of which is available on Infosys’ Web site, Mr S.D. Shibulal, COO, Infosys, pointed out that the company was able to hold its margins despite the rupee appreciating by 11 per cent from last year average to this year average.

Less dependent on US

He said the company was “also seeing the results of our core strategies this year”.

He said the “core strategies” was to reduce the dependency on US and grow other markets. He said the US revenue had come down to 60.2 per cent from where it was last year and the share of Europe has gone up to 29.3 per cent from last year’s 26.4 per cent which was a substantial increase.

He said the Infosys’ `strategy of de-risking US and growing other parts of the world is working’.

The company was investing in other emerging markets and its investments include India, China, Japan, Australia, Canada, Latin America and West Asia. He hoped to see strong growth in these markets.

Replying to a question as to whether Infosys was competing on price to drive its growth, Mr Shibulal asserted that Infosys was “not competing on price to drive growth”. The company always believed that “we should try and get deals at the right pricing level’.

Mr V. Balakrishnan, CFO, Infosys, said the company’s long-term strategy was to “improve revenue productivity’. He said the company last year gave a guidance of 28-30 per cent that assumed pricing to be flat and 27.5 per cent growth in volumes and 2.2 per cent increase in prices, adding up to 30 per cent growth for the year. But actually, the company achieved 27.6 per cent growth in volumes, 5.2 per cent growth in price.

The company did multiple things-changing the business mix, trying to do more solutions and focusing on consulting and package implementation.

He said “we are not going behind all kind of deals. We are very particular about margins, we are very particular about pricing’ which has already reflected in the FY 08 numbers.

Asked about the kind of growth opportunities Infosys saw in Europe, Mr Shibulal said the company’s revenue from Europe had crossed 29.3 per cent this quarter and there were opportunities all around.

He said UK was “definitely a high opportunity” for the company and almost two thirds of the revenue from Europe came from UK and it was investing in Germany and Switzerland as well. Financial services was a growth area in Europe and there were other segments like aerospace, manufacturing and communications service provider and he saw the continent as a growth opportunity.

Stable pricing

Mr Kris Gopalakrishnan, CEO and MD, Infosys, commenting on whether the company was seeing any price under cutting, said he did not see a risk coming from pricing and Infosys was able to maintain its pricing.

Asked whether Infosys expected the MNC competition to be stronger, he said there will be competition whether it was MNC or captives or internal IT teams and he did not see a significant change in the scenario and it was always the same 3 or 4 companies with which it competes.

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