Infosys becoming bellwether again, says chairman Nandan Nilekani

Industry insiders and analysts, while agreeing that Infosys’ performance has been industry-leading in certain segments for the past few quarters, have unanimously said that the firm has miles to go
Having regained lost ground and demonstrated consistent performance, Infosys has set its sights on the next goal — to regain the ‘industry bellwether’ tag. 

Even though it may still be some time away, the firm believes the strategy it has put in place and investments it has made in the past couple of years will help it achieve the target sooner than later.

Infosys is becoming the bellwether again,” Nandan Nilekani, chairman of Infosys, told Business Standard. He said the firm was already in the ‘best’ position before the pandemic struck, thanks to the investments made over the past 2-3 years. He also credited MD and CEO Salil Parekh for “doing an amazing job”. 

“He (Parekh) got the business momentum going and created a well-knit team focused on customers. The technology and investments made in the past made it possible to switch to the WFH environment quickly, while localisation initiatives ensured no visa dependency issues exist today,” added Nilekani, also one of the co-founders.

The term ‘bellwether’ is not used to refer to the best performer in terms of financial performance, but to the entity that leads or indicates a trend expected from the rest of the players. However, the IT industry’s performance over the past couple of years has been quite patchy, with hardly any uniformity seen among players. 

Industry insiders and analysts, while agreeing that Infosys’ performance has been industry-leading in certain segments for the past few quarters, have unanimously said that the firm has miles to go. 

“While it is tempting to do so, it is too early to describe Infosys as a bellwether again,” said Thomas Reuner, senior vice-president (IT services), HFS Research.
Despite macro-level challenges, he said, Infosys has stabilised and “under Salil (Parekh), the company is no longer the epicenter of gossip stories”. The firm has returned to solid financial results. 

At the same time, sound acquisitions and targeted investments have seen the company being seen as a trusted partner for digital transformation, added Reuner. “If it continues in steady waters, Infosys could indeed return to become a bellwether.”

After a slow start, Infosys under Parekh seems to be back in the ring with consistent performance for over eight quarters — both in terms of revenue growth and profit. Profitability has been maintained at the same level, while TCS — which currently commands industry-leading profit margin — has somewhat faltered on that front. 

The only other company to have come close to Infosys on these counts is HCL Technologies, though much of its growth is attributable to its inorganic play, including investments in buying intellectual properties (IPs). 

“Each IT service vendor has pursued a slightly different road amid the industry’s transition to digital, and Infosys has taken a road sharply focused on services,” said Hansa Iyengar, principal analyst (digital enterprise services) at research firm Omdia. “They have also made internal changes to become an adaptable, intelligent and digital business.” 

Among the first things Parekh did after joining in January 2018 was to turn inward to create the next line of leaders. The former Capgemini executive also laid out a three-year road map, saying FY19 was going to be the year of stabilisation for the company, while it builds momentum in FY20 and accelerates in FY21. 

The company, say experts, has so far stuck to it. “It is absolutely true to say that they have recovered some of their mojo and have being doing well under Nandan but they are a long way from regaining the dominant industry leadership they enjoyed when Nandan was CEO in his last tenure in leadership,” said Peter Bendor-Samuel, founder and CEO of Everest Group.

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