“In an open letter to the company’s CEO & MD S D Shibulal, brokerage firm, CLSA Asia Pacific Markets, voiced the collective dismay of 100 institutional investors seeking to know the company’s plans to correct the loss of revenues and earnings before interest and tax.
Infosys, which announced its fourth-quarter numbers earlier this week, missed its March 2012 guidance by 1.9-2.2 per cent. More importantly, its guidance of 8-10 per cent growth in FY13 shocked the Street, as it was lower than industry body Nasscom’s estimate of 11-13 per cent”
The investors are disappointed, the employees are agitated. Yet this remains a cash rich company ($4 billion as per the CFO) with a market cap of $26.5 bn with a respectable image. But what went wrong with the early player of the sunshine industry?
In this environment, Infosys doesn’t want to be a commodity player. Yet their premium offerings seem to be taking a beating.
But the reality remains that Infosys has large been an epitome of commodity business, with low growth. Ask an employee or a manager and the truth will be evident.
If the focus on pricing and the fact that most of the work done isn’t premium, where does Infosys head to? The company seriously requires a change of strategy. Like Cognizant and HCL, there is a need to cut prices, provide innovative solutions and look for acquisitions to unlock value.
An exodus of talent will only increase costs of service. However with low utilization levels, this may not affect the company much. In fact, the decision to indefinitely delay increments may have been a deliberate move to reduce lateral staff. And of course, it is possible to service commodity offerings with newer staff. However, any move in this direction will only tarnish the image NRN and Nilekani had worked so hard to build.
To an outsider, this is akin to anarchy in a giant after the founders have relinquished their management responsibilities.