Friday, February 15, 2013

Infosys chairman on why 2013 will be a better year than 2012


In an interview with ET Now, S Gopalakrishnan, Co-Chairman, Infosys, shares his outlook for the IT sector. Excerpts:

ET Now: People believe that the Nasscom outlook for 2013 is marginally positive, but that is not a great improvement. Is 2013 really going to be a year of turnaround or are we only going to see incremental growth? Is that going to be new normal for the industry?
S Gopalakrishnan: 2013 is going to be better than 2012. Now, how much better it is, is difficult to say at this point because the external environment continues to be uncertain. It is positive and we need to leave it at that at this point. Is it a turnaround? Probably yes, because I believe that 2012 was the low point and things should improve. A lot of uncertainties which were there in 2012 are no longer there. There is no concern about Europe breaking up. There is no concern about the election in the US. The growth has come back in China. India may also see growth coming back now. So, a lot of uncertainties have gone away and that is the reason why I believe 2012 was probably the low point.

ET Now: But in terms of the budget's visibility, are we at a better position compared to 2012 in terms of the demand that is coming out, the deal pipeline that is there for companies?

S Gopalakrishnan: If you look at our own outlook at the end of Q3, the deal pipeline is strong and there are significant wins in Q3. So things are at a better position than 2012. Now, having said that, the uncertainty is still not over. There are concerns about long-term investments. Most of the investments that we are seeing are short term. The budget may not completely get utilised, if something happens. So, those uncertainties still remain.

ET Now: You mentioned how Q3 gave a very positive outlook. Is that momentum going to continue? Is this going to be the year when that 3.0 strategy really starts paying off huge dividends for Infy because last year was still a year to get this in place, if you can get your view?

S Gopalakrishnan: So 3.0 strategy is already working. If you look at our platform revenues and the pipeline for platform, it is growing. We already have about $600 million worth of orders which we have received for the platform solution. So definitely 3.0 strategy is working. The consulting piece is working. Now, it will take time. Every time we come up with something new, it takes about three to five years to see significant impact on the bottom line and the top line because the base is very large. So, even when we look at billing of 100 million in a base of about 7.4 billion, it takes time to see the impact.

ET Now: And in terms of hiring, everyone in the industry is talking about how it will not be able to hire on huge numbers as before. If you can give your view on that and also what impact is likely to have on salaries, are we going to see an overall moderation of wages in the IT sector?

S Gopalakrishnan: If you look at what happened in 2012, Nasscom numbers, for example say 1.7 lakh people got additional jobs, are significant. In this environment, 1.7 lakh jobs are being created and these are good paying jobs. These are jobs that are created primarily for graduate. Under these circumstances, I would rate this very good.

Now, even if the industry grows at around, let us say, 12% to 14% in 2013, an additional 1.7 to 2 lakh jobs will be created, and that is very significant. There are very few other sectors that are creating that many numbers of new jobs. I am actually optimistic. Having said that, of course we are about 7,00,000 to 8,00,000 graduates coming out, means that many of them will have to look for jobs in other sectors rather than just the IT sector. So there is some positive news in this, but it also means that the other sectors will also have to grow for the job scenario to improve. This is where I look at the overall growth of the Indian GDP. We need to get the growth back to 7-8%, which seems to be challenging right now. We all need to work together to see the growth goes back to 7-8%.

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