Infosys 3.0 strategy is not the problem; it could well be the solution

After Infosys disappointed everyone with its outlook, voices questioning the future of the company have got louder. At stake is not just the company, but a whole new business culture that it engendered.

This once-undisputed thought leader of Indian IT seems to be completely directionless. I use the word directionless consciously because more than its actual performance and even future guidance, it is the vibes that the company is sending out that is particularly worrying. Some of these are in stark contrast to what Infosys has stood for and championed all along.

First and foremost is accountability. “Uncertainty continues in the broader economic environment. We are living in a very fragile environment,” said CEO S D Shibulal, in the earnings call with analysts.

That is as vague a reason as it could be. The situation is nowhere near what it was in, say, 2008-09. Certainly not so bad as to identify that to be the most important reason for its performance. A bad economic environment would affect all companies. But peers TCS, HCL and Cognizant have done far better in the last few quarters.

Second is its inability to give margin guidance. Sure, it’s not an industry norm. But for Infosys, which has clarified time and again that, margins, not growth is its No 1 pursued objective, that is a huge shift.

Third, and the most troubling, is Shibulal’s ‘admission’ that adoption of Infosys 3.0 has been affected by the volatile environment. (Never mind, in as late as October 12, he had claimed that it has truly started to roll). The subsequent conclusion by media and analysts has been that implementing its 3.0 strategy at a time when things are not going your way is a big mistake and that has affected both the performance of and sentiments about the company.

Is Infosys 3.0 the real culprit?

Infosys announced the intent to go for what it called Infosys 3.0 in late 2010 and spelt out details of it in May 2011. This was the first holistic differentiation strategy statement to come from Infosys, at least post-2000. It may sound surprising that the company that has given us so many radical management ideas — from HR to organisation culture to B2B marketing — did not have a positioning statement as far market diffentiation is concerned.

Despite certain criticism, not the least of which was around timing of the announcement, Infosys 3.0 was a fairly balanced, though a little progressive, statement of intent. Its articulation of client needs was fairly good, when it said that Infosys needed to consolidate its services around operate, transform and innovate. It also consolidated all its verticals into four major groups and identified seven new themes around which to play. They were digital consumers, emerging economies, sustainable tomorrow, new commerce, healthcare economy, smarter organisation, and pervasive computing. Each of these was contemporary to slightly futuristic.

And then, somewhere it lost the game. Though it quickly rolled out a few platform-based solutions and won quite a few deals around these, for some strange reasons, most of the major deals it signed around these themes — especially digital consumer and new commerce — were with new customers and rarely integrated solutions with traditional IT services, or combining what it says operate, transform and innovate.

In effect, all these new wins were point solutions and made good news headlines, but hardly affected Infosys’ overall transformation. Probably it was a conscious decision not to upset the apple cart in the traditional annuity-based business while adding clients in new areas. To be fair to Infosys, it has not done a bad job in the latter. But in pure value terms, that has not been able to push up the overall topline too much, because traditional business has been impacted by pricing pressure, as the company has admitted.

Infosys 3.0 was never meant to be a repair formula; it was a transformation strategy. Measuring its success through the yardsticks of the former would lead nowhere. Of course, that has to be clearly communicated to the investors.

In effect, the problem is not Infosys 3.0 as a strategy but the less-than-enthusiastic approach to implement it. Probably it is time for Infosys to shed that ambivalence about something which it decided on after a lot of research and deliberation.

One of the biggest proofs of that dillema has been the lack of thought leadership from Infosys on its identified themes such as emerging economies, new commerce and digital consumers.

Unlike peer Wipro, Infosys has always had a marketing led approach. That is missing in these new areas. In fact, the focus has been too much on tactical closing of sales and showing a number of wins in these areas.

What stops Infosys from studying the Indian organised retail market and telling potential clients the pain points to avoid? Or doing similar stuff around the new media market in Brazil? That would restore its image as a thought leader in its chosen areas of new commerce, digital consumer and emerging markets.

An overhaul is due at Infosys. Thankfully, it does not have to scout for ideas now. Infosys 3.0, a very good framework, is already with it. It just has to be less ambivalent and reclaim its thought leadership position in the new areas it has identified.

Das is director and head, business research,at Juxt, a research-based advisory firm