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ShareIn 2007, Subhash Dhar, executive council member and head - communications, media and entertainment business of Infosys Technologies, India’s largest IT firm by market capitalisation, was chosen by the World Economic Forum as one of the 25 Young Global Leaders from India.
In a candid conversation with Amit Tripathi, Dhar, one of the next-rung leaders at Infosys, shared some of the new approaches being adopted at the firm:
What is this New Engagement Model that Infosys recently announced?
Well, I would call the new engagement model (NEM) more appropriately as ‘alternate engagement model’ because the word ‘new’ is relative. Traditionally, our business has been dominated by time and material kind of engagements. We work on time and material with our customers. We may carry larger responsibilities in the projects, but pricing relationship is dominantly time and material.
It works for both — for us; for them. But it’s not necessarily aligned to making the industry more efficient. If you are billing me your time, inherently you will be less productive because the more productive you are the more revenue you lose.
This is something, which has been discussed for a long time. I think there are other ways to counter that. Some of our customers in the developed world try to force productivity clauses in the contract saying “whatever you did this year you will do better next year.” But we still don’t know whether this is the best model. Because one model works for us, one model works for them.
If it is purely time and material, it works for me very well. If you started posing forced productivity improvements every year without knowing whether it is even possible and not allowing me to reduce team size — because every time I reduce team size I get penalised by lower revenues — it really works against me.
So I have to have these ten people on the project, no matter what, year on year, because it’s a maintenance project. But I have to give better productivity every year, which means everybody has to do more, and not every project we can do more in, because some of these projects just need so many people to be done. So, in a way, it either becomes a win for me or for them. And it is always a struggle and it is going on for some time.
As customers want more for less, and this has become a reality than talk, we have seen customers are more open to discuss a win-win model. It is harder to implement because changes need to happen on both sides. And whenever there is change, there is discomfort with that change. These are times when customers are saying “we are willing to change as long as you are willing to change.”
That is one big part of our new engagement model where we are saying we will get paid for results and not effort. Yes, some could be effort but some part has to be results. ‘Pay for results’ is one model and second is ‘pay as you go’ model, which is even more evolved and says “don’t pay me at all until you get a result. You pay me per transaction, per device, per subscriber, per order, I process for you; per service request, I close for you, etc, where the entire risk of upfront costs comes on me and I recover it over a period of time.”
Customers are saying “I like that because it helps me conserve capital. I don’t have to spend on hardware, software and then pay you and then at the end of all that payment figure out whether I have derived any value. That’s the model today. So, the customers are liking it. It means bigger investments for us. It also means more sticky relationship with customers.
Where will those bigger investments be directed?
Well, if they are not going to spend on hardware and software, I have to spend on hardware and software.
