Infosys says non-linear revenues are taking off

Infosys Technologies Ltd, India’s second-largest software company, is fast moving towards its goal of generating a third of its revenues from non-linear efforts—those which are not linked to the number of employees deployed on a project.

Sometime back, Infosys chief executive officer (CEO) S Kris Gopalakrishnan had said the company was striving to push up its non-linear revenues to a third of its total revenue.

On Tuesday, Subhash Dhar, senior vice-president and head of communications, media and entertainment business unit, said the non-linear revenues of the company had already reached 10% of total revenues this year from 4% last year.

He expects it to jump higher by the end of the current fiscal.
“Our non-linear revenue is growing very fast. Today, it is 10% but it’s a long way up (for reaching a third of our revenues).”

Infosys and other domestic tech companies are trying to move away from linear revenue model to protect themselves from volatile attrition rate and go for higher margin IT product and services.

Today, a large part of tech firms’ revenue is based on a revenue model that links pricing to heads involved in a project.

Non-linear revenue model would make it licence-based or outcome-based or tie it to specialised skills, or domain expertise of a company.

In this direction, Infosys is developing business and technology platforms for its customers, who build their consumer devices and applications around it.

Today, close to 7,000 of the 1.2 lakh Infosys employees are engaged in the product engineering and R&D, working on developing IT products and platforms for clients.

Abhishek, vice-president and head - delivery - product engineering, said the new engagement models will take the Infosys closer to Gopalakrishnan’s vision faster.

“The new engagement models (based on platforms and IT products) will grow our non-linear revenues faster.  That’s the intent,” he said.

On Tuesday, Abhishek’s product engineering group launched its first technology platform powered by chip maker Intel’s Atom processor E600 that links multiple home devices, enabling consumers to manage them a WiFi console, smart phone or remotely via the web.

Dhar said the company was already in discussion with its customers for the platform. He expects the new platform to boost Infosys’ non-linear revenues.

“There is huge market for this (technology platform) across all markets. Just take the 15 billion devices (in the market) and start thinking about that market. More and more of that (device) is digital, so you can do the math,” he said.

And given the recent trend of consumer IT growing faster than corporate IT, Infosys believes the new solution will see a huge traction among its customers.

“Worldwide, spends on consumer IT is more than corporate IT now. This has happened for the first time in the history of technology. And consumer spending on IT is growing at a higher rate than corporate spending. So, it is very natural to see that the whole IT focus has started growing in the consumer space,” he said.

As per industry estimate, consumer spending is currently growing at 6% and corporate at about 4-5%.