Good bottomline is the key: Murthy

On its Silver Jubilee year, Infosys has become one of the front player in the IT services arena. Speaking to Latha Chandradeep and Srinivas R of CyberMedia News, Murthy discussed the future of IT services in India, future trends, importance of `productising' services and future of small and medium IT companies in the country. Excerpts:

How long can India sustain only “services”?

You can sustain it forever as long as you can expand the scope, as long as you bring value, as long as you innovate. Example, if you look at the scenario 20 years ago, services pie was a fraction. I am not talking about IT services, but all kinds of services--healthcare, financial services and so on. We are all primarily in to software development and now in the last 4-5 years have added BPO to it. In BPO, we are already into Equity Research, medical services. We can expand in to tourism services and, who knows, in future, we might tutor foreign children from India. We can broadcast to different homes: what it means is that once you change the scope of "services" then the possibilities are huge. If you innovate, I don't see any issues in services. Today, MNCs such as Accenture and IBM global services are also into services. You could easily have 10 Indian companies having $15-20 billion in revenues.

That brings us to the issue of what stops Indian companies from building Intellectual Property "productising" services? We can grow geometrically with the same number of people.

It is already happening. We have anti-money laundering, which is an IP-based service. We already have RFID-based services. Yes, we need to build more and more IP-based platforms for services. We need to develop more and more frameworks and objects and use that IPR to deliver services.

Do you see that happening among smaller Indian software companies?

You have to make that analysis. My view is that smaller companies are not growing as much as we expected them to. There are a few reasons for this. First, the down-turn: markets became tougher and customers became very savvy; they became careful with spending money and went with the better known companies. It worries me somewhat. It is difficult to say whether we will have 20 companies with revenues of $20 billion.

Given this situation, do you see yourself acquiring some of these smaller companies for leveraging their relationships?

We have set specific parameters for acquisition. First, they must bring complimentary strengths and values. Second, they should have IP, which we can leverage to either sell or create products or services. It could be a product, a toolset, a methodology, etc. Third, its aspiration and value system should be similar to that of Infosys. Also the combined composition should get to the current level of profitability in 2- 3 years. We have looked at 200 companies...(I am) not a great believer in topline. According to me, good bottomline is the key. There must be a plan to get back to the original figure (profitability).

You had considered acquiring a consulting firm when you looked at getting into consulting.

We thought of acquiring a consulting firm, but found it unwilling to make adjustments. There was a need to reduce expenses in sales and administration. So we decided to start our own consulting firm.

When can we look at productivity per person at $300,000 and above, which is kind of the norm when you look at consulting services companies in the US, do you think it is possible to get to that from Indian services companies?

First of all, software development companies cannot get it and it should not get to that figure. They are local companies in the US and Europe. We brought in the advantage of leveraging India. Given that per capita GDP of India is USD 500 as compared to the US at USD 50,000, we can't get to that figure. However, if we use the power of the Global Delivery Model into consulting, while improving per capita revenue and leave money on the table for the customer, then it will be great.

Look another way, at USD 76,000, Infosys per person productivity is 150 times the Indian per capita GDP. We have to accept that people working in India will have lower per capita income.

Will you always need thousands of people to get to billions of dollars?

It is inevitable. We have to hire if we have to grow. We have built a scalable model; we understand the game and we play the game that way. We are gearing up to expand significantly in the next five years.

What do you foresee for the Indian software industry?

Today, we have 5-6 people in the multi-billion category. If we have eight, it will be wonderful. Could be MNCs...job opportunities are created in India. A couple could be Indian companies as well--very feasible. About 15-20 in the next category...half the revenue of top companies. I wish more and more companies join the first rung. I don't see any problem in having eight at the top. Both Accenture and IBM are serious about India. They should be able to join the first rung in terms of value addition from India.

Do you think we might see Indian software companies getting to the hub and spoke model where the small companies survive through the ecosystem created by large companies?

I feel, they have to create a niche for themselves in the beginning and become unique players in their niches. If they want to play the game our way, it is unlikely; the top four have created such advantages for themselves in terms of financial muscle, training, people, infrastructure that it is not easy. If I were in their shoes, I won't compete with these guys. I would get to a niche and do something. For instance, none of the top guys have anything significant in healthcare practice. May be that's a good area. Or in tourism. They need to focus, become leaders and then expand laterally. Once customers know you, you can grow.

We have seen trends such as Y2K, Internet, Outsourcing, etc., driving our growth. What is the next trend? When do you think we can create a trend of our own and grow?

I think we should look at salesforce.com kind of business or product --that is, providing a web-based software platform. To me that offers extraordinary opportunities for India. This depends only on development--quickly adding new features. This could definitely be the next wave. The web is truly a level playing field and all can compete very well. You can build such a web platform and have all services in the US. It is not dependent on marketing. Here it doesn't need huge infrastructure to create anything. On the net, it is a different model.