Salil Parekh, recently appointed CEO and Managing Director for Infosys took some time out of his busy schedule during his client partner conference to catch up with me to talk about his vision for all things Infosys and the future of services…
Phil Fersht, CEO and Chief Analyst, HFS Research: Welcome to your first HfS interview Salil! Maybe you could take us a little bit back to your early career. When did you get the appetite to lead one of the largest IT services firms in the world? You know, was this something you always wanted to do? Was this planned, or have you always been an opportunist?
Salil Parekh, CEO, Infosys: Thank you, Phil, this was quite an un-planned scenario for me. So, maybe when I finished with Engineering, a Master’s in Computer Science, and I was working with a consulting firm for years. Then we got acquired by a consulting and tech company, so I’d basically been in the same company for 25 years. And then this opportunity showed up a few months ago. It’s a tremendous privilege to have this opportunity. It’s one of those things you dream about, in your career, as you sort of think, ‘Maybe it’s possible,’ but when it happened, at least, for me, it was completely unplanned. So I’m delighted to be here, I wish I could plan such things, but I can’t [laughter].
Phil: So, how would you compare this new Infy experience with Capgemini, you know, both global services powerhouses, one with a Parisian epicentre, the other one Bangalorian, so – what haves been your observations?
Salil: Well, I think, Cap’s a fantastic company. I think I would focus much more on the strengths that I’ve found within Infosys. The first few months, I’ve spent essentially meeting with our clients and our employees. I met with just about 50 clients, and it’s been just amazing to see how much the clients trust Infosys, and our delivery capability, and the strength of the organisation. And then, with the employees, it’s been much more the pride in being with a number one company. And so to me, we have, at least in my mind, an incredible platform, from which, if we can execute right, we can become partners for our clients’ digital journey. So, that’s really the joy, of where I am at Infosys right now.
Phil: Salil, your predecessor unleashed some of the passion and culture in Infosys; it didn’t quite end up, I think, how he wanted it to, but how do you think you’re going to be different from him?
Salil: So, my thinking is, the way we’ve built our strategic direction, which I’ll spend a minute on, maybe later, is, what are our clients looking for and where are they going? So, how do we evolve with them? Then, what other new areas, new clients, can we target from our asset base, or our foundation? And those are the two ways in which I have looked at the business. From our clients, they all want to progress on their digital journey. They have the foundation tech in good shape, and my focus is going to be to see how we scale up our own digital focus to go on that journey with them.
It’s interesting, already one fourth of our revenue is in those Digital areas, so it’s not that we’re starting from zero. The new Digital areas that we want to go after, there’s new sets of clients, there’s expansion in the European markets, there’s more expansion in the Asia-Pacific. There are some sectors we are underpenetrated, healthcare, or life sciences, or manufacturing, and we have great strengths which we can leverage, I think, to go after those. And in terms of the strategic direction, it’s more in the services area, with 4 pillars – scale agile digital services, energize core services, reskilling of our people, and localising, that is a new approach where we’re starting to build delivery capacity here in the US, in the European markets, in Australia, to make sure that we are closer to our clients. So, that’s the direction that we’ve charted out, and so far, it’s something that’s resonated with our clients, with the market, (I know you had presented a set of views after our analyst day), the sales teams within the company. So, I think there’s a lot of support and traction for this approach, and now it’s more really, an execution play for us to make sure we get this organized properly.
Phil: I think you’ve excited the market, acquiring two interesting digital firms in the UK, and US: Brilliant Basics and WONGDOODY. What’s the plan to bulldoze your way to the front of this market? Do you have an M&A strategy lined up, or is this going to be more opportunistic? How do you think this is going to play out for you?
Salil: There we have a very focused approach to what we call ‘Programmatic M&A’ and we’ve defined five dimensions of digital: experience, insights, innovate, accelerate and assure. Behind that, we’ve put each of our service lines. So, our head of M&A, Deepak is now looking at, from the landscape of companies that are in the market, how do they map on to this framework? And then which are the areas we should invest in. From these, we want to create multiple $1 billion businesses. So, you can take an example, on the cloud migration journey. There’ll be large plays in Azure, AWS and Google Cloud, and we want to be in that space. There’ll be large plays in data and insights. On experience, which is where these two companies are, Brilliant Basics and Wongdoody. Traditionally, we do not have a strong position in these areas, so I want to make sure that we build up our position, so that we can engage with our clients on any aspect of this digital journey. Different clients start at different places, and then go on to the different parts. And what we have noticed is, that it’s not really a transformation with a start and a finish, it’s more a journey that people are going through different components, some going faster, some taking a longer path. My approach, through this five-pronged, Digital ‘pentagon’ that we’ve put together, is that we want to be part of any digital journey. Therefore the experience side, is where we thought we should build out some strengths. But overall, we’ve got, I think there’s a shortlist of companies that he has built, from some companies that we’ve been meeting over the last three months. With M&A, as you know, it’s more a question of availability, price, and, sort of, a lot of other factors going right at the last minute, culture, integration, fit. So, hopefully we’ll start to execute on that.
Phil: M&A’s been a key issue in our industry for a while, Salil. There’ve been far more failures than successes when we look across the board at all that’s happened over the last few years. As you look at bringing on some of these emerging companies, with a very different mindset, what’s your view on how to integrate them into your business?
Salil: So, yeah, just as an example, with Wongdoody (and with Brilliant Basics); we are recruiting, in the US, students from design schools as well and those will essentially be under the direction of the Wongdoody leadership. Plus, two individuals from Infosys that will join that team, and that will drive the scaleup. So, they know how that must be done.. So, we will leverage their knowledge and experience, and build it out, under that umbrella. Then, our service line leaders have put together a plan for how all the experience assets, user experience, or creative, come together. We are also thinking about what we should do with the branding because at this stage, we’ve not made any changes; however, over a three-year period, we want to align to a branding position that we want to develop.
Phil: Salil, we’ve seen a few other providers try and influence their culture too much on their niche acquisitions (especially with digital firms)… and I think what you’re saying is, “buy some of these special firms, and nurture them, grow them, build them, retain the culture, and then figure out the synergies”
Salil: Absolutely, yes – because, as you know, there are two basic models of acquisitions in our business. One is, buy it, make it look exactly like them, and then go ahead.
My experience has been much more than you buy something, learn the culture, and try to build the best of both, as opposed to overwhelming one or the other. And this is what we are trying to do by not changing the culture, in fact, enhancing it. We still need to have some guidelines in how the overall strategy comes together, but the culture is very difficult -if we start to impose upon these companies, as you mention, it will destroy value quickly.
Phil: There’s been a lot of talk, Salil, about investing in products .v. services. It feels like Infosys is moving down the services path. Going higher-value, looking at more consultative, digital mindsets…
Salil: My focus today is much more services. But what I would say is, first, there are things that I call platforms, and what I mean is, within Infosys, we have an insurance platform called McCamish. You may have heard of it.
Phil: I know it very well…
Salil: So, that, I will scale up. So, we just announced, three weeks ago, a large win with John Hancock, it’s in the public domain, $175 million win. That is a phenomenal approach, we think, in the insurance market of today, where we can use that platform. So, it’s not just a product play for us. Equally, we are not (and we’ve announced that we are exploring to sell Panaya), which to me, is not a product that I can scale that much. The market there, for SAP upgrades, has changed and there’s always bandwidth issues and management. So, if there are platform plays, we will actually buy and expand. We are not going to, at least at this stage, look at standalone product plays. Some of these also require multiple third parties to implement them, which is not easy, when you sit within a services company. So, given all of those dynamics, that’s the approach we’ve taken, primarily services. If you can build a platform that would be phenomenal, like this McCamish one, there could be others you could imagine, on mortgage processing, or trade settlements. There are areas which lend themselves to platform. But we have to find something, or build it ourselves, and that we will scale.
Phil: I’m sure your BPM guys’ll be thrilled to hear that =)
Salil: They’re delighted and BPM’s growing very well for us right now, so we are very happy with that.
Phil: Good. I’ve known them since the Progeon days!
Salil: Oh, brilliant! Okay. Yeah, no, I think if you saw that, we went through a bit of a dip, but the last 24-36 months, we had a good trajectory. In fact, if you look at it on a standalone basis, it’s probably the highest, fastest-growing BPO business, if I look at competitors, and it’s also the best margin BPO business. So, I think that, in that business, I will happily invest in platforms.
And there is Finacle, where we are leaders, and that is a product and a platform play for us, that we are scaling up. We have seen recently two very successful Digital banks being built on Finacle – one here in the US and one in Asia. That is a strong business for us and we will look to scale.
We also have our AI platform Nia – which will become the foundation of all our services re-invention. We will enhance and build that out.
Phil: So we’re looking at a lot of these interesting insurtech/fintech businesses. What’s the approach there? Are you going to look to acquire these, or maybe do more partnering?
Salil: So, today we are more on the partnering, but it also depends. There are some fintech players, which could become a platform. But today, as you know well, they’re very expensive, if you’re going to buy. So, you’ve got to figure it out first. And we’ve not done a lot of partnerships yet. We’ve got an investment fund, through which we invest, we haven’t tried yet to have a partnership where we do many client projects together. So, first we’ll try a bit of that with the fintechs, and then, if it looks like we can build, again, a scaled fintech play, which is more a platform, so it’s not just a product play, then we will look at it eventually.
Phil: So, one final question, Salil… You’ve been annointed the Emperor of the Services Industry for one week, and you have one wish, to change the industry for the better. What would that wish be?
Salil: [Laughter]. Give all your business to Infosys, of course [laughter]. But, no, I think, you know, it’s a bit ironic, notwithstanding what people outside think, I feel like we are in a uniquely good position, so I’m not sure I would change many things. We are doing many things to enhance our position. The industry, itself, is in a nice phase where there is massive opportunity in the future, clients are changing. For any company that’s ready to invest and position themselves, within the next five years, you will have a new set of leaders emerge, and to me, that’s as good an opportunity as anyone can get, when you have a huge incumbent company, which still has an opportunity to win again in a different area. So, I’m delighted. There’s not too many things I would change. I think the best wish is, try not to be the Emperor beyond a week [laughter].
Phil: There you go, that’s a fantastic answer =) Good luck in the new role, Salil… you sound very geared up for it!