BENGALURU: Infosys CEO Salil Parekh could unwind more of his predecessor’s strategy, even attempt to sell some of the internal product development he had invested in, as Parekh moves away from the software-and-people model built by Vishal Sikka to focus more on digital services, analysts say. Former CEO Sikka’s vision was predicated on building products that would raise revenue per employee and margins.
The company acquired application automation programme Panaya and retail ecommerce product Skava for $200 million and $120 million each. On Friday, Infosys said it has put both up for sale and taken a $90 million writedown on Panaya on a standalone basis.
“We can also expect that it will deemphasise and potentially attempt to sell some of the internal product development that Infosys has been investing in. As many of these investments are less-commercially developed than Skava and Panaya, this may come in the form of joint ventures with VC firms who may have an interest in commercialising some of this IP,” Peter Bendor-Samuel, CEO of IT advisory firm Everest Research, said. He added that both Panaya and Skava were early in their development when Infosys bought them and their progress was slowed by the IT company needing to use their offerings to diversify its own rather than build on their products.
Under Sikka, Infosys built its automation platform Nia, earlier called Mana, but that will remain a key part of the company’s offering. In the first quarter of 2016, Skava, Panaya and Nia brought in revenue of $53 million, then CEO Sikka had disclosed. Revenue from new software, which includes the Edge platform, contributed 1.6% to Infosys’ revenue of $10.94 billion in FY18.
The company also built out the Infosys Information Platform and its robotic process automation platform AssistEdge. Infosys has already written down its investment in DWA Nova, one of Sikka’s first bets and has sold its stake in captive consultancy firm ANSR for less than it initially paid. “There was very little detail given on the actual strategy. Parekh just talked about focusing in digital services.
Hopefully, there will be more detail in the analyst day because the market had really bought into the story of the software + people strategy. This seems like going back to the old ways of Infosys,” a buy-side analyst with a Mumbai-based investment house said. The company has said it will hold an analyst day on April 23.
Infosys did not respond to a mail seeking comment. Infosys has said the sale of the two products would be completed by March 2019 and analysts point out that a quick resolution would hopefully please the founders.
“These are areas where he (Sikka) and the founders do not see their future and want to cash in. I think they also see these as areas where Sikka was making unfocused moves and they want to start afresh with a more focused strategy and they also feel they overpaid for these assets. Hence cutting their losses and quickly moving on is the clear imperative here,” Phil Fersht, CEO of consultancy HfS Research, said. Fersht added that the company would need to raise its M&A game, especially in digital technologies, to keep up with its rivals.
“Infosys has lagged behind Cognizant and Wipro with acquisitions and is miles behind Accenture. I see more recent digital acquisitions like WONGDOODY and Brilliant Basics as the future direction: product design and customer experience additions in both US and UK giving them a digital play that pits them against Wipro, Cognizant and Accenture in digital tech enablement services,” Fersht said.
Source: Economic Times