Infosys looking at more ways to reduce costs

Software major Infosys is optimistic about the demand environment but has cautioned that pricing pressure continues, forcing the company to look at more ways to reduce costs and boost margins. The company also expects growth to stay choppy in the near term, stating that it needs at least 5-6 good quarters of order-booking to bring back more predictability in business.

"The demand environment has certainly improved, US is looking much better than Europe right now. Financial services deals are very price-competitive. We are looking at acquisitions to increase our presence in healthcare," Infosys CFO Rajiv Bansal said at the Wells Fargo Investor Conference in New York on Wednesday.

Bansal further said that the company would look into its cost structure as there was potential to reduce onsite and move more work offshore. "We need to be more cost competitive to win more deals. There is potential to take the onsite component further down from 33% to 20-15% for system integration projects. We are looking to offshore support functions," he said.

The renewed focus on cost comes months after Infosys founder NR Narayana Murthy returned as chairman, as the company lagged peers in growth and struggled to execute its Infosys 3.0 strategy. Bansal conceded at the investor call that the 3.0 strategy was wrongly timed but that it was the right one in the medium to long term.

Also, in what is a marked departure from Infosys' long-held tradition of maintaining superior margins, the company will now focus more on growth, as it tries to catch up with rivals. "We ploughed currency benefits back into business. We are keeping the margin profile in a narrow band and there is more focus on growth. We will take tough decisions; invest more, even if it impacts margins. We want to get back to industry-leading growth," Bansal said.

He also cautioned that growth numbers are likely to stay choppy in the near-term and that the company would need at least 5-6 quarters of order-booking to correct the choppiness in business.

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