Post-results carnage Sikka admits to execution failure
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Infosys, CEO, Vishal Sikka has said that the company's lower-than-expected performance in the June quarter -- which spooked the stock markets on Friday -- was no reflection of his strategy to move the company away from its focus on lowering costs for clients to one that develops innovative solutions for them said a report in the Times of India. He said it was an execution failure in certain segments of the business and he was taking steps to fix those.
And in an apparent admission of failure to provide appropriate revenue guidance in April, Sikka said one of the big areas he still needed to address is to improve internal processes and make Infosys a real-time company, "including our ability to forecast." The modest performance in the June quarter -- which follows several quarters of good performance compared to most of its peers -- forced Infosys to lower its revenue guidance for the full year to 10.5-12%, from the 11.5-13.5% it gave in April. The stock market reaction to that wiped out Rs 23,000 crore of investor wealth in a single day. Some analysts are sceptical about Infosys achieving even this lower guidance, considering that the first quarter is normally one of the stronger quarters.
Sikka said the traditional way of delivering services is under a very structural threat and there is tremendous pricing pressure on it. He attributed the pricing pressure to two major developments: The clients being under tremendous cost pressure and significant improvement in their ability to set up captive centres. A number of leading companies globally has been establishing their own technology centres in countries like India, a trend that adversely impacts the volume of outsourcing.
