For many who see Infosys as conservative, this may come as a surprise. The company's new management under K V Kamath and S D Shibulal is planning to set up a separate company focused on IT products, platforms and intellectual property-driven solutions.
The $6-billion company has so far built its global reputation on providing IT services to international firms. The move to establish this new company represents a focused shift to a higher value business. Products are riskier to do, given that they can fail even after substantial investments . But the payoffs from successful products can be huge, as the likes of Microsoft , IBM and SAP have shown.
"We are discussing several options to set up this new company to house innovations ," Subhash Dhar, the head of business innovation at Infosys told TOI. One of these is to make an acquisition of an existing company that is involved in areas where Infosys is looking to innovate . These areas include fast growing practices such as cloud computing, mobility and sustainability.
The other option is to create a new company. Employees at Infosys who are already involved on the innovation side, which includes products and platforms, would move to this new firm.
Dhar said the new company would provide a start-up kind of environment. Product-driven companies require a culture and DNA that nurtures out-of-the-box thinking, the way start-ups do. This culture is very different from what prevails in large firms, which tend to get tied down by processes and bureaucratic procedures, and in IT servicefocused firms, which does not involve much risk-taking .
Siddharth Pai, MD of global sourcing advisory services firm TPI India , said Indian service providers had shown with core banking solutions that they can compete with the best product companies in the world (Infosys has a successful banking product called Finacle, and TCS has a successful one called Bancs). He said it is a natural progression for IT services companies to move to products. "The lines are blurring between product and services players. To remain competitive , it is essential to become a full services provider. It can help win long-term and stickier deals." Pai echoed Dhar's view that the two businesses are fundamentally different, and therefore a separate entity for products and platforms makes sense. Nasscom president Som Mittal said that clients are now demanding high-end solutions such as platforms and products from Indian IT service providers to drive greater value and efficiencies.
The Indian IT sector , he said, had moved up the value chain from providing basic application support to become domain experts. Mittal said that from the IT companies' perspective, such initiatives are also driven by the need for them to become more non-linear (do more with fewer employees) and become end-to-end service providers.
Dhar said that traditional IT services are getting commoditized , with pricing and margin pressures. "In order to bring in non-linearity and differentiation in a competitive environment, innovative products and platforms become vital."
The firm has begun the process of setting up a separate unit. Seven new positions at VP and AVP levels have just been created for products and platforms, four of which will be for innovations coming out of the banking & finance, manufacturing , retail, and energy and utilities segments. The other three will build product engineering , product management and commercialization teams for new innovations.
"We have not fully utilized several of our products and IP-led platform solutions. The plan is to monetize some of these opportunities as well as build future products and solutions under this new unit," said Dhar. This includes existing products like mobile application platform Flypp and healthcare product I Transform , as well as solutions built for areas like supply chain visibility. The banking product Finacle however will not be part of this unit since it is already well established.
The products and platforms effort is part of the 'Infosys 3.0' strategy under which it intends to transform from a technology solutions company to a business solutions firm. It recently structured the company under three service lines. The first is transformation , which includes 'Change-the-business' initiatives like package implementation and consulting. The second is business operations, which includes 'run-the-business ' initiatives like application development & maintenance, testing and BPO. And the third is innovation, including products and platforms.
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