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  • How Infosys is regaining digital mindshare through acquisitions

    Publish Date: September 18, 2018

    Technology services giant Infosys is regaining its mojo on the digital front. After a very public spat between the former CEO and the founders, the company has been constantly in the news for the wrong reasons. The tech bellwether has seen a spate of high-profile exits recently. So, when on September 14 the company announced its Euro 65-million buy of Fluido, there was finally a reason to rejoice.

    The about Rs 550-crore acquisition may be small given Infosys’s Rs 70,000-crore annual top line, but the transaction reinforces the company’s strategic focus on the digital sector. This is the company’s second digital buy in the last five months. Find out how Infosys is scripting a ‘digital’ comeback.

    Big deal

    Fluido is a Nordics-based Salesforce consulting company. It is a platinum partner of Salesforce. It offers consulting, implementation, and training services. Plus, Salesforce Ventures owns a minority stake. Thus, there are clear advantages of the Fluido deal.

    First, this acquisition has the potential to help Infosys improve its presence in the Nordic market, a market in which it has historically been weak. Two, Salesforce is a fast-growing practice for all companies and Fluido allows Infosys a vehicle to ride that upward wave. An entrenched company helps build scale quickly in this fast-growing area.

    Related: What you need to know about the high-profile exits from Infosys

    Digital dab

    The third and most important advantage is the renewed focus on the digital sector. After buying the first firm (a digital creative agency) called Wongdoody in April 2018, Infosys is clearly following the string-of-pearls strategy to go big in the digital market.

    A mix of small capability-building or tuck-in acquisitions and organic capability has a big potential to accelerate Infosys’ digital shift. We feel such a strategy can help Infosys regain lost ground.

    It is no surprise that Infosys had lost mindshare and relative positioning due to the churn. This caused a lag in select digital practices like the Internet of Things (IoT) and cyber security. Also, the company had insufficient engagement with industry analysts and communication.

    Related: Infosys Q1 earnings: 5 things to know

    Course correction

    Infosys may have erred earlier, but today it is back in the reckoning. The course correction involves acquisitions which allow the building out of competencies organically. It is also taking steps like industry analyst outreach. These steps, Kotak feels, have been in the right direction.

    Overall, Infosys’s total contract value (TCV) of deal wins has been robust. In fact, the figure has increased considerably in the last six months. We expect this momentum to sustain. The client metrics have been impressive as well. Growth has been witnessed in its large client base. For instance, the number of clients with billing of more than $100 million has risen to 24, up from 18 a year back.

    However, high attrition remains a key risk. While Infosys has made a number of significant interventions, investors will need to closely track its movements going forward.

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