Global environment will be tough in the next 2-3 years: Kris Gopalakrishnan

Suave, and often reticent, Infosys Technologies co-chairman Senapathy Gopalakrishnan, or Kris Gopalakrishnan as he is popularly known, has been an enduring presence in the Bangalore-based information technology company Infosys Technologies through its 31 years of existence, first as co-founder and then as one of its guiding spirits. While in Kochi to open the Startup Village on Sunday, Gopalakrishnan chatted with Ravi Menon about the prospects of a deepening economic slowdown, slower client spending and the road ahead for Infosys: Excerpts:
We have still not seen the expected economic revival going by the IIP numbers till February.In fact, corporate profits fell by over 5% in the October-December period and overall growth is slower than we expected. So, what is your prognosis for the industry ahead?
Well, I think the global environment is going to be challenging for the next two to three years, and there are clear signs to that effect. Financial services companies are seeing significant pressure in maintaining their momentum. What we have been seeing is that even though IT budgets of clients are flat or slightly down, hence spending is not really happening as usual.
We have also seen some changes in the senior IT leaderships of our clients. This is being driven by the pressures brought to bear to reduce IT budgets.
Often, when the IT leaderships of the clients fail to meet their reduced budget targets, they are asked to leave. This kind of tremendous pressure to contain costs often results in projects being delayed or postponed for a certain period of time. Similarly, projects can also get scaled down up to 50% owing to budget constraints or pressure to reduce certain components of a project.
We witnessed this phenomenon during the previous (January-March) quarter...
Yes, we did. In fact, we had reduced our earnings guidance during the previous quarter keeping that in mind. And, we saw that
During that point, many of our listed peers in the industry were also expressing similar concerns about market conditions. Therefore, we have to wait and see how the industry as a whole performs during this quarter.
Do you think the slowdown is deepening?
The Indian environment is as challenging as the global scene because of two reasons. One is that the global economy is slowing down and it invariably impacts India's prospects.
Second, is the high level of uncertainty created in India over government policies. This has reduced investments coming into the country and can contribute to the slowing down of the economy.
Infosys has in recent years been upbeat on tapping service markets in niche areas, and transformational outsourcing -- providing entire bouquet of services to clients from front to back-end.
Well, our growth plans have always been based on trends in the market and demand from our clients. If you look at our consulting division today, it gives us around 30% of our revenues. The really new stuff that we are doing is in the products, platforms and solutions space. This segment contributes 6.5% of our top line and we expect this to grow faster.
Our long term goal is to fetch a third of our revenues from what we call 'business IT services', a third from consulting and a third from products, platforms and solutions.
Consulting has been a rather high margins business.
Well, revenue productivity is certainly higher in the consulting space. As for margins, they have been similar across all our business verticals.
If there is a single direction Infosys should take in the next two years, what would that be?
Clearly, the focus will be on growing our products, platforms and solutions business. Because, then there would be a balanced portfolio of services which the company which
will enable us to address all the client's requirements. Today, we are able to address only some of them.
Well, that brings up my usual question: any acquisition plans this year?
We are actively exploring acquisition targets, as it is a part of our growth strategy. It doesn't make sense to carry out acquisitions just for the sake of it. Whenever we find the right company at the right price, we will go ahead. We did one acquisition recently in Australia and another in New Zealand. We are looking at possible acquiree companies in the US and Canada as well.
How are your expansion plans in Kerala shaping up?
Our Technopark campus is doing well. We recently signed an MoU for opening a second campus at the Technocity in Thiruvananthapuram. Construction will start in the next 12 months once we get all the necessary approvals. That said, our total hiring target for fiscal 2013 is 35,000 people and we are hopeful of meeting it.