Infosys getting into high margin business

With competition becoming cost efficient and its margins under pressure, IT major Infosys Technologies Ltd is slowly altering its business mix to enter into the high-margin space and improve its per capita revenue to offset the impact of rising salaries.

The second-largest Indian IT firm has already expanded its income from consultancy services, which today constitutes 4-5% of its total revenues. Just two and half years ago, the company's revenue from consultancy was insignificant.

The company has also substantially improved income from package implementation solution to 17% this year from 7-8% last year. Its product Finacle, the universal banking solution, is also generating 2-3% of its revenues.

"These are all high-margin areas of the IT business and will impact our overall margins positively. We want to gradually increase their share in business mix," said Infosys Technologies Ltd's chief financial officer V Balakrishnan.

The company is also looking at increasing its per capita revenue through improved human resource utilisation and other such measures.

"Our offshore salaries are growing at an average rate of 13-15% annually and the onsite salaries at 2-3%. If this continues then at some point of time in future, our per capita realisation could become negative. So, we are trying to use lots of levers to offset the effects of rising employee costs on our realisation," said Balakrishnan.

The company has already managed to improve its per capita revenue marginally.

"Over the last two quarters, our per capita revenue has grown by 1%," Balakrishnan said. "Our buyouts will be driven by our need to fill gaps (in our verticals) and penetrate into new geographies. We are not looking at large acquisitions," said Balakrishnan.