There is tremendous need for innovation in these days whether it is in the renewal of existing systems and bringing more efficiency to those or completely new kinds of opportunities that are opening up, says Infosys CEO Vishal Sikka.
Speaking exclusively to CNBC-TV18's Menaka Doshi on the sidelines of 45th World Economic Forum in Davos, Sikka says the company needs to look beyond IT budgets and must consider revenues and costs.
He believes a lot of companies are fighting fundamental disruption in the industry and many clients are looking at automation to cut costs.
Below is verbatim transcript of the interview:
Q: What take away are you taking away from Davos with regards to the spending environment in 2015?
A: I have always believed that when the times are good you need innovation and when the times are not so good you need innovation and so far I would say I have met a dozen leaders and that is coming true in spades.
There is a tremendous need for innovation in these days whether it is in the renewal of existing systems and bringing more efficiency to those or completely new kinds of opportunities that are opening up in front of us. So, I just met with a very large financial services company chairman and it is true. There is a tremendous need for innovation out there.
Q: What does that mean in term of IT budgets, do you think that this will be a year of robust IT budget spending?
A: It depends on the industry, the circumstances companies are in, however, we have to also look beyond the IT budget and at the broader performance of the company both on the costs side as well as the revenue side. So, when you look at it more holistically, we see that a lot of companies are fighting fundamental disruption in the industries and so there is a great need for innovative ways to think about things.
Yesterday, we met with a whole bunch of our clients and our prospects and everyone seems to be on the one hand thinking about the broader economic environment, how to lower costs and things like this and on the other hand they are thinking about what does automation mean for us, what is the sort of pervasive digitisation that is happening all around and what does that mean for us. So, I do not see any shortage of need for new ideas and new innovations.
Q: What does that mean for those who measure Infosys quarter by quarter or even financial year by financial year? Will your clients be spending more this year than they were in 2014?
A: We will have a lot more to say on that in April but there is a great opportunity. There is no shortage of innovation to be done in the software world, in the services world, the bigger challenge is can we rise up to those opportunities and deliver internally and this is the thing that I worry about.
I am focussed most on how do we organise ourselves, how do we gear up to serve the great need out there for software and so the performance depends not so much on the availability of the opportunity outside but our ability to deliver against that.
Q: I am going to quote from a survey done by Goldman Sachs very recently on spending intentions for the IT business and 52 percent of the respondents expected a pickup in discretionary budgets in the next six months, a 16 percent uptick from the August reading and large offshore vendors have been preferring tier 2 vendors, the survey seems to be indicating that this is a time when Indian companies can improve market share. Would you agree broadly with these statements?
A: Broadly, I would agree with that. There is no shortage of innovation and great projects to be done.
Infosys stock price
On January 22, 2015, Infosys closed at Rs 2195.70, up Rs 30.60, or 1.41 percent. The 52-week high of the share was Rs 4401.00 and the 52-week low was Rs 1447.00.
The company's trailing 12-month (TTM) EPS was at Rs 104.69 per share as per the quarter ended December 2014. The stock's price-to-earnings (P/E) ratio was 20.97. The latest book value of the company is Rs 366.51 per share. At current value, the price-to-book value of the company is 5.99.
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