Infosys reduces sales outlook, but says open source is area of future growth

Cloud growth and Micro Focus SUSE collaboration for open source development environments show promise, says Infosys Chairman Nandan Nilekani

In second quarter results released this week, leading systems integration firm Infosys has cut its annual revenue forecast to a range of between 6.5% and 7.5%, compared to analysts’ expectations of around 7.6%.

However, the results suggest that client engagements continue to evolve, as new models and go-to market approaches are explored. Earlier this year, Infosys collaborated with with Micro Focus SUSE, the unit of Micro Focus that specialises in providing platforms for the integration of open source software tools, to launch a private cloud solution which provides software-defined data centre infrastructure and application delivery solutions. The solution is designed to help businesses accelerate their digital transformation journey by being hardware agnostic, enabling faster time to market through rapid adoption, providing faster delivery of services, and greater infrastructure agility and control, the companies say. The results show that new software business continues to grow and contributed 1.6% to revenue in Q2 2018.

Additionally, Infosys has highlighted that investments in new services are showing promising results. Over the past quarter, investments in cloud ecosystem, big data and analytics, API and micro services, data and mainframe modernization have contributed 9.4% to Infosys revenues, a proportion the company says will grow.

Although Infosys reported a net income of 37.3 billion rupees ($573 million) in the September quarter, an increase on the 35.3 billion rupees projected, the lower forecast follows the ouster of Chief Executive Officer Vishal Sikka, which reduced the company’s market value.

“The next few quarters will be extremely critical for the company,” said Sanchit Vir Gogia, the New Delhi-based Chief Analyst of consultancy Greyhound Knowledge Group. “The new management has to go out of their way and keep focus on what matters: client outcomes, employee happiness and investor returns,” he says.

The results also come alongside a review by the Chairman Nandan Nilekani, who returned to chair the company in August, of external investigations into anonymous complaints received by the company, particularly regarding the acquisition of Panaya, provider of software testing solutions, which was completed in February 2015 and the severance payments to the former Chief Financial Officer. Among other things, the review reaffirmed the conclusion of the independent investigation that there was no merit to the allegations of wrongdoing with respect to the acquisition. Nilekani said: “the Board and I are committed to the highest standards of professionalism and will deal promptly and decisively with any governance issues should they ever come up in the future”.

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