Infosys starts offering cloud-based business platforms

Infosys, India’s second largest outsourcer, is offering business platforms on a subscription model from the cloud, as part of its strategy to focus on intellectual property to boost revenue, the company’s new CEO and managing director said.

The company has so far signed 20 large enterprise clients for its business platforms delivered through the cloud, S. D. Shibulal said on Monday. Shibulal, who was formerly COO, took charge at the outsourcer this month.

The company has rolled out applications in the areas of human resource, procurement, social commerce, and digital marketing, and a white-label app store that offers services to mobile telephony operators, Shibulal said.

It also launched this month its TalentEdge cloud platform that brings together processes to help enterprises streamline HR (human resources) operations and free up time spent on transactional HR activities such as payroll, attendance, and benefits processing.

“We build the intellectual property, and charge the customer on a pay-per-use model,” Shibulal said.

The company also offers IT services to customers setting up clouds, as part of its traditional IT services business.

Clients are interested in business platforms and applications because they can avoid capital expenditure, Shibulal said. But adoption of the cloud is still bedeviled by issues such as concerns about security, and integration of data across the organization, he added..

This may be the wrong time for Infosys to roll out business platforms, as IT budgets in the U.S., a key market, are likely to see cuts, and customers will put on hold investments in discretionary applications around new technologies such as cloud, mobile, and social networking, said Sudin Apte, principal analyst and CEO of Offshore Insights, a research and advisory firm.

Infosys will also be competing with companies that have built strong brands in the cloud applications business, in addition to traditional outsourcers, Apte said. The delivery of cloud applications require large investments in the back-end, and a large scale of operations, which Indian outsourcers may not be able to achieve with a few point solutions, he added.

Infosys and other Indian outsourcers are largely tied to a “time and materials” model where customers are typically billed for the number of people working on a project and its duration. Infosys has set up a large center to train 14,000 staff at a time, and this year plans to hire another 45,000 staff.

The model is however untenable in the long term, as you just can’t keep hiring more and more staff to get more revenue, Shibulal said. The company is investing in intellectual property and in revenue models that will be “non-linear” in relation to the number of staff deployed, Shibulal said.

The company is aiming to reduce its revenue from its core business in application development and maintenance and other IT services to about one-third of revenue over the next five to seven years, with business consulting and systems integration contributing another one-third of revenue, Shibulal said. The balance revenue will come from cloud applications, and a new products and platform business that focuses on creating products and platforms, and then offering them to customers in return for a license fee, payment per transaction, or royalties.

Consulting and system integration currently account for about 25 to 27 percent of revenue, while products and platforms only account for about 7 percent.

Infosys will not resell cloud applications from other software vendors, though some of its applications use software from Oracle and SAP and other vendors as the underlying platform, Shibulal said. TalentEdge is for example built on Oracle’s PeopleSoft Human Capital Management Suite.

Infosys offer its platforms from a private, hybrid or public cloud, and has already tied with datacenter providers, Shibulal said. Cloud platforms and products will change Infosys’ business model to an extent as the company has to now invest upfront in technologies and intellectual property, and wait for revenues to kick in, he added.

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