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I met up with Sanjay Purohit, Global Head of Products, Platforms & Solutions (PPS) at Infosys on the same day that India’s Economic Times (think FT+Hello!) questioned the likelihood of driving substantial growth and profit from this nascent division, which comprises the Finacle banking product and the ‘Edge’ IP platforms. Edge is a suite of products and platforms that Infosys has developed to support its drive into ‘new world’ propositions (or as Infosys prefers to call it, ‘Tomorrow’s Enterprise’) such as social media and big data analytics, and is winning them some useful new clients.
The challenge is still ahead of Purohit and his team. To date PPS generates some 5-6% of Infosys $7.6bn revenues and according to the ET article is losing money. But the financials should not come as a surprise; PPS is still in investment phase. The Edge products are primarily being constructed as hosted solutions with variable fees that can be structured on a subscription basis, a transaction basis, or on what Infosys refers to as an ‘outcome’ basis (linked directly – or perhaps more accurately, indirectly – to ROI). Purohit aims that PPS margins should exceed the company average over the next few years.
We have written much about IP-led services and see it as one of the most important levers for IT and business process services firms to differentiate themselves (see our ESAS Market Trends and Forecast 2013 and UK Business Process Services Market Trends & Forecast 2013 reports). The challenge, though, is how to make money from them. With Edge, Infosys has the branding and messaging spot on and impressive reference proof points. But with no upfront fees to kick-start revenue flow, nor recurring maintenance streams to cushion usage variability, Edge propositions really will have to look very different to the traditional IT services model if Purohit is to realise his margin dream.
