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Infosys looks to digital services as legacy business feels the squeeze

Infosys looks to digital services as legacy business feels the squeeze

Cloud, big data and analytics which accounted for more than a quarter of Infosys' revenue in year to March 2018

Infosys plans to renew its focus on digital services as it looks to boost growth amid shrinking profit margins in its legacy business and rising competition from local and international rivals.

Digital services – such as cloud, big data and analytics which accounted for more than a quarter of Infosys' revenue in year to March 2018 – are a massive opportunity, the company’s chief executive Salil Parekh said on Monday at its first analyst meeting in nearly two years.

"The idea is - this is a huge market, how can we be more relevant for our clients' future through this market," Parekh said.

India's US$154 billion software services industry, led by Tata Consultancy Services and No. 2 Infosys, is facing a margin squeeze in its legacy business such as routine infrastructure maintenance as clients increasingly demand more work for less money.

Digital services are the new, big long-term opportunity for most Indian IT firms as they help Western clients transform traditional businesses and prevent them from getting disrupted by tech-savvy and agile start-ups.

Earlier this month, Infosys reported a rise in profit and forecast healthy revenue growth for the year, but its outlook on profit margins failed to cheer investors.

On Monday, Parekh said Infosys had set a three-year roadmap. "The first year in fiscal 2019 to stabilise where we are, the second year to start to build momentum and (the) third year to start to accelerate where we can have more and more share of our clients' relevance and that will obviously translate, overall, to a better Infosys," he said.

Bigger rival TCS on Monday became the first Indian company to hit the US$100 billion market capitalisation mark, riding on the back of a record quarterly profit and a weaker rupee.

(Reporting by Sankalp Phartiyal; Editing by Euan Rocha and Susan Fenton)


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