Apr 23, 2012 (11:04 AM EDT)
Can Software Help Infosys Out Of Financial Rut?

Read the Original Article at InformationWeek

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Infosys derives only about 6% of its almost $7 billion in annual revenue from proprietary software products. Its goal is to pump that up to one third of its revenue. The move comes as Infosys's traditional IT services business faces slower growth. To understand how Infosys hopes to get to this new future in software, look at its new software product in one of the industry’s hottest markets: digital marketing.

Infosys is selling an online, subscription software product called BrandEdge, aimed at helping companies conduct digital marketing campaigns and measure the results. Inofsys is pitching the software to chief marketing officers, whose tech budgets are rising as their work moves increasingly to websites, email, mobile apps, and social networks, and as CMOs do more analytics to measure performance. Gartner analyst Laura McClellan caused a stir early this year by predicting CMOs at high-tech firms would control more tech budget than CIOs by 2017.

Infosys is selling the BrandEdge software service in partnership with WPP, one of the world's largest advertising and marketing firms, whose Fabric subsidiary provides marketing management software that's part of this suite. Infosys is selling the software as an online subscription, and it also sells consulting services for things such as search engine optimization, analyzing performance stats, and improving the user experience.

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Infosys has been downgraded by several equity analysts after a disappointing fourth quarter earnings report, when it forecast 8% to 10% revenue growth for the coming fiscal year, compared with the 11% to 14% that NASSCOM is predicting for India's IT services sector.

Most of Infosys's business today is in providing IT and business process outsourcing services, work such as developing applications, running IT infrastructure and applications, and providing services such as transaction processing, tapping India's large and relatively inexpensive labor pool. But every big outsourcer uses that model now, and bigger companies like Accenture, by hiring their own huge global staffs, are seen as matching Indian firms' costs. Such services also are a linear growth model--increasing revenue requires hiring more people. Infosys, as well as other IT service providers, are looking for more diversified revenue streams and eyeing the high profit margins that come from software.

This software push is "at the core of our strategy," says Sanjay Purohit, who as Infosys senior VP of products, platforms and solutions is in charge of getting to that 33% of revenue goal for software. That percentage is a long-term goal--a "strategic aspiration"--with no set target date. Infosys has about two dozen software offerings today; about 500 engineers work on that software today, and Purohit expects that number to grow to 1,000 this year. In total, Infosys employs about 150,000 people, most of them in India.

Software to drive digital marketing is a hot growth segment, but it's also teeming with established competition.