Gopalakrishnan took over as chief executive of the outsourcing giant with $4.2 billion in revenue, Infosys Technologies, last June. Since then, the company has been rocked by the softening economy: Its stock hit a 52-week low of $32.65 on March 17. Profits for the quarter ending in March fell shy of analysts' expectations. But the company's 12-month outlook boosted investors' confidence, and Infosys has been rising, closing on Wednesday at $46.69. Gopalakrishnan visited Forbes.com to share his views on the economy, on doing business in China and on why an Indian company is providing financial support to U.S. universities.
Forbes.com: What did you see happening in the business environment in March?
Gopalakrishnan: In every quarter, we do a thorough analysis of our top 100 clients. We found 76% said that this year's [information technology] budget will be flat or down. But most also said that they will increase global outsourcing because it's beneficial for them. But will they do it immediately or later? In the past, there's typically a lag [between plans and increased outsourcing]. So we gave a guidance of 19% to 21% revenue growth compared to a 36% increase last year. It was reassurance that there is still growth.
Has your business grown a lot in China?
Growth has been slower in China and outside China. Both have taken longer than we liked. In China, for potential Chinese clients, the brand is not there. It takes more time to develop the market. Outside of China, too, customers' use of our Chinese development center has been slower than we expected. We thought the pickup would've been much faster, but clients saw it differently. They felt it would be one more location we need to audit, one more location to certify. We have about 15 global clients we support out of China.
How difficult is it to do business in China?
We are finding it difficult to expand in the Chinese market. The business environment, and the standards and processes are different. It's a learning process. The second challenge is getting accustomed to how Chinese companies do business with each other and what are the usual expectations. For instance, typically when you work globally, you receive payment in 30 or 60 days. In China, the norm is 270 days.
Is Infosys expanding beyond services to build products?
We have a product for the banking industry--Finacle--that we'll continue to invest in. And there are two past instances where we have spun out two ideas into separate companies--Yantra, acquired by Sterling Commerce in 2005, and OnMobile, which went public in India in January. As part of our services, we deliver software as a service to our clients. And an emerging business opportunity for us is "social commerce."
What do you mean by social commerce?
There are two aspects: There's the customer facing part where you have a product you may sell to businesses or consumers and you want to get feedback on how those products or services should evolve or what it should feature. That feedback will have an impact on your research and development. And you want to engage with your employees within the enterprise. Dell has done this with "IdeaStorm." We are piloting such software with some of our customers.
Most corporate employees now have a presence on Facebook or MySpace. If you can create a space where you allow them to blog and they have their own social networks within the company, it creates dynamic groups. We developed for Infosys the equivalent of Facebook. That's been live for about a year now. [Infosys highlights its blogs on its Web site].
How many Infosys employees are blogging?
I don't know. I've been blogging, but in a very different way, for six months. [The blog is behind a company firewall.] We call it "Ask Kris." In the past three months, I've received 6,500 queries. It is a way to connect with employees. I select some and reply personally, but someone else reads and replies to the rest.
Are you twittering?
No. [Gopalakrishnan smiles]. I do use instant messaging and SMS.
What's the biggest takeaway with the queries and engagement with employees?
People are passionate about our company. This is a powerful mechanism for interesting ideas coming from the grassroots level. For instance, we have a robust Linux users group at the grassroots level. We're developing a grid computing product using an open-source model. It's not been a company sponsored project [but we're embracing it.]
Forbes.com: What did you see happening in the business environment in March?
Gopalakrishnan: In every quarter, we do a thorough analysis of our top 100 clients. We found 76% said that this year's [information technology] budget will be flat or down. But most also said that they will increase global outsourcing because it's beneficial for them. But will they do it immediately or later? In the past, there's typically a lag [between plans and increased outsourcing]. So we gave a guidance of 19% to 21% revenue growth compared to a 36% increase last year. It was reassurance that there is still growth.
Has your business grown a lot in China?
Growth has been slower in China and outside China. Both have taken longer than we liked. In China, for potential Chinese clients, the brand is not there. It takes more time to develop the market. Outside of China, too, customers' use of our Chinese development center has been slower than we expected. We thought the pickup would've been much faster, but clients saw it differently. They felt it would be one more location we need to audit, one more location to certify. We have about 15 global clients we support out of China.
How difficult is it to do business in China?
We are finding it difficult to expand in the Chinese market. The business environment, and the standards and processes are different. It's a learning process. The second challenge is getting accustomed to how Chinese companies do business with each other and what are the usual expectations. For instance, typically when you work globally, you receive payment in 30 or 60 days. In China, the norm is 270 days.
Is Infosys expanding beyond services to build products?
We have a product for the banking industry--Finacle--that we'll continue to invest in. And there are two past instances where we have spun out two ideas into separate companies--Yantra, acquired by Sterling Commerce in 2005, and OnMobile, which went public in India in January. As part of our services, we deliver software as a service to our clients. And an emerging business opportunity for us is "social commerce."
What do you mean by social commerce?
There are two aspects: There's the customer facing part where you have a product you may sell to businesses or consumers and you want to get feedback on how those products or services should evolve or what it should feature. That feedback will have an impact on your research and development. And you want to engage with your employees within the enterprise. Dell has done this with "IdeaStorm." We are piloting such software with some of our customers.
Most corporate employees now have a presence on Facebook or MySpace. If you can create a space where you allow them to blog and they have their own social networks within the company, it creates dynamic groups. We developed for Infosys the equivalent of Facebook. That's been live for about a year now. [Infosys highlights its blogs on its Web site].
How many Infosys employees are blogging?
I don't know. I've been blogging, but in a very different way, for six months. [The blog is behind a company firewall.] We call it "Ask Kris." In the past three months, I've received 6,500 queries. It is a way to connect with employees. I select some and reply personally, but someone else reads and replies to the rest.
Are you twittering?
No. [Gopalakrishnan smiles]. I do use instant messaging and SMS.
What's the biggest takeaway with the queries and engagement with employees?
People are passionate about our company. This is a powerful mechanism for interesting ideas coming from the grassroots level. For instance, we have a robust Linux users group at the grassroots level. We're developing a grid computing product using an open-source model. It's not been a company sponsored project [but we're embracing it.]
