Ailing outsourcing giant Infosys yesterday inked a deal with IPsoft, a New York-based firm that automates IT infrastructure management—the sort of dreadfully dull stuff grunts in Bangalore typically do.
Infrastructure management only accounted for 7% of Infosys sales in the last financial year, according to the Economic Times. That compares to a whopping 28% for HCL, which is doing rather well. But it’s enough (and enough of a drag) to gobble up chunks of Infosys’s manpower. The numbers aren’t public but IPsoft will train 4,500 Infosys employees to run the software, which indicates a many more employees must have done it manually. According to IPsoft, its software can automate up to 60% of the most basic tasks. The freed-up employees can now focus on other projects while Infosys can pitch for more infrastructure management projects without having to expand dramatically. The industry lingo for this is “non-linear growth.”
“The economics are simple—minimal human intervention with services delivered at unparalleled quality, and there are no annual wage increases, too,” IPsoft’s Asia-Pacific head told the Mint newspaper last year. At the time, the paper reported that Infosys competitors Wipro and Cognizant were hoping to tie up with IPsoft, so getting there first represents something of a coup for Infosys
The company certainly needs a morale booster. “The past 3-4 quarterly financial announcements from Indian service providers suggest that many are struggling to conserve their margins in a tough market environment and that their non-linear innovations have not progressed quickly enough,” Fred Giron, an analyst at Forrester, wrote on his blog. Infosys’s profits in the three months to the end of March were up 3.4% on the previous year but its forceast for the coming year was well below what analysts expected. Its stock lost a fifth of its value that day.
There’s also a lovely circularity to all of this. Firms like Infosys have for years been derided for stealing American jobs. Now getting rid of those jobs is making money for a company in America. And Chetan Dube, the guy who founded IPsoft, is an Indian immigrant to the US.