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Infosys reports strong financial results in difficult times

The Indian outsourcer expressed concern about the global economic environment

India's second-largest outsourcer, Infosys, reported strong revenue and profit growth for the quarter ended Sept. 30, despite concerns about economic problems in its key markets in the U.S. and Europe.

The company reported revenue for the quarter of US$1.75 billion according to international financial reporting standards, up by 16.7 percent from the same quarter last year. Net profit was up 9.9 percent to $411 million.

Unlike in the economic downturn in 2008, when the immediate reaction of customers was to cut costs, customers now expect the current economic uncertainty to continue, and are investing in technology to help boost revenue, said Ashok Vemuri, member of the board and head of Americas at Infosys, in a telephone interview.

The investments over the last two years by Infosys in the areas of mobility, business transformation, and products are paying off, Vemuri said. "There is not a single bank out there that is not leveraging mobility capabilities," he added.

Customers are also looking to outsourcers to provide services including consulting, building software, and process management, Vemuri said. Infosys, for example, is building and deploying a deposit module for a bank across 16 countries with different regulations.

Revenue and profit growth in the quarter was however far lower than the 29.6 percent growth in revenue and 18 percent growth in net profit that the company reported in the same quarter last year. Infosys now describes that quarter in 2010 as a "blockbuster" quarter, followed by relatively slower quarters. The company expects growth to be evenly distributed across all quarters this year.

Infosys added 8,262 staff in the quarter, taking its total number of staff at the end of September to 141,822. The company plans to add 45,000 new staff during its fiscal year ending March 31, 2012. It added 45 new clients in the quarter.

The company also lowered its U.S. dollar revenue forecast for the current fiscal year slightly, saying it will now be no higher than $7.2 billion, a year-on-year growth of about 19 percent. The company blamed currency fluctuations for the lower forecast. It had previously forecast revenue of up to $7.25 billion for the year.

Infosys said in the last quarter that it is investing in a products and platforms business that will help it break its dependence on its traditional "time and materials" model for which contracts are priced on the basis of the number of staff working and the duratoin of a project. This change of strategy has become critical for Indian outsourcers as it is becoming tougher to hire good quality staff, and staff salaries are rising.

The company is also exploring acquisitions for technology platforms, products, and access to new markets, the company's CEO S.D. Shibulal told a local TV channel on Wednesday.

North America accounted for 65.3 percent of revenue in the quarter, followed by Europe at 20.5 percent. The company bagged a number of deals from continental Europe in the quarter, Vemuri said. Traditionally most of the business in Europe for Indian outsourcers comes from the U.K.

A depreciation of the Indian rupee against the U.S. dollar over the last few months helped the company boost margins, as it incurs most of its expenses on staff and facilities in India.

John Ribeiro covers outsourcing and general technology breaking news from India for The IDG News Service. Follow John on Twitter at @Johnribeiro. John's e-mail address is john_ribeiro@idg.com


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