Shareholders should vote against the board members when the re-appointment is due. The board needs a revamp desperately otherwise the same old boomer tactics will continue and INFY will lag fall behind.
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My experience is from product development. I have many of my friends in IT services. This is what I understand: The processes, values, culture, and almost everything about product companies are very different from IT service companies.
There are definitely some synergies. But product development capability is very limited for these companies, in my view. I donât expect a Google, SAP, Zoho, or even a Paytm coming out of our IT services.
If I invest in IT services, that would be the bet on the future of IT services only.
Iâm not sure if it is wise to invest in these companies, based on the hope that they could one day successfully transform into product companies (even considering their large talent pool and cash reserves). I believe such a shift is a shift to a very different industry. It wonât be easy, and Iâm not even sure such a transformation is desirable.
Iâm not saying it can never happen. A visionary leader can make any such magic possible. I just wonât place my bet on it.
@gsapte @StonePitbull
Good thinking and agree that cash reach company should invest in breakthrough technology like AI. And as new age share holder we should convey our sentiment to companies.
However if you go to past, infosys under NM invested in some US startup that time. Indian investor that time blasted and take assurance from infosys that they will not do such thing in future. Second, IT companies are good in knowing trend, as example, infy invested (donated) in openai in 2015. They may have find start up working in similarline and may have invested.
Also letâs not restrict this thinking to IT companies only. As example Bajaj Auto and TVS, we should question why they are not investing aggresively in EV, why not put in cell or bettery tech (Like OLA doing) and why not aggresively do R&D like (Aether and OLA)? They put their african operations in open for honeybees (Chinise) to come and take. Why they are not penetrating their EV sells in Africa aggresively? They still depend on rare earth from china, whereas new boy like ola find alternative.
Just my thoughtsâŚ
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While there is consensus here on forum that Indian IT providers should be focusing on AI rather than buyback, I would like to propose a counter argument (after reading too much Ed Zitron) that economics of AI are yet to be proven. Rather than burning a hole in their balance sheet, they are being prudent in capital allocation. (We have seen in past how metaverse capex backfired spectacularly for META when it was consensus future technology)
Unit economics of AI is abysmal and barring product companies (Google, Microsoft) no one has yet established use cases of AI other than text generation and coding assistants. I would much prefer management that does buyback and returns cash to shareholders than AI capex.
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Itâs a phase. In a few years, if the current massive capital expenditure in AI starts to look foolish, these buybacks will be viewed as savvy capital allocation decisions. The aggregate global capital expenditure in AI increasingly resembles a black hole, and much of it is poised to deliver subpar returns, if any at all. Identifying which projects will emerge as spectacular successes amid such a rapidly shifting landscape is akin to searching for a needle in a haystack. In stark contrast, buybacks provide much greater certainty in outcomes compared to investing in an unpredictable industry rife with swift changes and fierce competition. If investors are dissatisfied with the companyâs capital allocation decisions regarding buybacks and would prefer that funds be channeled into AI investments, they always have the option to sell their shares on the market or in the buyback offer. They can then use the proceeds to invest in companies that are indeed focusing on AI. Thereâs nothing preventing them from doing that.
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Any serious strides in AI will also likely cannibalize their existing service revenues. Its kinda like Kodak holding back their Digital Camera tech. Choosing to suppress the technology despite an employeeâs 1975 invention of the first digital camera. Management feared that digital photography would undermine their profitable film and processing business, leading them to shelve the innovation rather than pursue it.
IBM held back their Relational Database system which lead to the rise of Oracle, which filled that gap and then IBM played catch up.
Donât hold me on these examples, our IT players are not withholding any secret tech, however being the incumbents, they are more focused on protecting the margins that playing offense.
How Intel lost (light read)
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I disagree with this part. The likes of TCS, Infy and HCL have a large enough portfolio of products and platforms which generate 10-15% of their overall revenue. These products complement their services offerings quite well and also give a major margin boost. Unlike pure play enterprise software startups, these IT giants donât have to spend a truckload of money on sales/marketing/advertising because they already have thousands of clients and are merely upselling/cross-selling these products to existing clients.
HCL has done this effectively with its HCLSoftware division, which mainly consists of IBMâs old suite of products. If HCLSoftware was a listed company, it would probably be valued above 1 lakh crore, based on its revenue and profits. Infy has a subsidiary called EdgeVerve, which operates as an independent company and pays salaries similar to top product companies, but after Sikkaâs departure has become a relic.
Iâm not saying these companies should give up on services and switch completely to products. I just think the TAM for services might have peaked/saturated, especially with AI-related productivity gains and GCC shift. So these IT services giants might be nearing their terminal value and gradually start to become dividend stocks, unless they get into other things besides the same old services.
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We differ by what we mean by Products. Product companies talk about âusersâ, not âclientsâ. By users, weâre talking about thousands or millions. Not tens or hundreds of âclientsâ.
As far as I understand, these âproductsâ by our IT service companies are mainly common denominators of the requirements of their multiple clients, built on top of third party products such as SAP. Theyâre useful for quicker customization for their clients. But I donât consider them as Products in lines of the products of Google, Microsoft, etc.
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Dude, Finacle and TCS BaNCS serves I donât know how many billion âusersâ. The banks are the clients, the customers of the banks are the users. If your argument is about semantics and not the crux of the matter, which is Infy choosing financial engineering (buyback) instead of investments on IPs and innovations, then youâre arguing with yourself here.
Expressing my opinions here is to check my biases and get my views corrected. Iâm happy that youâre contradicting my views.
You mentioned TCS BaNCS. I have few queries to understand how this works:
- Is it something a bank can take it off the shelf and use it on their own?
- Do they need TCSâs help to get it deployed, maintained, supported?
- Is TCS getting paid for the software (subscription), or the deployment, or both?
- Is the billing for these mainly based on the headcount?
Since this is a thread about Infosys, I would also like to learn about such products from Infosys.
BaNCS equivalent from Infosys is Finacle - A universal digital banking solution suite used globally by banks to transform their core banking operations.
Infosys Edge Suite - A suite of business platforms that enables enterprises to respond to market opportunities with cloud-based IP business models.
Infosys NIA - An AI-driven platform that automates IT and business processes for improved efficiency.
Panaya - An application delivery platform offering automation for testing and change impact analysis.
Skava (now Infosys Equinox) - A digital commerce platform focused on delivering omnichannel customer experiences.
Infosys Cortex - A customer engagement platform leveraging AI for personalized interactions.
Infosys Meridian - A workplace platform designed to enhance learning and employee experience.
Infosys Wingspan - A digital learning platform that drives workforce skill development.
Infosys Polycloud - A multi-cloud management platform enabling cloud migration and governance.
Infosys McCamish - Insurance and retirement services software for life insurance, annuities, and claims processing.
Infosys Facets - A healthcare product for payor integration, claims, and benefits administration.
Infosys Cobalt - A cloud services suite helping enterprises in cloud adoption and digital transformation.
Infosys Topaz - A platform integrating generative AI capabilities for business innovation.
Infosys BPM - A business process management service offering outsourced process transformation.
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