Not seeing pricing pressure, says Infosys' Pravin Rao

Infosys, the second-largest IT services company, on Wednesday said that it is not seeing any pricing cuts in its projects but said that its clients are not reinvesting in new technology areas.

Addressing analysts at the Morgan Stanley India conference, Infosys Chief Operating Officer U B Pravin Rao said that the company is not seeing any unusual pricing pressure.

“The rates have remained the same and we have not seen any change in the rate cards and in many cases we have seen rate increases as well,” he said.

Rao also pointed out that if there really was an issue with pricing pressure, then it would have reflected more acutely in the margins. “Our margins have remained in a narrow band,” he said. For fiscal 2018, Infosys has projected operating margins to be in the range of 23% to 25%.

IT services companies in India have been facing margin pressures in the commoditised part of their business, which involves maintaining IT systems or software applications. The core business contributed to 65% of total revenues of Infosys.

He, however, cautioned that some of its clients, despite getting cost benefits have not reinvested in new areas such as digital. “What we are seeing is that there is no linearity between cost take-out and reinvestments. In some clients, we see repurposing of spending but there are many clients where we have seen their infrastructure is not ready to invest for newer technologies and they are doing it in a phased manner,” he said.

Rao also pointed out that Infosys remains committed to its guidance of 6.5% to 8.5% revenue growth this year even as some clients ask for projects to be carried out at 30% to 40% lower costs than before.

He also said Infosys will continue to focus on increasing local hiring in markets where it has a significant presence as that is the only way it can mitigate any long-term impact that you could have on uncertainty around visa.

"We are going to all the premium colleges, community colleges in and around the US. We started that process this year... We have had the first batch," he said.

Last month, Infosys said it will hire about 10,000 locals in the US over the next two years and set up four technology and innovation hubs there.