Infosys to increase local hiring and chase acquisitions in U

BANGALORE: Infosys Technologies, India’s second biggest software exporter, will increase local hiring and even explore acquisition opportunities in the US in order to cope with tightened immigration norms, senior company officials told investors on Wednesday.

The company also expressed concerns about a worsening economic climate in the US, and cautioned that if the situation does not improve, customers’ IT budget could be affected.

“We will accelerate local hiring and even inorganic growth to get the pool,” said V Balakrishnan, CFO of Infosys. “The US economic data is very bad, we will have to see whether it impacts next year budgets of customers,” he added. He added that increased visa costs could mean $15-20 mn cost for the company that can be easily managed.

The company said despite macro economic volatility, customers continue to offshore more projects, which will ensure that it meets its forecast of 19% growth this year.

“Our challenge is to balance the short term growth with long terms risks. While we have said the operating margins would decline by 150 basis points, if revenue growth continues, we could do better,” Mr Balakrishnan said. Infosys also plans to tap aggressively into the US government’s multi-billion outsoutrcing market.

“We are in the process of preparing a business plan and establishing leadership for the public services subsidiary,” said SD Shibulal, COO of Infosys.

Infosys established its US subsidiary targeting a $100-bn government outsourcing market, the firm has shifted out Eric Paternoster, its head of insurance and healthcare business to take charge as the chief executive of Infosys Public Services.

US IT budget is $82 bn for fiscal 2010, with about $35 bn earmarked for the Defense Department. Other areas that might be available for vendors such as Infosys to address are Departments of Justice, Transportation, Homeland Security, Health and Human Services, Commerce, Energy, Veterans Administration, Agriculture and Treasury, experts said.

Infosys also welcomed India’s direct tax code (DTC) proposal, and said it provides more clarity on SEZ rules. “There are better provisions, which provide a window of 2-4 years to operationalise new SEZ units. The DTC is neutral to slightly beneficial in terms of impact,” said Mr Balakrishnan.