Anant Adya, EVP and Service Offering Head at Infosys Cobalt talks to businessline about the company’s cloud arm enjoying better margins than conventional services, and Infosys’ AI-arm Topaz’s use cases driving cloud consumption.
We launched Cobalt in August 2020 to consolidate all the offerings, narrative, and go-to-market motions under one brand, because everybody was talking about cloud. Cobalt was launched as a brand to showcase Infosys’ point of view or value proposition on Cobalt or cloud.
We were the first globally to launch a services brand, Cobalt. Subsequently, Topaz and Aster were launched, but Cobalt was the first of its kind. Most customers spoke about getting out of data centers and migrating workloads to the cloud, which became mainstream during COVID because everybody was working remotely, and handling workloads in a hybrid model.
Our business took off in 2021 and 2022 where almost every customer was leveraging cloud, from a technology standpoint. At the same time, clients were saying, “What are you doing specifically for financial services, banking, retail, and healthcare? What relevant industry solutions can you bring so I can focus on driving business value?’ That’s when we launched our industry cloud offerings, with financial services cloud and CPG cloud.
While driving the IT and the efficiency bucket, we focused on business agility and use cases. Then, we leveraged platforms like Finacle and Helix to co-create solutions. That was the story till 2022’s end. Later, a problem of everybody buying technologies in cloud, data, 5G, IoT, edge, and AI, without knowing how to tie everything together to achieve business outcomes, came up.
We ended our 2023 first-half narrative by saying that while we continue to do IT, business, and co-creation, the six technologies will come together to deliver business outcomes. That was the evolution of Cobalt till the early part of 2023 when we launched Topaz. During those three years, we were constantly growing double digits and winning many large deals.
What kind of margins does Cobalt enjoy?
Cobalt engagement margins have always been attractive, unlike the pure play services margin, broadly due to three reasons. The amount of instrumentation, tools, and technologies used in executing a Cloud project is higher than in conventional services.
If you look at a project – consider workload migration to the cloud with usually five steps, including the creation, the logical and physical design, the actual migration, the testing, and the cloud finops. Much work can be done without humans — testing, cloud finops, creating the migration plan, and workload migration.
Our margins on the cloud projects have been very high, because of which Cobalt in general enjoys significantly better margins than conventional services.
We also created a narrative about how Cobalt and Topaz will come together. We were the first in the world to say, ‘Let’s combine the narrative of cloud and AI because both require each other to survive’. For example, all AI projects will drive incremental cloud consumption and cloud is mandatorily required to derive value from AI. A lot of Topaz use cases are driving Cobalt or cloud consumption.
Have you been able to attract newer customers because of Cobalt?
Our customer base consists of three types — existing clients whose digital journey we can help with. The second aspect is focused on some of our industry solutions. While we might be selling IT to all the IT stakeholders, with Cobalt and cloud, we could go beyond IT.
For example, last year, we had a multi-billion-dollar deal in Europe with Liberty Global to cloudify their assets and help them become cloud-native. This engagement was not sold to a CIO, or a CTO responsible for internal IT, but to the stakeholders beyond IT. We also work with semiconductor companies, who have workloads outside of IT, significantly more than what they use for IT — R&D, ISV, and engineering workloads.
That was the second bucket that opened beyond IT. The third was net new logos and account openings. In addition, there are also “cloud plus plus”, or associated cloud services. Because of cloud, more things opened, like cybersecurity.
You cannot do cloud with security as an afterthought. As customers started putting more workloads in the public cloud, SaaS, and data centers at the edge, even the network had to be redesigned because you can’t run your IT with workloads sitting all over the place with the traditional network.
The network started becoming software-defined and we got many opportunities in the network space. There was also a huge focus on legacy transformation. We also see cloud becoming an operating model. Everybody is spending on cloud and we are bullish about it, our pipeline wins, growth plus attraction in the market.
What sectors and geographies are you seeing traction from?
Financial services, CPG retail, logistics, manufacturing and communication, media, and high tech are the biggest verticals for us concerning cloud traction, adoption, pipeline, and revenue.
However, we see select patterns in the healthcare & life sciences space because of the focus on patient experience using data and AI to drive better experiences for patients and people consuming the services.
During COVID, the drug discovery process was made efficient using the power of cloud and AI and so, that is picking up. While we see common themes across CPG retail, logistics, financial services, manufacturing, and CM tech, healthcare tends to be more industry solutions-focused.
Region-wise, North America, and APAC are at the forefront. Europe is still not as big as North America, EMEA, and APAC because of the local regulations, data privacy, and confidentiality laws. Many European customers believe their crown jewel application should not reside on the public cloud.
A new region picking up in the last four quarters is Southeast Asia. We see a lot of traction, especially in Korea, Malaysia, Indonesia, Singapore, and the Philippines, around adopting AI. They are jumping onto the bandwagon of AI, and the AI revolution is driving cloud consumption.
North America, followed by Southeast Asia, ANZ, and Europe are some of the bigger markets, from a public cloud standpoint.
You have acquired companies like GuideVision and Simplus. What parameters do you consider when acquiring?
When we acquire, we assess a strategic fit in terms of three things — it should either help us with the asset that comes with it, help monetize the asset, and create downstream revenues; it gives us the capability in a practice or an offering area that doesn’t exist for us; it gives us access to some markets we are not present in.
For example, we are not big in LATAM today and want to see how we can create traction there. Why we don’t acquire is for scale or for getting people because that’s something we can build. We continue looking at assets creating a strategic fit in areas like cybersecurity, cloud, service now, and data AI.
Published on December 23, 2024
