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TheStreet Open House

Infosys Leads Indian Outsourcing Back to Its Roots

Stocks in this article: INFYMSFTIBMHPQ

What Murthy has done since his return is to bring Infosys back to its roots, as the India-based low-cost provider of custom programming, and so far it's working. Revenue grew 15% in dollar terms during the September quarter, just reported, which is no mean feat given that the Indian rupee fell 11% in value during the same period.

Margins are down, but Murthy is making it up on volume, taking advantage of the cheap rupee to undercut Western companies on price.

The problems with Infosys are a mirror of India's economic problems in general. The country has many skilled professionals, but it has made its niche as a low-cost provider, and when it tries to move up it has trouble. Its best and brightest working in the West get recruited by competitors, and it winds up back where it started.

Murthy hasn't solved the problem, yet. So far he has mainly brought in more lower-level programmers and gone back to Infosys' roots. He may have "fighting spirit," but Murthy will have to offer more if Infosys, and the Indian information technology sector, is to get the respect it feels it deserves.

At the time of publication, the author held shares of IBM.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

Dana Blankenhorn has been a business journalist since 1978, and a tech reporter since 1982. His specialty has been getting to the future ahead of the crowd, then leaving before success arrived. That meant covering the Internet in 1985, e-commerce in 1994, the Internet of Things in 2005, open source in 2005 and, since 2010, renewable energy. He has written for every medium from newspapers and magazines to Web sites, from books to blogs. He still seeks tomorrow from his Craftsman home in Atlanta.
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