First there is the high rate of attrition. In June 2013, which was the quarter when Narayana Murthy returned in an executive capacity, Infosys 's attrition rate shot up to 16.9 per cent. In the September 2013 quarter, it has moved higher to 17.3 per cent. In other words the magic of Narayana Murthy has not worked on his employees who prefer greener pastures outside the organisation rather than wait to see the change taking place.
Change is happening in the company as can be seen by the increase in utilisation level. More employees have come out of the bench and are now gainfully employed in projects, indicating the aggressiveness of the management which is how Murthy was known to operate. Rather than the number of employees in a company it is their utilisation which adds to the company's revenues. Infosys, for the September 2013 quarter, had a utilisation rate of 77.8 per cent as compared to 73.3 per cent last year and 75.9 per cent in June 2013. The manifestation of this is captured in higher volume growth of 3.1 per cent over the previous quarter.
Aggressiveness can also be seen in how the sales and marketing team is made to sweat. Sales and marketing expense as a percentage of sales has increased to 5.8 per cent as compared to 5.1 per cent last year and 5.2 per cent in June 2013 quarter. This has already started showing results with more clients added during the quarter. In September 2013 the company added 68 new clients out of which five are Fortune 500 companies. As we approach the December quarter, the benefit of this effort will be seen as migration of clients is typically high in that quarter.
A flattish operating margin despite salary hike, pick-up in growth in volume terms and a pricing uptick indicate the undercurrent in Infosys' numbers. The company has revised its guidance to the upper end of the range from the lower one earlier, but given the traction and assuming nothing untoward happens in the US, Infosys can surpass these figures. After all that is what the legacy of Narayana Murthy says – guide lower and achieve higher.