Today in Tech: Infosys-Lodestone, two takeaways; Can universities catc...

Infosys buys Lodestone: Two takeawaysNew trade-offs: Infosys is trying to get more revenues with fewer people. Its revenue per employee is about $50,000. In consulting and system integration business, a segment it’s trying to expand in, it’s about $90,000 per employee. For Lodestone, a company it acquired yesterday paying $350 million, it’s about $250,000. This is one of the reasons why it made the acquisition. In fact, Infosys CFO V Balakrishnan started his presentation yesterday by referring to people problem: adding more and more people is not a viable option. Yet, consulting businesses - which have a high revenue-per-employee  ratio - come with low, and often single-digit margins. To grow consulting business would invariably mean reducing margins. But, IT companies are okay with it because, as Bala pointed out yesterday, a dollar of consulting business brings with it $2 to $3 worth of business opportunities in traditional IT outsourcing services. And here lies the complication: consulting business, while being non-linear itself, actually feeds the linear growth businesses. The takeaway: There are different types of non-linear growth. And if headcount is going to be a problem for IT companies, it’s important to know what kind of non-linear growth they are pursuing.Process Vs People: Infosys built its business on process excellence. But, Lodestone acquisition is all about people. Let the people go and most of the value gets eroded. Infosys understands this, and that shows in the way the deal was structured. One, Lodestone will be a subsidiary of Infosys. Its management structure / roles will not change. They management team will be reporting to a board headed by BG Srinivas. Two, Infosys will pay two thirds of the deal amount now, and the rest after three years based on retention of key employees.But, to get the best out of this talent will demand more than this. (While being a subsidiary ensures independence, it’s not the best structure for tapping the synergy one gets from a merger. Contracts to retain people have serious limitations - especially in a people driven business like consulting.) It will be interesting to see how Infosys manages this.The key challenge though is to keep track of how this acquisition progresses. It’s small both in terms of money spent on it (relative to the revenues of Infosys) and in terms of the number of people who will be coming on board. Will our colleges keep pace with the industry demand?Phaneesh Murthy, CEO of iGate, raises an important point in today’s interview in Mint.

For a lot of our work, which is coming on bleeding-edge technology, we are finding it very difficult to get manpower. And that traditionally should be a university problem. My son goes to Berkeley, he’s studying computer science and I was looking at his course curriculum and what is covered there and what is covered here in a typical computer science course in a leading college here, and they are very different. They are preparing so much for the technologies of today and tomorrow, while many of the Indian educational institutions, because of the slowness of bureaucracy, are still teaching the technologies of yesterday. There is so much more work coming in new platforms like mobility, social analytics and all, and you don’t get those people in the university.