beyondbrics

If Chancellor Angela Merkel and Prime Ministers David Cameron and Mario Monti came to Davos this week to convince the world the worst is over for Europe, they’ll get an approving nod from at least one Indian participant: “Kris” Gopalakrishnan, the chairman of IT giant Infosys.

“I’m very optimistic on Europe,” Gopalakrishnan told beyondbrics in Davos. “Europe has some great global businesses, and they seem to be doing much better than the overall economy. At some point, Europe will continue to grow. ”

The chairman’s optimism on Europe was a key reason for Infosys to buy Swiss IT firm Lodestone last September. That move was necessary, Gopalakrishnan said, because Europe’s GDP is as big as that of the US, but Infosys’ presence there isn’t. “Clearly, we see Europe as an opportunity,” Gopalakrishnan said. “We need to get more clients and revenue from Europe.”

In that way, the Lodestone acquisition, which cost $350m, was a good point of entry. It accounted for roughly a third of the Indian company’s quarterly growth, the company announced last week. In all, the quarterly growth meant good news for Infosys, after a few disappointing quarters.

But the future holds even more good news for Infosys and other EM companies focused on Europe, Gopalakrishnan said.

“The problems in Europe have nothing to do with its size or potential,” the chairman said. “They don’t even have anything to do with the demographics of Europe. They are caused by sovereign debt and are bound to end, like every cycle before has ended.”

For proof of his statement, Gopalakrishnan pointed to countries like Sweden and Finland “which have strong economies despite their low number of inhabitants.” He also said that ageing of population doesn’t have to be a problem “because people will work longer and be healthier longer.” Finally, he reckoned that the jobs of tomorrow “aren’t industrial or agricultural, and thus they don’t require employees to be young”.

But what if all his predictions prove to be wrong, and Europe remains the ‘sick man of the world economy’? Even then, Gopalakrishnan says, his European ventures can yield growing revenues. Why? “Because in today’s economy, even if the bulk of value is created in other parts of the world than your own, you can capture it in your own company.”

Take Apple and the US, he says. “A majority of the value of an iPad or iPhone is not created by the company, but by users all over the world. Yet, the profits go to Apple and to the US. The same thing can happen in Europe, where our partners can create value by leveraging their partners.”

Clearly, if European leaders look for someone to raise their spirits this week, “Kris” Gopalakrishnan is the man to turn to.

Related reading:
India IT: good results, mixed response, beyondbrics
Infosys results raise Indian spirits, beyondbrics
Tata follows Infosys lead, beyondbrics