Strategic Management

Project on Infosys
Group Members:-
Parul Bhatnagar(04)
Chetan Ganatra(06)
Varun Goyal(07)
NMIMS MBA Siddhartha Jha(10)
Capital Markets- Saurabh Kumar(14)
2008-10 Amish Pansuria(22)
Shreedhar Rengarajan(24)
 IT Industry Overview
»
» The total revenues for the Indian
IT industry were around US$
71.7 billion in 2008-09.
» Contribution of IT industry to
India’s gross domestic product
(GDP) has grown from 1.2 per
cent in 1997-08 to an estimated
5.8 per cent in 2008-09.
» The Indian IT industry has been
growing at a compound annual
growth rate (CAGR) of 27 per
cent for the last five years.
»
»

 IT Industry Overview
Overall Revenues by Segment in $(Bn.)

CAGR :27%
 Advantage India
» Cost advantage Ease of scalability
»
» •Cost of an engineer is about 20 –40 •6,75,000 technical graduates per
per cent of the comparable cost in annum, of which 4,00,000 are
European Union (EU) engineers
»
» •Selling, general and administrative •Over 50,000 MBAs graduating
costs approximately 80 per cent of per annum
comparable cost in EU
» •Indian IT industry is expected to
» •Average offshore billing rate at US$ add 40,000 employees in 2009-10.
20 to 35 per hour; about 50 to 70 per
cent lower than EU
»

 Advantage India

India topped the A.T. Kearney Global Services Location Index



2009, beating 49 other countries of the world, emerging to

be the destination of choice as an off shoring location of
global IT/ITeS power houses.
 Vision And Mission

» Vision “To be a globally respected corporation that provides

best-of-breed business solutions, leveraging technology,
delivered by best-in-class people."
»
»
» Mission "To achieve our objectives in an environment of
fairness, honesty, and courtesy towards our clients, employees,
vendors and society at large."

 Values
» Infosys’ value system is best articulated by the
acronym C-Life – Customer Delight, Leadership
by Example, Integrity & Transparency, Fairness
and Pursuit of Excellence.
»
» The major objective of the company is to become
India’s most respected company.
»
» Infosys deliberately defocused on revenue and
profits. Their goal was to do everything by the
book.
»
 Introduction to Infosys

ØInfosys Technologies Ltd. was started in 1981.

ØToday, it is a global leader in the "next generation" of IT and consulting.

ØInfosys defines, designs and delivers technology-enabled business solutions

that help Global 2000 companies win in a Flat World.

ØInfosys serves the client globally and is one of the pioneers in strategic
offshore outsourcing of software services
Ø
ØInfosys pioneered Global Delivery Model (GDM)
  Milestones

In 1987 Infosys got its first foreign client.

In 1993, Infosys became a public limited company and received ISO

9001/TickIT certification.

In 1999, Infosys crossed $100 Million and was listed on NASDAQ.

In 2006, Infosys completed 25 years of its existence and its revenues crossed $ 2
billion.

Today Infosys has more than 1,03,078 employees and has presence in more than
20 countries across the world. Its corporate headquarters is in Bangalore.
  Awards and Achievements

Infosys moved up to No. 14 on FinTech 100.

Infosys was awarded the ‘India’s best company to work for’ in 2009.

Infosys entered the Balanced Scorecard Hall of Fame for Executing Strategy on
the strength of its innovative strategy planning and execution capabilities.

Infosys was honored with the Sharpening Brand and Competitive Differentiation
Marketing Excellence Award from the Information Technology Services
Marketing Association (ITSMA)

A leader in SAP implementation services.

 Infosys - Business Lines
Insurance Bankin Communicat Energy, Retails, Man New India
Healthcar g and ion Media utilities Consumer ufact Market Business Unit
e and Life capital and and Goods and uring s and
Sciences Market Entertainme Services Logistics Service
s nt s

Consulting Solutions (CS)

Enterprise Solutions (ES)
Product Engineering and Validation Services (PEVS) – PED, PLES, IVS
Infrastructure Management Services (IMS)
Software Engineering and Technology Labs (SETLabs)
System Integration Services (SI)
Corporate Sales and Marketing (CSM)
 Geographical Presence (Revenue)

Country 2009 2008 2007 2006 2005

North 63.2 62 63.3 64.8 65.2

America
Europe 26.4 28.1 26.4 24.5 22.3

India 1.3 1.3 1.6 1.7 1.9

Rest of the 9.1 8.6 8.7 9 10.6

World
Total 100 100 100 100 100

Revenue Segmentation 2009

 Geographical Presence (Service Delivery)

» Infosys has presence in over 31 Countries.

» Infosys has expanded in low cost service centers like
China, Philippines etc.
 Financial Performance

Revenues Rs 20766 Crores

PAT Rs 5819 Crores
EPS 101.58
Total Assets Rs 17809 Crores
Cash and Cash Equivalent Rs 10289 Crores

For Year 2009

Source : www.moneycontrol.com
 Financial Performance
Service Offering
  2009 2008 2007 2006
Services        
Application 42.4 45.4 48 51.5
Development and
Maintenance
Business Process 6 5.7 4.7 4
Management
Consulting services 24.9 23.8 21.1 19.7
and packages

Infrastructure 6.3 4.9 4.4 3.6

Management
product Engineering 2.2 1.6 1.6 1.8
services
System Integration 3.6 2.8 2.3 1.7
Testing Services 6.8 7.5 6.9 5.9
Others 3.9 4.7 7.1 8
Total Services 96.1 96.4 96.1 96.2
Product revenues 3.9 3.6 3.9 3.8
Total 100 100 100 100
 Financial Growth

Revenue Break up as per Services offered in 2009

Industry Segmentation Performance

Source – Annual Financial report Infosys, 2009

 S.W.O.T. Analysis

» Strengths:-
» Cost advantage – Presence of Infosys in India is key
to its success
» Breadth of service offering – end to end solutions
including high end services like IT consultancy and
KPO
» Quality and maturity of process – Infosys has quality
standards such as CMM Level 5i to differentiate
from other competitors
» Global and 24/7 delivery capability – excellent
internet backbone and telecommunications
facilities enabling companies to develop 24/7
delivery capabilities from India itself

 S.W.O.T. Analysis

» Weaknesses:-
» Excessive dependence on USA for revenues – US
Companies are cutting down IT budget hence
revenues to be hit hard for Infosys
» Excessive dependence on BFSI sector for revenues
– Banking sector is facing a crisis globally and is
going to spend less on IT
» High rates of attrition – Although slowdown in global
economy has lowered attrition rate but the industry
still faces high attrition rates as compared to other
sectors
» Decreasing competitive advantage – rising salary
expenses is taking away the cost advantage
enjoyed by Indian companies (including Infosys).



 S.W.O.T. Analysis

» Opportunities:-
» Greater scope for product innovation
» Increased focus on high end work like consulting
and KPO
» Domestic demand for IT services is to grow at 20 %
» Greater scope to service domains other than BFSI
such as Transportation, Infrastructure, etc.
» Satyam fiasco – Likely to have positive impact on
business considering corporate governance,
possibility of shifting of business, getting higher
incremental business from overlapped clients, and
winning new business from new clients



 S.W.O.T. Analysis

» Threats :-
» Global economic slowdown may continue for several
years – hence low IT spending globally
» US Govt. against outsourcing
» Shrinking margins due to rising wage inflation
» Rupee-dollar movement affects revenue and hence
margins
» Increased competition from foreign firms like Accenture,
IBM etc.
» Increased competition from low-wage countries like
China, Indonesia etc.



 Porters Five Forces Model

Threat of Substitutes:
1.Other offshore locations – Low Cost
Locations like Eastern Europe,
Philippines and China.
2.Price quoted is the biggest
Differentiator.

Bargaining
Rivalry among Firms:Power of Customers:
Bargaining Power of Suppliers:
1.Large Number of IT Companies vying for projects – High C
1.Low Cost
1.Due to Slow Down, Job Cuts,
2.Huge Decline in IT Expenditure
2.Commoditized
layoff & bleak IT outlook
2.Demand Supply is not favorable offering
to employees 3.High Industry growth
3.Availability of vast pool of talent.

Barriers to Entry:
1.Low Capital Requirements
2.Large value chain for small
enterprises
3.MNCs are ramping up capacity and
employee strength
 BCG Matrix – Infosys (USA)
HI
G
H Consulting, KPO
BPO
Busines Package Implementation
s
Growth
Rate L Maintenance Application &
O development, Software Products
W NONE

HIGH LOW

Market Share
 BCG Matrix – Infosys (India)
HI
G
H Maintenance
Software Products
Busines Package Implementation
s
Growth
Rate L
O
W NONE
Consulting, BPO,
KPO
HIGH LOW

Market Share
 McKinsey’s 7 S Model
Style - LEADERSHIP
“Infosys Leadership Institute”
open door policy,
continuous sharing of information,
takes inputs from employees in decision making,
builds personal rapport with employees

Staff – HUMAN RESOURCES
“Knowledge Based Industry” (90% are
engineers)
Emphasis on academic records
Technical skills
Ability to learn
2.65 per cent of its revenues on up gradation of
employees‟ skills
McKinsey’s 7 S Model
 McKinsey’s 7 S Model
Strategy


» Client focused strategy (custom built soft wares)

» Quality driven model
» Strong Engagements with existing clients
» Value added services to new clients
» Geographical Expansion
» Enhanced Solution Set
» Consulting
» Business Process Management
» Systems Integration
» Infrastructure Management
» Deep Industry Knowledge
» Brand Visibility
» Pursue alliances and strategic acquisitions



 McKinsey’s 7 S Model
 Shared Values
» Customer Delight
» Leadership by Example
» Integrity and Transparency
» Fairness
» Pursuit of Excellence
Organizational Structure

» Free Form
» Flexible Team Structure
 E.g. A member, who might have been team leader in one project,
may be replaced by another member of the same team for another
project.
» Equality among employees

 McKinsey’s 7 S Model
 Skills


» Domain specific Certifications

» Competency Building
»
Infosys has been CMM-Level 5 certified for its process capabilities.

It has entered the Balanced Scorecard Hall of Fame for Executing
Strategy for achieving breakthrough performance results using the

Balanced Scorecard (BSC).

 Key Success Factors

Sound Management Skills

Nurturing Working Atmosphere

Commitment To Values, Speed ,Imagination and

Excellence

Personnel Management

Infrastructure
 Other Success Factors

»Invest in well understood, proven product & not

just R&D.
»While dealing with investors, always under-
promise and over deliver.
»Have a healthy sense of paranoia and respect for
the competition.
»Leaders in the making.

Strategy Analysis - Infosys
 Infosys- Corporate Level Strategy

» Global Delivery Model: Producing where it is most cost

effective and selling where it is most profitable.
»
» Moving UP the value chain: Getting involved in a software
development project at the earliest stage of the life
cycle.
»
» PSPD Model: “Predictability of Revenues, sustainability of
revenues, Profitability, De-Risking” for Risk
Management.
 Infosys – Corporate Level Strategy
» Actions Taken
» Expansion into low cost countries like Mauritius,
Philippines, Thailand, Mexico etc.
» Improved Quality capabilities -> CMM Level 5i
» Emphasis on delivering high value services
» Currency hedging for predictability of revenues.
» Investing heavily in training centers.
 Infosys – Generic Strategy
» Low cost Global delivery 24/7 Model
»
» Little differentiation in low-end services of value chain;
high differentiation in high end services in value chain
like software products and package solutions.
»
» Focus on Quality, Customer relationship management,
timely delivery.
 Infosys – Grand Strategies
» Ansoff’s matrix


Current Market New Market

Current Product Market Penetration Market
Strategy Development
New Product Product Strategy
Diversification
Development Strategy
Strategy
 Market Penetration Strategy
» Current Markets: USA and Europe
» Current Products: BPO, KPO, consultancy services (in
BFSI, manufacturing and retail) and software products
(financial products).
» Recommendation: As most large clients in US and Europe
are cutting costs, Infosys needs to be more aggressive
on cost and quality front.
» Result of strategy: Unlikely to yield good results
 Market Development Strategy
» New Market: India, Middle-east and Australia
» Current Product: ADM, BPO, KPO, consultancy services
(in BFSI, manufacturing and retail) and software products
(financial products).
» Recommendation: Since these are fast developing IT
market, Infosys needs a paradigm shift in focus from US
and EU markets to these markets.
» Result of strategy: Likely to yield good result.
 Product Development Strategy
» Current Market: USA and Europe
» New Product: Consultancy and package implementation
services in relatively growing sectors esp. healthcare, life
sciences and aviation sector, and KPO services.
» Recommendation: Concentrate on building expertise in
these domains by strategic acquisitions.
» Result of Strategy: Likely to have good result. (better the
company acquired, the better the result).
 Diversification Strategy
» New Market: India, Middle-east and Australia
» New product: Consultancy and package implementation
services in relatively growing sectors esp. healthcare, life
sciences and aviation sector, and KPO services.
» Recommendation: Changing Brand image from low value
service provider to high value service provider.
» Result of Strategy: Difficult to achieve overnight (possible
in long term)
 Other Strategies
» CONCENTRATION: 90% of Infosys revenues from American and
European nations.


» VERTICAL INTEGRATION: Infosys recently made a bid to acquire a

European major – Axon consultancy to improve its business in
European markets, but finally called off the deal due to high
valuation. Otherwise, Infosys has always believed in organic growth.


» INNOVATION: The Software Engineering and Technology Labs

(SETLabs) at Infosys is the center for applied technology research in
software engineering and enterprise technology.
 SETLabs conducted 24 Innovation
Workshops with customers from the US and Australia, to identify
research collaboration possibilities. Infosys promotes a favorable work
environment that encourages innovation and meritocracy.
Future Strategies
 Future Strategies Contd..
» Global sourcing strategy is aligned with business strategy
» Enhancing operational efficiency and delivering value
added services
» Structuring processes and services into modules thus
leading to enhanced flexibility and productivity
» Aggressive focus on ERP solutions like Oracle and SAP
» Expand into high end consulting
 Lessons to Draw
» Do not put all eggs in one basket:
» Provide more high end services in value chain (3rd wave
IT)
» Shift in focus from low cost advantage to high quality
services
» Consolidation and Strategic acquisitions are essential for
future growth of revenues.
» Quick adoption to high growth markets is necessary.
 Thank you