Infosys Strategy 2003

8/6/2019 Infosys Strategy 2003

http://slidepdf.com/reader/full/infosys-strategy-2003 1/52

Strategic Analysis of

Infosys

Group Members:-

Kaushik Adhikari (24)Kuntal Datta (25)

Mamohau Paulina Shale (26)

Manish K Agrawal (27)

Manish Kumar (28)

IMI XPGDM,

2009-10



» The total revenues for the Indian ITindustry were around US$ 71.7 billion in2008-09.

» Contribution of IT industry to India’s grossdomestic product (GDP) has grown from1.2 per cent in 1997-08 to an estimated5.8 per cent in 2008-09.

» The Indian IT industry has been growing ata compound annual growth rate (CAGR)of 27 per cent for the last five years.

IT Industry Overview



IT Industry OverviewOverall Revenues by Segment in $(Bn.)

CAGR :27%



Industry Life CycleIT sector is globally recording

a 30% growth. The sector is in the growth stage with

IT companies trying tomaintain or increase their revenue by maintainingthere existing market shareand trying to penetrate intoun-tapped market. Alsothere is a trend of Mergersand Acquisitions

© Infosys Technologies Limited 2004



» Cost advantage

» •Cost of an engineer is about 20 –40 per cent of the comparable cost in European

Union (EU)

» •Selling, general and administrative costsapproximately 80 per cent of comparablecost in EU

» •Average offshore billing rate at US$ 20 to35 per hour; about 50 to 70 per cent lower than EU

Advantage India

Ease of scalability

•6,75,000 technical graduates per

annum, of which 4,00,000 areengineers

•Over 50,000 MBAs graduating

per annum

•Indian IT industry is expected to

add 40,000 employees in 2009-10.



India topped the A.T. Kearney Global Services Location Index2009, beating 49 other countries of the world, emerging tobe the destination of choice as an off shoring location of global IT/ITeS power houses.

Advantage India





PESTLE Analysis




PESTLE Analysis




PESTLE Analysis




PESTLE Analysis




Introduction to Infosys

Infosys Technologies Ltd. was started in 1981.

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

Infosys defines, designs and delivers technology-enabled business solutions

that help Global 2000 companies win in a Flat World.

Infosys serves the client globally and is one of the pioneers in strategic

offshore outsourcing of software services

Infosys pioneered Global Delivery Model (GDM)



Vision And Mission

» Vision “To be a globally respected corporation that providesbest-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 andPursuit of Excellence.

» The major objective of the company is to become

India’s most respected company.

» Infosys deliberately defocused on revenue andprofits. Their goal was to do everything by the book.



In 1987 Infosys got its first foreign client.

In 1993, Infosys became a public limited company and received ISO 9001/Tick-

IT 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.

Milestones



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 ServicesMarketing Association (ITSMA)

A leader in SAP implementation services.

Awards and Achievements



Infosys – Verticals & Horizontals



Geographical Presence (Revenue)

Country 2009 2008 2007 2006 2005

North

America

63.2 62 63.3 64.8 65.2

Europe 26.4 28.1 26.4 24.5 22.3

India 1.3 1.3 1.6 1.7 1.9

Rest of theWorld

9.1 8.6 8.7 9 10.6

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 likeChina, Philippines etc.



Financial Performance

Source : www.moneycontrol.com

For Year 2009



Financial PerformanceService Offering

2009 2008 2007 2006

Services

ApplicationDevelopment andMaintenance

42.4 45.4 48 51.5

Business ProcessManagement

6 5.7 4.7 4

Consulting servicesand packages

24.9 23.8 21.1 19.7

InfrastructureManagement

6.3 4.9 4.4 3.6

product Engineering

services

2.2 1.6 1.6 1.8

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 Pie

Revenue Break up as per Services offered in 2009



Industry Segment 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 highend services like IT consultancy and KPO

» Quality and maturity of process – Infosys has quality standardssuch as CMM Level 5i to differentiate from other competitors

» Global and 24/7 delivery capability – excellent internetbackbone 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 tobe hit hard for Infosys

» Excessive dependence on BFSI sector for revenues –

Banking sector is facing a crisis globally and is going tospend less on IT

» High rates of attrition – Although slowdown in globaleconomy has lowered attrition rate but the industry still faceshigh attrition rates as compared to other sectors

» Decreasing competitive advantage – rising salary expensesis taking away the cost advantage enjoyed by Indiancompanies (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 asTransportation, Infrastructure, etc.

» Satyam fiasco – Likely to have positive impact on businessconsidering corporate governance, possibility of shifting of business, getting higher incremental business from

overlapped clients, and winning new business from newclients



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, IBMetc.

» Increased competition from low-wage countries like China,Indonesia etc.



Porters Five Forces Model

Threat of Substitutes:

1.Other offshore locations – Low CostLocations like Eastern Europe,

Philippines and China.

2.Price quoted is the biggest

Differentiator.

Bargaining Power of Customers:

1.Large Number of IT Companiesvying for projects – HighCompetition2.Huge Decline in IT Expenditure

Barriers to Entry:1.Low Capital Requirements

2.Large value chain for small

enterprises

3.MNCs are ramping up capacity and

employee strength

Bargaining Power of Suppliers:

1.Due to Slow Down, Job Cuts,layoff & bleak IT outlook

2.Demand Supply is not favorable

to employees

3.Availability of vast pool of

talent.

Rivalry among Firms:

1.Low Cost2.Commoditized

offering

3.High Industry growth



BCG Matrix – Infosys (USA)

BPOConsulting, KPO

Package Implementation

Maintenance Application &development, SoftwareProducts

NONE

HIGH LOW

Relative Market Share

Business

Growth

Rate



BCG Matrix – Infosys (India)

Software ProductsMaintenance

Package Implementation

NONE Consulting, BPO,KPO

HIGH LOW

Relative Market Share

BusinessGrowth

Rate



McKinsey’s 7 S Model

Strategy: the plan devised to maintain and buildcompetitive advantage over the competition.

Structure: the way the organization is structured andwho reports to whom.

Systems: the daily activities and procedures that staff members engage in to get the job done.

Shared Values: called "super-ordinate goals" whenthe model was first developed, these are the corevalues of the company that are evidenced in the

corporate culture and the general work ethic.

Style: the style of leadership adopted.

Staff: the employees and their general capabilities.

Skills: the actual skills and competencies of the

employees working for the company.




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% areengineers)

• Emphasis on academic records• Technical skills• Ability to learn• 2.65 per cent of its revenues on up gradation of

employees skills• High training standards






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




Shared Values

» Customer Delight

» Leadership by Example

» Integrity and Transparency

» Fairness

» Pursuit of Excellence

Organizational Structure

» 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




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 FactorsSound 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 costeffective and selling where it is most profitable.

» Moving UP the value chain: Getting involved in a softwaredevelopment 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 -> CMMI Level 5

» 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 likesoftware 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 PenetrationStrategy

Market DevelopmentStrategy

New Product Product DevelopmentStrategy

Diversification Strategy



Market Penetration Strategy» Current Markets: USA and Europe

» Current Products: BPO, KPO, consultancy services (inBFSI, manufacturing and retail) and software products

(financial products).

» Recommendation: As most large clients in US and Europeare cutting costs, Infosys needs to be more aggressive oncost 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 ITmarket, Infosys needs a paradigm shift in focus from USand 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 implementationservices in relatively growing sectors esp. healthcare, life

sciences and aviation sector, and KPO services.

» Recommendation: Concentrate on building expertise inthese 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 implementationservices in relatively growing sectors esp. healthcare, life

sciences and aviation sector, and KPO services.

» Recommendation: Changing Brand image from low valueservice 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 inEuropean 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 centre for applied technology research in

software engineering and enterprise technology.SETLabs conducted 24 InnovationWorkshops with customers from the US and Australia, to identifyresearch collaboration possibilities. Infosys promotes a favourablework environment that encourages innovation and meritocracy.



Future Strategies



Future Strategies Contd..» Global sourcing strategy is aligned with business strategy

» Enhancing operational efficiency and delivering valueadded services

» Structuring processes and services into modules thusleading 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 qualityservices

» Consolidation and Strategic acquisitions are essential for future growth of revenues.

» Quick adoption to high growth markets is necessary.



Documents

Infosys Strategy 2003