Strategic Management Project on Infosys

Group Members:-Parul Bhatnagar(04)Chetan Ganatra(06)Varun Goyal(07)Siddhartha Jha(10)Saurabh Kumar(14)Amish Pansuria(22)Shreedhar Rengarajan(24)

NMIMS MBA Capital Markets- 2008-10

»» 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

IT Industry Overview

Overall Revenues by Segment in $(Bn.)

CAGR :27%

» Cost advantage»» •Cost of an engineer is about 20 –40

per cent of the comparable cost in European Union (EU)

»» •Selling, general and administrative

costs approximately 80 per cent of comparable cost in EU

»» •Average offshore billing rate at US$

20 to 35 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 are engineers

•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 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.

Advantage India

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 ØØInfosys pioneered Global Delivery Model (GDM)

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.

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 Services Marketing Association (ITSMA)

A leader in SAP implementation services.

Awards and Achievements

Infosys - Business Lines

Insurance Healthcare and Life Sciences

Banking and capital Markets

Communication Media and Entertainment

Energy, utilities and Services

Retails, Consumer Goods and Logistics

Manufacturing

New Markets and Services

India Business Unit

Consulting Solutions (CS)Enterprise Solutions (ES)Product Engineering and Validation Services (PEVS) – PED, PLES, IVSInfrastructure 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

NorthAmerica

.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 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

Source : www.moneycontrol.com

For Year 2009

Financial Performance Service Offering

  2009 2008 2007 2006Services        

Application Development and

Maintenance

.42 4 .45 4 48 .51 5

Business ProcessManagement

6 .5 7 .4 7 4

Consulting services and packages

.24 9 .23 8 .21 1 .19 7

InfrastructureManagement

.6 3 .4 9 .4 4 .3 6

product Engineeringservices

.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 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 Power of Customers:1.Large Number of IT Companies vying for projects – High Competition2.Huge Decline in IT Expenditure

Barriers to Entry:1.Low Capital Requirements2.Large value chain for small

enterprises3.MNCs are ramping up capacity and

employee strength

Bargaining Power of Suppliers:1.Due to Slow Down, Job Cuts,

layoff & bleak IT outlook2.Demand Supply is not favorable

to employees3.Availability of vast pool of talent.

Rivalry among Firms:1.Low Cost2.Commoditized

offering3.High Industry growth

BCG Matrix – Infosys (USA)

BPOConsulting, KPO

Package Implementation

Maintenance Application & development, Software Products

NONE

HIGH LOW

Market Share

HIGH

LOW

Business

Growth Rate

BCG Matrix – Infosys (India)

Software ProductsMaintenance

Package Implementation

NONEConsulting, BPO,KPO

HIGH LOW

Market Share

HIGH

LOW

Business

Growth Rate

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 recordsTechnical skillsAbility to learn2.65 per cent of its revenues on up gradation of

employees skills ‟High training standards

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 ExcellenceOrganizational 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 ExecutingStrategy for achieving breakthrough performance results using theBalanced Scorecard (BSC).

McKinsey’s 7 S Model

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 Strategy

Market Development StrategyNew Product Product

Development Strategy

Diversification 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