Animal Behavior Consulting: Theory and Practice: Winter 2006
Ba401Infosys Consulting In 2006
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Transcript of Ba401Infosys Consulting In 2006
Infosys Consulting in 2006 : Leading the Next Generation of Business and Information Technology Consulting
IT Service Industry : Overview
CAGR 7%
Fragmented market
• On-shore incumbents are still larger: IBM, Accenture
• Off-shore players growing : TCS, Wipro, Infosys Technology
• 47% Annual growth (2003 vs. 2004)
• Still 0.8% market share
Change in Customer Needs
Change in Offerings
• More demanding in ROI• Get more out of tech investment• Rapid adaption /modification• Specific point solutions
• Invest in new technologies on faith and without strong links to ROI measurements (Over-purchase!)
• Off-shore IT services• SOA (Service-oriented
Architecture) & Web services• Applications as services
• Traditional enterprise application packages
• Homogeneous infrastructure
IT Service Industry : Transformation
Infosys today is a global leader in the “next generation” of IT and Consulting• Named India’s Most Respected Company in the Businessworld 2006
survey for the fourth consecutive time• Adjudged “India’s Best Managed Company” in a study conducted by
Business Today and A.T. Kearney• Forbes: “Infosys is a role model for companies everywhere in financial
transparency.”• “Dream company to work for” in India and amongst the “100 best
places to work for in IT” in the US• Amongst the first companies in world to be certified at CMMI Level 5• BusinessWeek: Amongst the top 3 IT Services companies in the world• Wired rated Infosys among its top 40 companies that have reshaped
the global economy.
Exceptional Financial Performance Increase in number of Active Clients Strong Growth in Employees
Rev
en
ue
($
M)
Em
plo
yee
s
Act
ive
Cli
en
ts
Applying GDM+ across the services spectrum
FY 01 FY 02 FY 03 FY 04 FY 05 FY 06
June 10, 2006© Infosys Technologies Limited 2005-06
41.1%
Application Development and Maintenance
Management Consulting
Business Process Management
IT Outsourcing
Systems Integration
Enterprise Solutions
Technology Consulting
Technology-enabled BPR
Software Re-engineering
People Organization Infrastructure Process Quality
Infosys Global Delivery Model
2006
2001
1981
1996
* New services is defined as services other than Application Development, Maintenance, Re-engineering and Products
New services* as % of revenue
37.7%35.4%
29.6%
24.9%22.8%
Infosys is a global leader in Consulting and IT Services
Mejor empleador, Mejor universidad
corporativa
Mejor gobierno corporativo
Empresa mejor gestionada
Líder en Tecnología Bancaria
Recognition
Achievements:
USD 4bill. + global revenues (2008)Europe represents over 25% of this figure
~ 32 billion USD market cap (NASDAQ:INFY)
Over 30% annual growth for the last 6 years
Global workforce of 100.000+
More than 450 clients, mostly Fortune 2000 companies
7 of the largest world companies are Infosys customers
Over 87% of projects on-time on-budget
More than 90% recurring customers
Global leader in quality practices CMM5, 6-Sigma, Malcolm Baldridge
Infosys is a global leader in Consulting and IT Services
199284
389551
775
1156
2002 2003 2004 2005 2006 2007
REVENUES FROM FINANCIAL SERVICES ($ M)
CAGR aprox. 40%
KEY FIGURES
More than 154 active clients (en su mayoría Global Fortune 2000)
More than 13.000 employees in 31 development centres around the world
6 of the 7 largest US banks
4 of the 5 largest European banks
3 of the 4 largest Australian banks
Banking and Capital Markets
Other Segments
37.8%37%
Infosys Technologies – Company Background
• Started in 1981 for $225• Built up in 1980s and 90s through customized software
solutions, developed in offshore (Indian) development centers• Also develops and markets software products
• Flagship product is ‘Finacle’, a modular banking solution for retail, corporate and banks
• Grew mostly through new business contracts, acquisition of smaller IT service providers, and alliances with larger companies.
Infosys Technologies – Business Model
“The process of breaking projects
down into their logical components and then
distributing those components to
locations (onsite, nearshore,
or offshore) where they can be delivered at maximum value.”
Global Delivery ModelDefinition
38 global development centers
• 20 in India• 18 in the US, the UK,
Australia, Canada, China, Mauritius and
Czech Republic.
Lower CostFaster Implementation
Lower RiskMeasurable
Vehicles
Modular Global SourcingFramework
Customer Value
12
3
Innovation to Meet New
Customer Needs
4
Infosys Technologies – Business Performance
CAGR 43%
CAGR 45%/30%
33% 33% 32% 32%EBITDA
Margin %
Infosys Technologies – Business PerformanceRevenue by Industry Revenue by Geographic Market
Infosys Technologies – What are the Competitive Advantages?
Global Delivery Model• Global development
centers• Right Talents
Open/transparent & performance-driven
culture
Excellent training program
Customer relationship
Flat organizational structure
Right reward system (stocks, career visions)
Domain knowledge
Brand/reputation
Abundant supply of low-cost scientists and
engineers
Infosys TechnologiesIndia
Cost & quality advantage
coming from GDM and low-
cost labor
Infosys Technologies – Sustainable? : vs. Current Competitors
On-shore Incumbents Other Off-shore Players
• Trying to adapt GDM while maintaining their existing business model & organizational structure
• Adding more off-shore workforce through M&A or expansion
• However…
• Can NOT completely migrate to GDM because…
• It can jeopardize existing businesses
• There is fundamental organizational difference (i.e. Hierarchic vs. Flat) which would make it hard to attract right talents for GDM
• Already offering the same services by copying the tangible part of business model
• 24/7 services• Global offices• Competing for the same
talents• However…
• Still behind Infosys in terms of operational excellence because…
• Infosys’s core competency is ‘People’ and supporting system to attract/keep talents
• Intangible assets and congruence of the whole system are hard to copy (e.g. Culture, HR, reputation)
On-shore Incumbents Other Off-shore Players
Infosys Technologies – Sustainable? : vs. Current Competitors
Gross Margin
Net Income Margin
Infosys 42% 26%
Wipro 33% 19%
TCS 46% 22%
USD (Mil)
Performance Comparison
Infosys Technologies – Sustainable? : vs. Current Competitors
On-shore Incumbents Other Off-shore Players
Infosys Technologies – Sustainable? : vs. Potential Competitors
They are disruptive not only to incumbents but to off-shore players
SaaS
Web 2.0
• Significantly easier & faster implementation
• Very low up-front capital investment
• User-focused, not buyer-focused : self-service IT
• Very cheap or free funded by Ad model
• No need to have expensive IT service providers
• Very low entry barrier• Force incumbents to
change product & pricing
Infosys’s competitive advantages no longer
sustainable
Infosys Technologies – SWOT AnalysisStrengths Weaknesses
Opportunities Threats
Significance of Impact
H High
M Medium
L Low
• Operational excellence to deliver GDM
• Capability to attract & keep talents
• Strong financial• Strong relationship with
Large Corporations
• More cost/speed conscious customers
• Market growth• Higher awareness on off-
shore model
• Over-reliance on US economy
• Limited position in value chain (i.e. No presence or relationship with consulting business)
• Wage inflation due to competition on talents (15+% / year)
• Newer disruptive business models (i.e. web services, web 2.0)
H
H
H
M
M
M
H
M
L
L
M
IT Consulting Market Context & Structure
• Subset of overall IT services market • Projected single-digit growth of 5% • Largely fragmented market with 2 key segments:
• On-shore consulting and IT services players (Accenture, IBM, Capgemini, EDS)
• Off-shore IT services players (Wipro and TCS)
• Largest shares held by Accenture and IBM
Infosys Consulting – Company Background
• Started in April 2004 with initial investment of $20M• Chose a wholly-owned subsidiary model• Led by former leadership of Deloitte Consulting India • Focused on the Global Delivery Model (GDM) and more cost-
competitive consulting rates• Integrating the business consulting and technology
implementation lifecycles • Engagements sourced from parent company and existing
client base of Infosys Technologies
Infosys Consulting – Company Organization
• Building a Unique Culture• Recruiting the Right People• Creating a Differentiated Approach• Rewarding Employees
Infosys Consulting – Business Model
“Integrate the business consulting
and technology implementation lifecycle. ‘1-1-3’ model gives one
client one ICI resource onsite, one
Infosys Tech resource onsite, and
3 Infosys Tech resources offshore.”
“1-1-3” ModelDefinition
• On-shore management
consulting talent• On-shore liasons• Off-shore resources
Lower blended rates
Faster Implementation
Integration
Vehicles
“1-1-3”combined with GDM
Customer Value
1
2
3
Infosys Consulting – What are the Competitive Advantages?
“1-1-3” Model•Blend on/off shore
• Cost efficient
Strong operational
skills
Access to Infosys Technologies clientsLarge supply of low-
cost IT/process resources
Cost & speed advantage
coming from “1-1-3” and GDM model
Unique, blended model
Easier to integrate
offshore with onshore
Infosys Consulting – ICI vs. Current Competitors
On-shore Incumbents Other Consulting Players
• Trying to adapt GDM while maintaining their existing business model & organizational structure
• Adding more off-shore workforce through M&A or expansion
• However…
• Can NOT completely migrate to GDM/”1-1-3” because…
• It can jeopardize existing businesses
• May be brand equity erosion
ICI Experiencing Revenue Growth
Revenue (USD Mil)$54
$36
$5.30
$0.00
$10.00
$20.00
$30.00
$40.00
$50.00
$60.00
FY05 FY06 FY07E
• High double-digit year on year revenue growth
• Approximately 2/3rds of revenue from the United States
• Key industries: Retail, Transportation, High Tech, Banking, Energy/Utilities
• Reflects steady growth in number of clients:
• 25 clients in FY05
• 54 clients in FY06
• 89 clients in FY07
But Increasingly Dim Profitability Results
• Infosys still deems Infosys Consulting to be in “investment phase.”
• Potential causes: • cheaper blended rates
• expensive on-shore resources
• Learning curve in managing consulting business economics
Net Income & FCF
($8.10)($9.40)
($28.20)
($30.00)
($25.00)
($20.00)
($15.00)
($10.00)
($5.00)
$0.00
FY05 FY06 FY07
Net Income (Loss)
Infosys Consulting vs. Current CompetitorsOperational Scale & Performance
On-shore Incumbents
Other Off-shore Players
ICI Accenture IBM BCSRevenue ($M) $54 $11,856 N.A. Employees 209 126000 60,000
ICI WCS TCS Revenue ($M) $54 N.A. N.A.Employees 209 5,000 34,000
Still a marginal player vis.a.visconsulting units of both the on-shore as well as off-shoremajors.
Infosys Consulting – SWOT AnalysisStrengths Weaknesses
Opportunities Threats
Significance of Impact
H HighM
Medium
L Low
• Unique blended model
• Access to Infosys clients
• Strong in operations
• More cost/speed conscious customers
• Market growth• Open up new segment of
market
• Low brand equity
• Inexperience with consulting relationships
• Challenge attracting top consulting talent
• Easy replicability of model
• Increasing IBM/ACN presence in India
• Culture clash with Infosys Technologies
H
M
M
M
H
M
H
M
MM
M H
Infosys Consulting: Cost or Profit Center?
Key Challenges
Needed Responses
• Approaching profitability or break even• Collaborating effectively with Infosys Technologies • Impending replication of ICI business model by others • Find firm, differentiated place in industry value chain
• Revisiting pricing and/or cost structure• Integrate client management with Infosys Technologies • Use ICI to monitor client trends & the “next big thing.” • Capitalize Infosys “flat world” aura to achieve positioning
What is ICI’s place in the Infosys Technologies Portfolio?
Moving forward… : Infosys’ StrategyInfosys should leverage ICI ,
1) To strengthen its position in current market, and 2) To prepare for further industry transformation
ICIInfosys
Technologies
More Value from
Existing Customer
Base
Strategic Alliance
with Emerging
Competitors
• More wallet share from current customers
• Integration rather than expansion
• Stronger relationship through involving higher-level decision making
• Provide more agile and customized solutions
• Antenna to sense changes in the market
• Influence customers’ strategic moves
• Relationship building with emerging players
• Acquire them as customers or partners
• Develop capabilities to offer right services/products in the long-term
Thank YouQ&A