24438695 infosys strategy
TRANSCRIPT
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