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Infosys Strategy
Infosys Strategy
Group Members:Parul Bhatnagar(04) Chetan Ganatra(06) Varun Goyal(07) Siddhartha Jha(10) Saurabh Kumar(14) 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 Indias 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.
47.30 24.30
$ (Bn.)
Exports
Domestic
IT Industry Overview
Overall Revenues by Segment in $(Bn.)
Domestic Revenue Share $(Bn.)
CAGR :27%
IT Services 8.26, 34% 11.91, 49% 1.94, 2.19, 8% 9% Software Products
ITES-BPO
Hardware
Advantage India
Cost advantage Cost of an engineer is about 20 40 per cent of the comparable cost in European Union (EU) Selling, general and administrative costs approximately 80 per cent of comparable cost in EU
Ease of scalability
Average offshore billing rate at US$ 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.
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 Indias most respected company. Infosys deliberately defocused on revenue and profits. Their goal was to do everything by the book.
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)
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.
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)
Manufacturing
Country
2009
1.3
9.1
North America 63.2 Europe India Rest of the World Total 26.4 1.3 9.1 100
26.4 63.2
India
Financial Performance
Revenues PAT EPS Total Assets Rs 20766 Crores Rs 5819 Crores 101.58 Rs 17809 Crores
Financial Performance
Service Offering 2009 Services 2008 2007 2006
42.4 6 24.9 6.3 2.2 3.6 6.8 3.9 96.1 3.9 100
45.4 5.7 23.8 4.9 1.6 2.8 7.5 4.7 96.4 3.6 100
48 4.7 21.1 4.4 1.6 2.3 6.9 7.1 96.1 3.9 100
Financial Growth
3.90 3.60 2.20 6.80
Application Development and Maintenance Business Process Management Consulting services and packages
6.30
42.40
Infrastructure Management
product Engineering services System Integration
24.90 6.00
12.6
18.1
33.9
Retail
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.
Barriers to Entry:
1. 2. 3. Low Capital Requirements Large value chain for small enterprises MNCs are ramping up capacity and employee strength
LOW
NONE
LOW
LOW
Package Implementation
NONE
HIGH
LOW
Market Share
McKinseys 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 High training standards
McKinseys 7 S Model
McKinseys 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
McKinseys 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
McKinseys 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).
Invest in well understood, proven product & not just R&D. While dealing with investors, always underpromise and over deliver. Have a healthy sense of paranoia and respect for the competition. Leaders in the making.
Corporate Level
Generic Strategy
Grand Strategy
Ansoffs Matrix Market Penetration Strategy Market development Strategy Product Development Strategy
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.
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 High Dependence on Export Revenues (99% revenues from overseas business) Cost cutting and reducing IT expenditure by almost all companies Negative in short term
Infosys
Global Slowdown
Likely Impact
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.
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