CASE STUDY ON INFOSYS

SUBMITTED BY: Barun Kumar Veeresh Tripathi Saurabh Mehta Rajesh Kumar Aparna Vyas Jayshree Bharti Manoj Dubey

OVERVIEW OF IT INDUSTRY
Indian economy has been impacted by the recessionary trends, with a slowdown in GDP growth to 7%. But IT-BPO industry in India- a growth engine for the economy

Contributing to increases in the GDP urban employment and exports

INDIAN IT INDUSTRY SECTOR

1. MARKET SIZE:

Revenues from domestic and export (in USD billion)

More than 80% of revenues come from Exports and only 20% from domestic business

Contribution of IT industry to Indian GDP

IT industry contributes to around 5.2% to Indian USD 1 trillion GDP.

Number of employees in IT Sector (Direct employment)

IT industry provides direct employment to more than 20 lakh people, indirect employment number goes far beyond..!!

Indian IT industry Revenue Break-up by sector

IT industry is largely dependent on Banking and financial industry. With the decline in these sectors, the revenue from these is expected to decline, hurting the bottomline of IT majors. This calls for exploring new verticals.

R&D Spending of IT majors

As compared to International IT giants, Infosys and other Indian companies are lack in R&D spending.

N. R. NARAYANA MURTHY

Born in Mysore, India on August 20, 1946. Graduated with a degree in electrical engineering from the National Institute of Engineering, University of Mysore . Articulated, designed and implemented the Global Delivery Model . He served on the boards of Unilever, HSBC, Ford Foundation and the UN Foundation. He served on the boards of Cornell University, Wharton School, Singapore Management University, Indian School of Business, Hyderabad, Indian Institute of Management Technology, Bangalore and INSEAD. Padma Vibhushan by the Government of India 2008. Legion d'honneur by the Government of France 2008. CBE by the British government 2007. World Entrepreneur of the Year - 2003 by Ernst & Young. Holds over 26 honorary doctorates from universities across the world.

TRAITS OF ENTREPRENEUR (N. R. NARAYANA MURTHY)

Independence. Persistence and Determination. Self-Confidence. Creativity. Organized and goal-oriented. Risk-taking and Tolerance. Perseverance and Hard Work. Commitment. Honesty and Honor.

INFOSYS INDIA
Delivers measurable business value in 3 ways: Transform They can transform the fundamental shape of the business P&L. They call it IMPACT to ensure a clear line of sight from process change to bottom-line impact, ensuring that you receive the business value you were promised. Optimize Beyond transformation and innovation, it boils down to execution - delivering on time, on budget and "on value". Innovate They can inject a level of product and service innovation into your business to create new revenue opportunities through collaboration and co-creation as they keep abreast of the latest technology and how it applies to the business issues.

INFOSYS LEVERAGING THE GLOBAL DELIVERY MODEL

The key to the success of Infosys has been its ability to leverage an innovative business model: "The Global Delivery Model" in order to help its clients economize on costs linked to information technology and software development. The term Global Delivery Mode is typically associated with companies engaged in IT consulting and services delivery business and using a model of executing a technology project using a team that is distributed globally.

DIVISIONS

Infosys BPO Infosys Consulting Infosys Public Services Infosys Australia Infosys Brazil Infosys China Infosys Mexico Infosys Sweden

SWOT ANALYSIS
Strengths: Leadership in sophisticated solutions that enable clients to optimize the efficiency of their business Proven Global delivery model Commitment to superior quality and process execution Strong Brand and Long-Standing Client Relationships Status as an employer of choice Ability to scale Innovation and leadership Weaknesses: Excessive dependence on US for revenues 67 % of revenues from USA Excessive dependence on BFSI sector for revenues 36 % of revenues from BFSI Weak player in domestic market. Only 1 % of revenues from India low as compared to peers Low R & D spending as compared to global IT companies only 1.3 % of total revenues Rising wage bill 42.9 % to 44.8 % of revenues Low expertise in high end services like Consultancy and KPO.

Opportunities:

Domestic market set to grow by 20%. Expanding into new geographies Europe, Middle East, etc Infosys is cash rich (Around US $ 1 Billion) - Acquiring companies to increase expertise in Consultancy, KPO and package implementation capabilities Opening offices and development centers in cost advantage countries such as those in Latin America and Eastern Europe.

Threats:

The economic environment, pricing pressure and rising wages in India and overseas Intense competition in the market for technology services could affect cost advantages. High dependency on a small number of clients, and the loss of any one of the major clients could significantly impact business. Failure to complete fixed-price, fixed-time frame contracts within budget and on time Currency fluctuations Termination of Client contracts can typically be terminated without cause and with little or no notice or penalty.

PEST ANALYSIS
Political stability:

Indian political structure is considered stable enough expect the fact that there is a fear of hung parliament (no clear majority). U.S. government has declared that U.S companies that outsource IT work to other locations other than U.S. will not get tax benefit. Government owned companies and PSUs have decided to give more IT projects to Indian IT companies. Terrorist attack or war. Positive Deep -ve Positive Negative Political

Economic :

Global IT spending (demand) Domestic IT Spending (Demand): Domestic market to grow by 20% and reach approx USD 20 billion in 2008-09 NASSCOM Currency Fluctuation Real Estate Prices: Decline in real estate prices has resulted reducing the rental expenditures. Attrition: Due to recession, the layoffs and job-cuts have resulted in low attrition rate. ECOMONIC ATTRACTIVENESS due to cost advantage and other factors. Negative Positive Negative Mildly +ve Mildly +ve Positive

Social Language spoken: English is widely spoken language in India, English medium being the most accepted medium of education. Thus, India boasts of large English speaking population. Education: A number of technical institutes and universities over the country offer IT education. Working age population Highly +ve Highly +ve Positive Number of IT graduates in India India creates a large pool of skilled IT professionals each year, to meet industry requirements. As per NASSCOM Strategic Review report, India is one of the few countries to have an increasing share of working population Technological Telephony: India has the worlds lowest call rates (1-2 US cents). Expected to have total subscriber base of about 500 million by 2010. ARPU for GSM is USD 6.6 per month. India has the second largest telephone network after china. Teledensity 19.86 % Enterprise telephone services, 3G, Wi-max and VPN are poised to grow. Internet Backbone: Due to IT revolution of 90s, Indian cities and India is well connected with undersea optical cables. New IT technologies: Technologies like SOA, Web 2.0, High-definition content, grid computing, etc and innovation in low cost technologies is presenting new challenges and opportunities for Indian IT industry. Highly +ve Positive Positive

COMPETITIVE ANALYSIS
3,579.79 11,090.48 11,744.84 24,626.28 38,686.65

Market Cap. (Rs. cr.)

TCS Infosys Wipro HCL Tech Oracle Financ Mahindra Satyam Tech Mahindra MphasiS Patni Computer Financial Tech Hexaware Tech MindTree Infotech Enter NIIT Tech

1,551.20 3,896.63 2,661.70 2,012.49 7,657.37 1,582.85 1,487.41 8,148.13

254,174.50 87,571.34

138,332.28

SALES TURNOVER
1,915.20 678.58 425.55 5,243.02 2,202.43 3,404.13 5,964.21 2,605.85 8,907.22 863.8 827.46 1,749.91 810.36 38,858.54 TCS Infosys Wipro HCL Tech Oracle Financ Mahindra Satyam Tech Mahindra MphasiS Patni Computer Financial Tech Hexaware Tech MindTree Infotech Enter NIIT Tech Persistent

Sales Turnover

32,053.60

31,254.00

BCG ANALYSIS OF INFOSYS

In 2004, Infosys became Indias first listed IT firm to exceed $1 billion in annual revenues and was one of the top software exporters with more than 97% of its revenues generated by software exports. So, it could be regarded as the STAR of that time. Infosys is regarded as a STAR in software products, QUESTION MARK in package implementation and maintenance and became a DOG in BPO & KPO industry.

ANALYSIS OF STRATEGIES OF INFOSYS

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. Actions Taken: : To maintain low-cost advantage, they have opened offices in Czech Republic, Mauritius, Poland, Philippines, Thailand and Mexico. Invested in developing training centres Improved quality capabilities. Infosys Consultancy established to provide high end services in value chain. Has hedged currency for more predictability of revenues (risk management).

Generic Strategies:

Little differentiation in low-end services of value chain; high differentiation in high end services of value chain like software products and package solutions. Focus on quality, customer relationship management, timelydelivery.

Market Penetration Strategy:

Current Markets: USA and Europe Current Products: ADM, 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

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: 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 (SET Labs) at Infosys is the centre for applied technology research in software engineering and enterprise technology. SET Labs conducted 24 Innovation Workshops with customers from the US and Australia, to identify research collaboration possibilities. Infosys promotes a favourable work environment that encourages innovation and meritocracy.

RATIO ANALYSIS

Ratios
1. 2. 3. 4. 5. Profit Margin Ratio Asset Turnover Ratio Return on Assets

A. Profitability Ratio
2012
.25 4.37 518.21 4.68 4.60

2011
.24 3.67 426.73 5.11 5.02

2010
.28 3.33 384.02 4.28 4.20

2009
.28 3.39 310.90 4.71 4.67

2008
.27 3.47 235.84 3.30 3.28

Current Ratio Quick Ratio

B. Growth Ratio
Ratios
1. Sales 31,254.00 25,385.00 21,140.00 20,264.00 15,648.00

2012

2011

2010

2009

2008

C. Solvency Ratio
Ratios 2012 2011 2010 2009 2008

1.

Debt. Equity Ratio

00

00

00

00

00

2.

Interest Coverage Ratio

00

00

00

00

00

4.

Net Worth 29,757.00 24,501.00 22,036.00 17,809.00 13,490.00

CONCLUSION

Infosys over the period grew from being a developer of software programs to being a solution provider for business problems. Outsourcing enabled Infosys to establish itself as a global brand, achieve market penetration and market extension. Infosys has nowadays realised the need of targeting tier 2 cities by opening BPO centres to bring stability in its operations and avoid attrition. Infosys has established a reputation as a low-cost operation and a high-efficiency service provider in the IT services field. Infosys realised the need of opening offices and development centres in cost advantage countries such as those in Latin America and Eastern Europe Targeting the domestic market and strengthening it.

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