A Report on Infosys

Submitted to Mr. Mohit Bansal

Submitted By Group 3 Azhar Ali Chiranjeev Brahma Deepak Rawat Dhara Trivedi Dinesh Garg Foziya Siddiquee Gaurav Pandey Himanshu Kanojia Honey Parnami 11-Apr-11

CONTENTS

Contents
CONTENTS ................................ ................................ ................................ ................................ ......... 2 IT Industry in India ................................ ................................ ................................ ............................. 3 PEST Analysis ................................ ................................ ................................ ................................ ..... 4 Political ................................ ................................ ................................ ................................ .......... 4 Economic ................................ ................................ ................................ ................................ ....... 5 Social ................................ ................................ ................................ ................................ ............. 5 Technological................................ ................................ ................................ ................................ . 5 Infosys ................................ ................................ ................................ ................................ ............... 6 Performance of Infosys ................................ ................................ ................................ ...................... 6 Financial Performance ................................ ................................ ................................ ................... 6 Focus on Expansion ................................ ................................ ................................ ........................... 9 Key success factors for Infosys ................................ ................................ ................................ ......... 10 Critical Success Factors ................................ ................................ ................................ .................... 11 Porter s Five Force Model on Infosys ................................ ................................ ............................... 11 Competency of Infosys ................................ ................................ ................................ .................... 13 Strategic moves of Infosys ................................ ................................ ................................ ............... 13 Functional Level of Infosys ................................ ................................ ................................ ............... 14 Recently posted jobs at Infosys ................................ ..................... Error! Bookmark not defined. Recruitment................................ ................................ ...................... Error! Bookmark not defined. Training ................................ ................................ ................................ ................................ ....... 16 Infosys leadership institute ................................ ................................ ................................ .......... 16 Performance appraisal................................ ................................ ................................ ................. 16 Conclusion ................................ ................................ ................................ ................................ ....... 16

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IT Industry in India
The information technology (IT) industry has become of the most robust industries in the world. IT, more than any other industry or economic face, has an increased productivity, particularly in the developed world, and therefore is a key driver of global economic growth. Both software development and the hardware involved in the IT industry include everything from computer systems, to the design, implementation, study and development of IT and management systems. Owing to its easy accessibility and the wide range of IT products available, the demand for IT services has increased substantially over the years. The IT sector has emerged as a major global source of both growth and employment.

Information technology is one of the most important industries in the Indian economy. IT industry of India has seen huge growth in recent years. This industry grew from $150 million in 1990-1991 to $50 billion in years 2006-2007. In last decade the information technology industry in India has grown at an average annual rate of 30%. During the ten year 1992-2002, the Indian software industry grew at double the rate as the US software industry. Some of the major reasons for the significant growth of IT industry of India are
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Availability of skilled manpower Reduced import duties on software and hardware products Cost advantages Reduced telecommunication and internet costs

Some of the major companies of IT industry of India are

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Tata Consultancy Services (TCS) Infosys Wipro IBM HP HCL Cognizant Technology Solutions (CTS) Patni Satyam NIIT

India s IT industry caters to both domestic and export markets. Exports contribute around 75% of the total revenue of IT industry in India. The IT industry can be broadly into four segments-

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y y y y

IT services Software (includes both engineering and Research & Development) ITES-BPO Hardware

PEST Analysis
Political
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Us government has said that US firms which are outsourcing it work to other location other than us will not get any tax benefit. It is expected to have deep negative impact as us is a major market for Indian It sector. In India, IT companies are battling hard against taxes & continuous STPI soaping. This would have negative impact on the industry. Government owned companies and PSU s in India have decided to give IT projects to Indian IT companies only. This would have positive impact on Indian it industries Indian government is trying to reduce international cost and is providing infrastructure support to organizations. This again is a positive factor.

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Economic
Indian It sector is one of the flourishing sectors in Indian financial sector and is expected to grow over the years. As per Nasscom, Indian IT exports are anticipated to attain 175$ billion by 2020 out of which domestic earnings would be around 50$ billion. India continues to be a leader in terms of global financial attractiveness.
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2 1.5 1 0.5 0 global attractiveness index(1-4)

The economic downturn has put IT spending on hold. It has resulted in projects cancellation, low confidence of customers, bankruptcies.

Social
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English is widely spoken in India. English is most accepted means of education in India. This gives us an edge over other non English speaking nations. India generates a pool of IT professionals each year to meet the increasing industry requirements. Indians represent nearly 30 percent of the global annual supply of graduate engineers. As per NASSCOM Strategic Review report, India is one of the few countries to have an increasing share of working population. India is expected to be the youngest nation in the aging world.

Technological
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Innovation in low cost technologies is presenting new challenges and opportunities for IT industry. Internet base is increasing in India. it has positive impact on Indian IT industry. India has 2n largest telephone network.
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Infosys
Infosys was es ablis e in 1981 by a group of IT professionals in Pune India with initial capital of US$ 250 and signed up its first client Data Basics Corporation, in New York. It opened its first international office in Boston, US in year 1987. In 1990 s it brought it IPO and introduced Employee Stock Options Programs and also ac uired ISO 9001 certification. Its revenue increased upto US$ 100 million in the late 90 s, it was listed on NASDAQ. Over the years Infosys has e panded its business in many countries like US, China, Japan, ermany, Australia etc. It also launched Infosys Consulting Inc. In the year 2004 and established subsidiaries in china and Australia.

Perfor

nce of Infosys

e have decided to analyse the performance of Infosys to better understand how well its strategies have worked out for the company. Since the company doesn t operate in isolaton and has many i competitors, we must understand the performance of the other companies as well. e have relied on data readily available on the internet such as the annual report of the companies on their websites or other financial websites. Let s understand the performance of the company in the following sub heads. 1. Financial performance 2. Focus on e pansion

Financial Perfor ance

Here are some interesting facts that were found from the financial data available for some companies. To begin with the chart below tells us that TCS achieved the highest amount of sales during the 2010 followed by Infosys and then ipro. But this doesn t provide the whole picture. e must look at the profits that these companies earned and that tells us a different story.
Infosys operates at the highest operating margins of 30 followed by TCS at 28 and them ipro

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Infosys, TCS and ipro are three major IT firms in the domestic market. Recently they have faced some competition by companies such as Cognizant.

From the graphs above it is clear that Infosys is far ahead of TCS and other in terms of operating profits as well as reported profits despite it lower operating income as shown in the first graph. The reason is pretty much apparent and can be understood if w look at the cost of sales as a percentage e of operating income. Its strategy has primarily been to keep its overheads lower than the industry standards.

St t : - Infosys has strived to achieve the lowest manufacturing cost for software as compared to TSC whose manufacturing cost for March 10 was 7.27 cr against 6630 cr for Infosys.

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St t : - Another striking feature we noticed is that Infosys spends a healthy sum of money on selling e penses. TCS tends to have a very low share of e penses on selling as compared to its revenues. On the other hand ipro seems to have a high selling e pense. In the graph below we can see that ipro tends to spend a remarkably large amount of money on selling practices whereas Infosys maintains a good ratio. Also we noticed that Infosys the tax saving for Infosys due to amortization of its intellectual property (software is far higher than any of the companies.

St t : - e noticed that Infosys has been sitting on a huge cash pile for a very long time and has been increasing its cash reserves since 2006. ipro on the other hand also has had a similar strategy but there is a striking difference. ipro has, for a long time followed a strategy they call Sting of pearls , where it has been ac uiring smaller companies. Recently it has ac uired another company called SAIC. Infosys has not been in the news for ac uisitions. It prefers to sit on huge cash reserves. Also the amount of earnings retained by Infosys is the highest in the industry.

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St t : - Retaining operating profit to a great extent is a strategy followed not only by Infosys but most of the competitors. Among all the players in the IT sector Infosys seems to retain the maximum share of its operating profits both in absolute terms and also as a percentage of the operating profit. However this trend may be shifting with more and more IT companies working towards a strategy where they increase their critical mass. Some smaller companies like HCL and Cognizant have focused more on increasing their top line than their bottom. They tend to have higher investment in activities that directly affect the client such as sales, marketing and higher wages to attract talent. This has helped these companies to increase their market share over the years.

Focus on Expansion
Unlike ipro, Infosys has predominantly relied on organic growth over the years and its aggressiveness towards retained earnings supports this argument. Infosys primarily relies on the US (North America) and Europe for its revenues. Almost 65 of the total revenue earned by Infosys is from US. Domestic business adds up to only 20 of revenue of Infosys.

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The company could use as much as 10 of its revenue for ac uisitions, or around $300 million to $500 million

But that doesn t mean that the company doesn t focus on emerging markets. It has set up operation in emerging markets such as Brazil with 180 employees and caters to the local businesses. Over 90 of the firms business in Brazil comes from local businesses. Recession was the time when perhaps most of the IT firms had to relook their strategy and Infosys did the same. In 2009, the CEO S. opalakrishnan, clearly expressed their intent to bring down their dependence on US from 60 to 40 . At the same time they would increase the presence in Asia Pacific from 10 to 20 and they would increase the share from Europe to 30 . One of the primary reasons for such a shift in strategy was due to a bill that was passed in the US by senators Dick Durbin and Chuck rassley that denied access to low cost worker in the US to Infosys. Also the New visa reforms in the US make it further difficult for Infosys to send its employees to the US. This has made the company to look for ac uisitions in the non-English speaking developed countries as well. In 2010, the CEO announced that local hiring in US would increase to mitigate the uncertainties due to policy changes in the US.

CEO opalakrishnan said the appreciating rupee was the biggest short-term challenge as a 1 gain or loss in the local currency has a 40 basis point impact on its margins

We re also investing into emerging markets, like China, Brazil, Mexico, the Middle East, India, so we re diversifying our portfolios to include emerging markets,

Key success fac ors for Infosys

y y y y y y y Sound management skills Personnel management Infrastructure Commitment to values, speed, imagination and excellence Invest in well understood, proven product and research & development While dealing with investors, always under-promise and over deliver. Have a healthy sense the competition.

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Critical Success Factors

Infosys depends on Sound management skills and Personnel management for its success. In Infosys the leadership qualities among employees is developed continuously and role vacuum does not exists. Top management emphasizes on open door policy, continuous sharing of information, taking inputs from employees in decision-making, and builds personal rapport with employees. This is critical for success.
Infosys is in knowledge based industry and about 90 per cent of the employees are computer professionals who are expertise in work. The company provides training and development to its employees on continuous basis and spends a considerable amount of its reven ues on up gradation of employees skills which increases the performance levels and thus leads to success of whole organization. The company offers stock options to every employee to motivate them and reduce employee turnover. The company emphasizes on high ethical values in work, equality among all personnel irrespective of their organizational positions, encouragement of high performance standards and sharing of outcomes of performance by all. Teamwork is also a critical factor for success in Infosys. The company always invests in well understood, proven products for profitable business and it also carries out research and development on continuous basis to compete in dynamic market. The company is committed to its values, imagination and excellence and has a healthy sense of competition which helps it achieve excellence in performance and unmatchable results.

Porter s Five Force Model on Infosys

An organization s competitive standing is determined by 4 important factors apart from industry rivals: customers, suppliers, potential entrants, and substitute products. The Porter s 5-force model can enable a company to clearly determine its industry structure and develop its strategy accordingly. The 5-force analysis provides a complete picture of where the company stands versus buyers, suppliers, entrants, rivals, and substitutes. The Porter's 5-force model of infosys is explained following:

1. Rivalry among Firms: The company has many competitors. In IT Industry, Infosys, TCS, Wipro and HCL Technologies are the major players in the domestic market. So TCS, Wipro and HCL Technologies are the major competitors of Infosys. Now the company is facing strong competition from these firms. As competitors are providing commoditized offerings, low cost products, new product introductions and service improvements, so the company with a clear understanding of the structural underpinnings of rivalry can take steps to shift the nature of competition in a more positive direction and can make strategies accordingly in order to compete among rivalry firms.

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2. Bargaining power of customers: there are other players like HCL,TCS, Wipro, Cognizant which are taking a hit on their profits but driving hard to get projects resulting in high competition for getting projects. With the presence of such competition the buyers have options like HCL and Tech Mahindra which charge less. Also competitors like Wipro and TCS are as technically sound as Infosys and hence again the buyers have such options. 3. Bargaining Power of Suppliers: Powerful suppliers capture more of the value for themselves by charging higher prices or limiting quality or services. In case of Infosys, the HR consultancy agencies which due to the lack of engineers in the company could charge high premium. The expertise that some supplier in some domains that leads them to charge higher for smaller sub contracted work. So the company made strategies accordingly by taking these things into consideration. 4. Threat of New Entrants: The threat of entry in an industry depends on the entry barriers in the industry. In case of IT Industry, there are low barriers to entry in this Industry. There is low capital required to be invested in order to start a new venture. There are also few government restrictions such as licensing in case of IT Industry. 5. Threat of Substitutes: The threat from substitutes depends on the factors like priceperformance trade-off offered by the substitute, buyers switching cost, similarity to functions performed by original product. Infosys face more threat of substitutes. Also Countries like Eastern Europe, China etc are emerging and posing threat to Indian IT Industry because of their cost advantage.

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Competency of Infosys
1. Aerospace and defence Infosys' Aerospace & Defence industry solutions and services help commercial and defence clients increase productivity, reduce costs and compete effectively. Our services cover Product Design & Development, Embedded Systems, Product Life Cycle Management and IT Solutions 2. Airlines Infosys enables Airlines and Air Transport service providers to become more competitive and responsive to the shifts of the Flat World. Our offerings span strategic consulting, business process re-engineering and industry-specific solutions.
3. Banking and capital markets Infosys partners with banks and capital markets firms to build new products and services and implement business and technology strategies. Our business, domain, technology and change management expertise helps you win in the Flat World

4. Consumer Packaged Goods Infosys' end-to-end IT services and business solutions help Consumer Packaged Goods (CPG) companies optimize business processes and systems across Product Development, Supply Chain Planning & Execution, Sales & Marketing Management and Customer Management. 5. Education Infosys partners with leading educational institutions to develop customized solutions that span IT Security, Identity Management, ERP, e-Learning and Disaster Recovery/Business Continuity. 6 . High technology Infosys' industry solutions, IT services and business process management enable High-Tech companies to optimize customer experience, enhance supply chain effectiveness, and leverage IT investments for business advantage. Our engineering services help companies accelerate product innovation in a highly competitive environment with short product life cycles.

Strategic moves of Infosys

Over the time Infosys has followed a systematic strategy to move ahead and achieve its goals. It diversified itself in to consulting services, business process outsourcing services in order to maximize its market share. It opened office in various countries, with a major focus on US and other European countries. The main strategic moves are
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Infosys strived to achieve the lowest manufacturing cost for software as compared to its competitor TCS

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It spends a healthy amount of money on selling expenses Succession planning of Infosys is that each of the member from the board will lead the company, Mr. Narayan Murthi announced that his son will not take over Infosys after him, they give each of the board member to be the CEO of the company It also tries to keep its overheads lower than the industry standard It assists the clients through constant communication with the management Although Infosys has not acquired any company but it is on top in revenue generation unlike its competitor who are acquiring other companies.

Functional Level of Infosys

Infosys has various recruitment strategy. Also it practices employee engagement and promotion of benefits that employee brings to their organization. It follows a complete cycle of hire to retire of its employees. Infosys has total 1,09,882 number of employees mentioned in their Q3 of year 2010. Besides hiring graduates and post graduate from India, they also hiring students from American universities and UK colleges. The following graphs show the number of students hired by Infosys and its competitors. The hired Employees are mostly graduates followed by post graduate.

Recruitment Strategy
The company is well known for its employee friendly HR practices. Infosys attract the best talent from across the world, and recruit the candidates by conducting toughest selection process. Nilekani said, "We focus on recruiting candidates who display a high degree of 'learnability.' The largest IT Company in India has 127,779 employees (including subsidiaries) as of 2010. These are fairly large numbers, and these numbers have come up because the industry is growing at a very rapid pace and globalizing. The strategy is to keep up the growth with pace needed to globalize and therefore they need to have a more global work force. Infosys has a global footprint with over 50 offices and development centre in India, China, Australia, the Czech Republic, Poland, the UK, Canada and Japan. 550,000 engineering graduates passing out every year, anywhere between 10% and 25% cannot be readily employed by any technology firm in the country. Nasscom says only 25% of graduates working in IT are employable, while 15% are for back-office jobs. They are spending almost $1 billion a year on readying these graduates. So they are trained properly.

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The above graph shows that Infosys is running far better than industry standards. They have bachelors more than the other companies. The recession in 2008 has left the job market and hiring capability even more challenging. The IT players were going through worst phase of there time. Recruitment was stop vehemently. The mostly hit were the fresher s. There was no scope of jobs whether in America, India, China, Taiwan, Germany etc. At that time Infosys has stopped hiring moreover offer letters given to individuals as final placement offers were asked to join later, they didn't mention any date or particular time of joining. So they were looking for the low cost labour. The increase in US visa fees and other factors, have led to a lower demand for the coveted H-1B visa. H1B1 visa charges against Infosys as they looking to hire more people in us form India. Allegations have come up with stating the visa misuse and age discrimination for the recruitment which has given a negative image. So they come with the strategy that they will recruit the people from the local market. Hiring from the local is the strategic need of the company to go up the value chain. Hiring people from local will help the company to engage the customer and gain their faith in the delivery system. They believe that customers are willing to pay more for high engagement. They are also more focusing on hiring because of the visa rules. They are not able to hire people from UK as there is not proper supply. France and Germany are different countries so it is difficult to talk about those countries. Also the attrition rate is too high in Infosys so they keep looking into the hiring process. They have a target of hiring 1000 people in America for their local needs. They overall strategy of having much more diverse workforce is that they are betting and investing on as they see related work in this area.

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Training
Infosys leadership institute The Infosys Leadership Institute (ILI) was set up in 2001 to nurture future leaders in the company so that they can manage effectively the exceptional growth. All the employees were required to undergo training every year, and some of the chosen employees were trained at the Infosys Leadership Institute to take on higher responsibilities in the company. The executives trained to handle the changes in the external and internal environment.

Performance appraisal
The evaluation of personal skills for the tasks assigned to an employee is the main criteria for the performance appraisal. To evaluate the performance different criteria were considered : y y y y y y y y y y

Timeliness quality of work carried out by the employee customer satisfaction peer satisfaction business potential learning and analytical ability communication skills decision making change management planning and organizing skills

Conclusion
The success of a company depends upon its strategy. The evaluation of strategy can be done by the performance of the company. Infosys is a huge brand name and yes its one of the major success factor is its strategy . If we are talking about the operating profit and reported profit Infosys is far ahead of other players. The idea is to keep their overheads lower. They have the lowest manufacturing cost. Infosys expands a huge amount on selling expenses. Infosys primarily relies on US(North America) and Europe for its revenues, also it has setup its operations in emerging markets. Infosys entered balanced scorecard for executing strategy of its innovative planning and execution capabilities. Leadership is based on the leadership skill training and action learning. Quality is the main focus of human resource at Infosys. They put stress on building and maintaining relationship. Being a knowledge based industry the professionals are expertise in the work. It does carries out research and development on continuous basis to compete in the dynamic market. It has diversified itself into various domain such as aerospace, defence, airlines, banking and capital markets, education etc. It focus on hiring graduates and post graduates from India as well as from colleges of UK and US. It has one of the best HR practices and it attracts best from the world.

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