Strategic Analysis of

Infosys
Group Members:-
Kaushik Adhikari (24)
Kuntal Datta (25)
IMI XPGDM, Mamohau Paulina Shale (26)
2009-10 Manish K Agrawal (27)
Manish Kumar (28)
 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 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
Overall Revenues by Segment in $(Bn.)

CAGR :27%
 Industry Life Cycle
IT sector is globally recording
a 30% growth. The sector
is in the growth stage with
IT companies trying to
maintain or increase their
revenue by maintaining
there existing market share
and trying to penetrate into
un-tapped market. Also
there is a trend of Mergers
and Acquisitions

© Infosys Technologies Limited 2004

 Advantage India
» Cost advantage Ease of scalability

» •Cost of an engineer is about 20 –40 per •6,75,000 technical graduates per

cent of the comparable cost in European annum, of which 4,00,000 are
Union (EU)
engineers
» •Selling, general and administrative costs
approximately 80 per cent of comparable •Over 50,000 MBAs graduating
cost in EU per annum

» •Average offshore billing rate at US$ 20 to •Indian IT industry is expected to

35 per hour; about 50 to 70 per cent lower add 40,000 employees in 2009-10.
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.
PESTLE Analysis

© Infosys Technologies Limited 2004

PESTLE Analysis

© Infosys Technologies Limited 2004

PESTLE Analysis

© Infosys Technologies Limited 2004

PESTLE Analysis

© Infosys Technologies Limited 2004

 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)

 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.
 Milestones
In 1987 Infosys got its first foreign client.

In 1993, Infosys became a public limited company and received ISO 9001/Tick-
IT 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.
 Awards and Achievements

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.

Infosys – Verticals & Horizontals
 Geographical Presence (Revenue)

Country 2009 2008 2007 2006 2005

North 63.2 62 63.3 64.8 65.2

America
Europe 26.4 28.1 26.4 24.5 22.3

India 1.3 1.3 1.6 1.7 1.9

Rest of the 9.1 8.6 8.7 9 10.6

World
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

For Year 2009

Source : www.moneycontrol.com
 Financial Performance
Service Offering
  2009 2008 2007 2006
Services        
Application 42.4 45.4 48 51.5
Development and
Maintenance
Business Process 6 5.7 4.7 4
Management
Consulting services 24.9 23.8 21.1 19.7
and packages

Infrastructure 6.3 4.9 4.4 3.6

Management
product Engineering 2.2 1.6 1.6 1.8
services
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 Pie

Revenue Break up as per Services offered in 2009

Industry Segment 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.

Rivalry among Firms: Bargaining Power of Customers:

Bargaining Power of Suppliers:
1.Low Cost 1.Large Number of IT Companies
1.Due to Slow Down, Job Cuts,
2.Commoditized vying for projects – High
layoff & bleak IT outlook
offering Competition
2.Demand Supply is not favorable
3.High Industry growth 2.Huge Decline in IT Expenditure
to employees
3.Availability of vast pool of
talent.

Barriers to Entry:
1.Low Capital Requirements
2.Large value chain for small
enterprises
3.MNCs are ramping up capacity and
employee strength
 BCG Matrix – Infosys (USA)

Consulting, KPO
BPO
Package Implementation
Busines
s
Growth
Rate
Maintenance Application &
development, Software NONE
Products

HIGH LOW

Relative Market Share

 BCG Matrix – Infosys (India)

Maintenance
Software Products
Package Implementation
Business
Growth
Rate

NONE Consulting, BPO,

KPO

HIGH LOW

Relative Market Share

 McKinsey’s 7 S Model
Strategy: the plan devised to maintain and build
competitive advantage over the competition.

Structure: the way the organization is structured and

who reports to whom.

Systems: the daily activities and procedures that staff

members engage in to get the job done.

Shared Values: called "super-ordinate goals" when

the model was first developed, these are the core
values of the company that are evidenced in the
corporate culture and the general work ethic.

Style: the style of leadership adopted.

Staff: the employees and their general capabilities.

Skills: the actual skills and competencies of the

employees working for the company.
 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 records
• Technical skills
• Ability to learn
• 2.65 per cent of its revenues on up gradation of
employees skills
• High training standards
McKinsey’s 7 S Model
 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 Excellence
Organizational Structure
» 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 Executing

Strategy for achieving breakthrough performance results using the
Balanced Scorecard (BSC).
 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 -> CMMI Level 5
» 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 Market Development
Strategy Strategy

New Product Product Development Diversification Strategy

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 centre 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 favourable
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.