Documente Academic
Documente Profesional
Documente Cultură
uiopasdfghjklzxcvbnmqwertyuiopasd
fghjklzxcvbnmqwertyuiopasdfghjklzx
cvbnmqwertyuiopasdfghjklzxcvbnmq
Infosys Technologies
wertyuiopasdfghjklzxcvbnmqwertyui
International Strategy and Global
opasdfghjklzxcvbnmqwertyuiopasdfg
Meltdown
hjklzxcvbnmqwertyuiopasdfghjklzxc
STRATEGY MANAGEMENT
vbnmqwertyuiopasdfghjklzxcvbnmq
wertyuiopasdfghjklzxcvbnmqwertyui
Author: Vipul Kaushik
opasdfghjklzxcvbnmqwertyuiopasdfg
Second Author: Suryansh Manglik
hjklzxcvbnmqwertyuiopasdfghjklzxc
vbnmqwertyuiopasdfghjklzxcvbnmq
wertyuiopasdfghjklzxcvbnmqwertyui
opasdfghjklzxcvbnmqwertyuiopasdfg
hjklzxcvbnmrtyuiopasdfghjklzxcvbn
mqwertyuiopasdfghjklzxcvbnmqwert
yuiopasdfghjklzxcvbnmqwertyuiopas
Infosys Technologies – International Strategy and Global Meltdown 2|P a g e
6th Renvoi
Case Study Presentation in Management
9th October, 2009
Registration Form
Last date of Receipt of Registration Form along with Abstract & Full Cases–18 th September2009
Registration:
1. As Case Author
Title of Case Study: Infosys Technologies – International Strategy and Global Meltdown
Organization for Case Development:
First Author:
Name: Vipul Kaushik Title/Designation: Mr
Organization and address: c/o Ganpathy, NMP Office, Management Development Institute, Mehrauli Road
Sukhrali, Gurgaon – 122007 , Haryana
Email address: mr.vipulkaushik@gmail.com
Mobile No: 9958676776
Second Author:
Name: Suryansh Manglik Title/Designation: Mr
Organization and address: c/o Ganpathy, NMP Office, Management Development Institute, Mehrauli Road
Sukhrali, Gurgaon – 122007 , Haryana
Email address: suryansh.manglik@gmail.com
Mobile No: 9350672851
Declarations:
a) The Case Study is original and unpublished.
b) We alone are responsible for the correctness of events, data, source and ethics
c) We agree to abide by all the rules & the regulations of the Renvoi, awards and publications.
d) Copyright of the Case Study, if accepted will vest with publishers/ Amity Business School Noida.
Signature:
(First Author) (Second Author)
Date: 14th September 2009
(c) [15th September 2009] [Vipul Kaushik and Suryansh Manglik, EPGPM, MDI Gurgaon] All rights
reserved.
Infosys Technologies – International Strategy and Global Meltdown 3|P a g e
INTRODUCTION
Infosys Technologies, India’s one of the top IT services company reported decline in
projected revenue for the first time since its inception to the global meltdown. The three
factors that will influence the company’s performance are decreasing volumes, competitive
pricing, threat from the competitors like TCS and Wipro and heightened volatility in the
current market.
“We have to wait and see whether we can revise our guidance upwards or downwards in the
coming quarters. The uncertainty is unprecedented,’ Gopalakrishnan, chief executive of
Infosys said”
Depreciating rupee in dollar terms is hitting the top line the most. Major part of revenue
comes from North American market, the fluctuation in currency decrease the profit further. In
last one year, rupee has depreciated by more than 22% from Rs. 39 to a dollar to Rs. 51 last
fiscal, as against 13% appreciation in last fiscal.
Clients are under pressure to cut back their IT spending in this downturn. As stated by
Gopalkrishnan, “Today’s signals are coming from analysts and economists and not from our
clients. About 60 percent of our clients have finalised their budgets, which are 10 percent
lower than in the past.”
Indian media was overwhelmed when Infosys reported revenue of Rs. 21,693 crore, a robust
growth of 30% YOY under the Indian accounting standard, the forcast for the next year is in
the range of Rs. 22000 – 22900 crore, which is meagre 1.7 to 5.7%. Mr. Gopalkrishnan has a
tough road to tread next year. The major challenge for CEO is to formalise a strategy, which
can bring Infosys out of this meltdown with flying colours and put Infosys in the league of
top three global IT companies.
(c) [15th September 2009] [Vipul Kaushik and Suryansh Manglik, EPGPM, MDI Gurgaon] All rights
reserved.
Infosys Technologies – International Strategy and Global Meltdown 4|P a g e
Over 75 per cent of the software industry’s revenues come from exports. The value of
software and services exports increased to $12.2 billion (IAS, 2009) in 2003.04 from $1.76
billion in 1997.981. America is by far the largest market for Indian software and services
exports, accounting for around 70 per cent of total exports. Other countries being pursued by
the Indian software industry are UK, Germany, Japan, Singapore, Netherlands, Belgium,
Canada, Australia and China.
The rise of the Indian software industry has attributed to the abundant availability of low cost
skilled labour, which has enabled Indian software companies to provide quality services to
overseas clients at much lower prices than available elsewhere. Realising the cost advantage
that India has to offer, global companies such as IBM, EDS, CSC and General Electric have
also set up shop in India.
Indian software companies have also gained by a sharp rise in the computerisation effort of
domestic banks. Select large corporate, financial markets, telecommunications and insurance
have been among the other major sources of growth in the domestic markets. Next big thing
in domestic area is Government spending on IT.
The Indian software panorama is dominated primarily by four large companies’ viz. Tata
Consultancy Service, Infosys Technologies, Wipro Ltd and Mahindra Satyam Computer ltd.
This group of companies’, together, account for more than half of the total business. Each has
a turnover in excess of a thousand crore rupees. While they shaped their growth on the
foundation of the global or offshore delivery model, all these four and a few others like
Ramco and IFlex are moving up the value chain by developing proprietary software products
and offering high end consulting services. So far, despite the huge opportunity in product
1
IAS – Industrial Analysis Services Database (MDI Online Library) (Accessed on: 05/09/2009)
(c) [15th September 2009] [Vipul Kaushik and Suryansh Manglik, EPGPM, MDI Gurgaon] All rights
reserved.
Infosys Technologies – International Strategy and Global Meltdown 5|P a g e
(c) [15th September 2009] [Vipul Kaushik and Suryansh Manglik, EPGPM, MDI Gurgaon] All rights
reserved.
Infosys Technologies – International Strategy and Global Meltdown 6|P a g e
INFOSYS TECHNOLOGIES
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."
COMPANY BACKGROUND
Infosys Technologies Limited is a public limited and India's second largest software exporter
company. On July 2nd 1981 the company was incorporated as Infosys Consultants Private
Limited at Mumbai. It was promoted by software professionals, viz. Mr. S. Gopalakrishnan,
Mr. K. Dinesh, Nandan M Nilekani, Mr. S. D. Shibulal, Mr. N.R. Narayana Murthy & Mr. N
S Raghavan. The company became a public limited company in the year 1992 under the
name Infosys Technologies Limited.
Infosys, the country’s second-biggest IT/ITES services companies, was the first Indian
company to be listed on the NASDAQ in the year 1999. Infosys also forms a part of the
NASDAQ-100 index. Continuously through the years 2001, 2002 and 2003 company won
National award for excellence in corporate governance conferred by the Govt. of India.
(c) [15th September 2009] [Vipul Kaushik and Suryansh Manglik, EPGPM, MDI Gurgaon] All rights
reserved.
Infosys Technologies – International Strategy and Global Meltdown 7|P a g e
GROWTH PATH
Infosys is a groundbreaking company in the field of information technology and it enjoys the
privilege of being a debt free company. Infosys used Global delivery Model (GDM) as a
strategic outsourcing tool and by using it; the company could take the work to the place
where it could be best performed at lowest cost with minimum risk. GDM provided a
superior value proposition at higher quality and lower cost. Company offers the services of
business and technology consulting, application services, systems integration, product
engineering, custom software development, maintenance, process re-engineering,
(c) [15th September 2009] [Vipul Kaushik and Suryansh Manglik, EPGPM, MDI Gurgaon] All rights
reserved.
Infosys Technologies – International Strategy and Global Meltdown 8|P a g e
20000
15000
10000
5000
0
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
REVENUE BY INDUSTRY
The company’s operations predominantly relate to providing end-to-end business solutions
that leverage technology, thereby enabling clients to enhance business performance delivered
to customers globally operating in various industry segments.
Industry segments at the company are primarily financial services comprising customers
providing banking, finance and insurance services; manufacturing companies; companies in
the telecommunications and the retail industry; and others such as utilities, transportation and
logistics companies.
(c) [15th September 2009] [Vipul Kaushik and Suryansh Manglik, EPGPM, MDI Gurgaon] All rights
reserved.
Infosys Technologies – International Strategy and Global Meltdown 9|P a g e
35.00%
30.00%
25.00%
Percentage
20.00%
15.00%
10.00%
5.00%
0.00%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Geographical Segment
25000
20000
Revenue (Rs Crore)
15000
10000
5000
0
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
(c) [15th September 2009] [Vipul Kaushik and Suryansh Manglik, EPGPM, MDI Gurgaon] All rights
reserved.
Infosys Technologies – International Strategy and Global Meltdown 10 | P a g e
Major contribution towards revenue is primarily from North America. As depicted in figure
5, around 65 percentage revenue is coming from North America. After IT bubble burst of
year 2000, Infosys started diversifying its business in Europe and other geographical areas to
minimize its dependence on American market. Fructified efforts brought down share of
American market from 80% to 65% by 2009 and share of Europe market from 9% to 25%.
Further, As part of a drive to decrease the dependence on the US market, Infosys
Technologies has bid for more than 10 large government projects in India, as reported by
Business Standard on August 20, 2009.
Geographical Segmentation
100.00%
80.00%
Revenue (%)
60.00%
40.00%
20.00%
0.00%
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
(c) [15th September 2009] [Vipul Kaushik and Suryansh Manglik, EPGPM, MDI Gurgaon] All rights
reserved.
Infosys Technologies – International Strategy and Global Meltdown 11 | P a g e
It knows it must run faster than the fastest lion or it will be killed.
In the year 2003 Infosys acquired Expert Information Services Pty. Limited, Australia for
$24.3 million and renamed it as Infosys Technologies (Australia) Pty. Limited. This
acquisition was primarily done due to market position of the company in Australia, skilled
employees, experts in telecom industry and potential to serve as a platform for enhancing
business opportunities in Australia. Infosys Australia currently has 48 clients and Rs. 549
crore in revenue and Rs. 46 crore in profit. On 1 st April 2008, Infosys Australia acquired
100% of the equity shares of Mainstream Software Pty. Limited for a cash consideration of
Rs. 12 crore2.
In 2007 Infosys acquired the 23% stake Citibank had in its BPO offshoot Progeon, making it
a wholly owned subsidiary of Infosys and changed the name to Infosys BPO Ltd.
In July 2007, Infosys took over Philips' finance and administration business process
outsourcing (BPO) centres spread across India, Poland and Thailand for $28 million. This
acquisition has proved beneficial to Infosys. First, it helped the company to establish
presence in important markets in Europe. Second, as part of agreement Philips awarded $250
million seven year contract to Infosys to provide Finance & Accounting (F&A) services and
the processing of purchasing orders3.
Recently, Infosys has been looking to increase revenues from SAP based services and
compete more effectively. In 2008, Infosys agreed to buy UK-based SAP consulting
company, Axon Group for 407 million pounds ($753 million), but HCL Technologies outbid
2
Infosys Annual Report - 2009
3
http://www.cio-weblog.com/50226711/infosys_acquires_philips_bpo.php (Accessed on : 01/09/2009)
(c) [15th September 2009] [Vipul Kaushik and Suryansh Manglik, EPGPM, MDI Gurgaon] All rights
reserved.
Infosys Technologies – International Strategy and Global Meltdown 12 | P a g e
Infosys for 441 million pounds. Now, Infosys has identified other European SAP services
firms BCC and Ciber Novasoft, among other as potential acquisition targets. Headquartered
in Poland and with a significant presence in the German market, BCC is expected to help
Infosys address the local market as well. Ciber Novasoft, a German SAP firm, has almost $75
million in revenues from the country and is a part of the US headquartered Ciber. Ciber
acquired Novasoft in August 2004 for an undisclosed sum4.
(Times)In a recent interview, Mr. S. Gopalakrishnan, CEO Infosys has stated that Infosys is
looking at acquisitions for strategic reasons - to fill a gap in our service portfolio, enter a new
market or a new industry. On the kind of prospects, Infosys is looking at Kris replies “We
have stated that a typical size or the cut-off limit will be 10 per cent of our revenue.
Therefore, we can look at acquisitions of $400 million to $500 million in revenue. That is
something that we can manage; it will not increase the risk too much. However, it does not
mean that we will not do something smaller or bigger. We may look at multiple acquisitions
because there are needs in different parts of the organizations. We can look at acquisitions in
BPO, consulting, enterprise solutions, and in Europe because we want to grow Europe
faster. We will look at whichever comes first. If two or three comes together, we will look at
it.” He further elaborates that Infosys wants to expand its footprint in healthcare, government
and public sector, utilities, energy, pharmacy5.
The long-term strategy of the company is to expand in the developing economies and change
the business landscape with help of accessible talent pools and the adoption of non-linear
growth model.
(c) [15th September 2009] [Vipul Kaushik and Suryansh Manglik, EPGPM, MDI Gurgaon] All rights
reserved.
Infosys Technologies – International Strategy and Global Meltdown 13 | P a g e
Infosys seek long term relationship with clients while addressing their IT requirements. The
customer centric approach has resulted in high levels of satisfaction. Repeat business
contributed up to 97.6% of revenue. Total 156 new clients were added, with a substantial
number of large global corporations. The total client base at the end of the year stood at 579.
In Rs Crore In Rs Crore
(c) [15th September 2009] [Vipul Kaushik and Suryansh Manglik, EPGPM, MDI Gurgaon] All rights
reserved.
Infosys Technologies – International Strategy and Global Meltdown 14 | P a g e
STRENGTHS
Leadership position in providing sophisticated services solutions in areas like Finance,
Technology, Manufacturing etc. Availability of vast talent pool provides flexibility of
executing large clients.
Infosys enjoys competitive advantage because of its India based delivery model. The low
labor cost and relatively high skills level of Information Technology makes India an
attractive place to do business for IT related companies. It offers low-cost based, highly
skilled competitive advantage.
Infosys has 48 sales offices, 54 global development centers operating in 26 countries which
make it a global brand with capability to support the global operations of multinational
clients.
WEAKNESS
Being an Indian company, Infosys struggles in US to acquire new projects, particularly in
securing United States Federal Government contracts in North America. Since these contracts
are highly profitable with long project time, Infosys is missing out on a lucrative business
opportunity. US domestic organizations acquire these contracts easily.
Despite being a huge IT company in relation to its Indian competitors, Infosys is much
smaller than its global competitors. As discussed above, Infosys generated $4 billion in 2008,
which is relatively low in comparison with large global competitors such as Hewlett-Packard
($91 billion), IBM ($91 billion), EDS ($21 billion) and Accenture ($18 billion).
Infosys has developed capability at the level of operation value creation but lacks in high end
services like management consulting. Competitors like IBM and Accenture dominates this
space. Low spending in R&D in comparison to its foreign competitors is a drawback to it.
(c) [15th September 2009] [Vipul Kaushik and Suryansh Manglik, EPGPM, MDI Gurgaon] All rights
reserved.
”
G
“
7
6
3
F
W
&
L
8
9
4
M
–
x
%
0
2
w
D
N
q
-
)
B
1
$
U
(
ffi
k
O
P
K
v
S
A
R
,E
d
h
IH
f
T
ti
fl
C
u
b
m
c
fi
ig
.s
y
lt
a
n
e
p
r
o
jz
tt
Figure 7 - SWOT Analysis
OPPORTUNITIES
Infosys Technologies – International Strategy and Global Meltdown
During global recession, it appears that companies will reduce the spending on IT and ITES
activities, which Infosys offers. However, in tough times companies try to cut cost and will
be more willing to adopt outsourcing model, which Infosys offers.
Infosys is spending in new markets of Europe and Middle East. Asian countries like China is
also immerging as a lucrative market because of the industrial revolution in last few years.
The strategic alliance between Infosys and Schlumberger gives the IT company access to
lucrative business in the gas and oil industries.
THREATS
China and Korea are emerging as major competitors with low-cost labor, and developing
capabilities in education through universities and technology colleges. This poses threat of
customers shifting to companies of these countries with offshore capability.
Other global players have realised that India has the benefit of low-cost, highly skilled labor
that often speaks English and is culturally sensitive to Western practices. As with all global
(c) [15th September 2009] [Vipul Kaushik and Suryansh Manglik, EPGPM, MDI Gurgaon] All rights
reserved.
15 | P a g e
Infosys Technologies – International Strategy and Global Meltdown 16 | P a g e
IT players, Infosys has to compete for skilled labour and this may have the effect of driving
up wage levels, and making it more difficult to recruit and retain staff.
Rising wage rates is hitting its bottom-line and global meltdown is negatively impacting its
top-line.
Currency fluctuation threatens the company’s bottom-line and pressurise it to hedge the risk
in money market.
High dependence on a small number of large clients makes it dependent on them. Loss of any
of such client can cause big business loss.
Infosys Technologies (Infosys) held its conference call after it announcing its first quarter
results on 10 July 2009. CEO and Managing Director S. Gopalkrishnan along with other
management members addressed the call. The call highlights the impact of global meltdown
on Infosys and its key performance figures in the quarter.
Consolidated operating profit dipped 3% to Rs 5,472 crore in the June 2009 quarter over the
March 2009 quarter and volume was down 1.1%. Rupee appreciation impacted negatively by
about 2.8%. Operating Profit Margin (OPM) improved 50 basis points (bps) to 34.1%,
benefited by higher revenue productivity and reduction in headcount. The bottom line was
down 5% to Rs 1527 crore6. Both revenue and the bottom line were above market
expectation.
Infosys is cautious for the short term as uncertainty still persists. However, the company is
prepared for growth in medium and long term. The macro environment is challenging.
Discretionary spend was down and talks with customers indicates recovery by mid 2010.
Research firms indicate that IT spent would be down 6% - 11%.
6
Infosys Technologies Annual Report - 09
(c) [15th September 2009] [Vipul Kaushik and Suryansh Manglik, EPGPM, MDI Gurgaon] All rights
reserved.
Infosys Technologies – International Strategy and Global Meltdown 17 | P a g e
The pipeline is looking good but decision making is slow. Infosys has guided for a 5%
decline in pricing as against a 6% dip guided earlier. The company has revised its guidance
for OPM to a 150-bp dip in FY 2010 as against a 300-bp fall guided earlier.
Global economy is continuously eroding giving signal for prospects of negative GDP growth
in major countries, which will influence the IT spending in 2009. According to the forecast
by IDC Black Book, the worldwide IT spending will grow by just 0.5 % year on year in 2009
and will be total nearly $1.44 trillion.
The greatest impact will be felt in global hardware markets, where overall spending growth
will be -3.6% this year, led by a steep decline in outlays for servers, PCs, and printers/MFPs.
In contrast, worldwide spending on software and IT services are each expected to grow 3.4%
in 2009, down from 4.6% and 3.7% growth respectively in the previous forecast.
Acknowledging this trend John Gantz, chief research officer at IDC says, "The data also
provides a clearer picture of how companies are curbing their expenditures. Investments in
software and services are being maintained in pursuit of productivity and efficiency gains
while hardware spending is being slashed in an attempt to stretch refresh cycles and squeeze
more out of existing assets."
Overall, IT spending in Western Europe is expected to grow 0.1% year over year in
2009, down from the November forecast of 1.2% growth. IT spending in Germany
and the United Kingdom to remain essentially flat in 2009, while France and Italy
will experience negative growth.
The forecast for IT spending growth in Asia/Pacific (excluding Japan) has also been
reduced, with overall growth now expected to be 1.4%, down from the earlier
(c) [15th September 2009] [Vipul Kaushik and Suryansh Manglik, EPGPM, MDI Gurgaon] All rights
reserved.
Infosys Technologies – International Strategy and Global Meltdown 18 | P a g e
Latin America will enjoy overall IT spending growth of 4% growth in 2009, down
from the November forecast of 8%. IT spending in Brazil will grow by 6% in 2009,
down somewhat from the 9% forecast in November.
1. The focus of most of the IT spending worldwide will be on software and IT services.
2. China, India and Brazil are seen to be having highest growth rate in terms of IT
spending.
7
The IDC report, Economic Crisis Response: Worldwide IT Spending 2008-2012 Forecast Update --
February 2009 Revision (IDC #216909)
8
http://www.forrester.com/Research/Document/Excerpt/0,7211,46676,00.html(Accessed on: 05/09/2009)
(c) [15th September 2009] [Vipul Kaushik and Suryansh Manglik, EPGPM, MDI Gurgaon] All rights
reserved.
Infosys Technologies – International Strategy and Global Meltdown 19 | P a g e
This analysis further puts emphasis on the share of Asia Pacific in global IT spending which
accounts for almost a quarter of share. Main players in this region are China, Japan,
Australia, India and South Korea. Top fifteen countries by projected IT spending is shown in
below figure9:
(c) [15th September 2009] [Vipul Kaushik and Suryansh Manglik, EPGPM, MDI Gurgaon] All rights
reserved.
Infosys Technologies – International Strategy and Global Meltdown 20 | P a g e
Netherlands 23.77
Mexico 19.85
South Korea 16.00
Switzerland 15.37
Belgium 11.27
Source@ Forrester report and Wikipedia page of countries GDP (Website mentioned
in footnote)
Figure 9 - Project IT Spending in Top 10 Countries
Hence a combined IT spending for the year 2009 of China, Japan, Australia, India and South
Korea is $361 billion. This represents a huge opportunity which is largely untapped by most
of the Indian IT companies. Infosys has already established its delivery centers at China and
Australia to tap most of this market. Next logical step would be to go for Japan and South
Korea market as well as domestic Indian market.
(c) [15th September 2009] [Vipul Kaushik and Suryansh Manglik, EPGPM, MDI Gurgaon] All rights
reserved.
Infosys Technologies – International Strategy and Global Meltdown 21 | P a g e
NEW OPPORTUNITIES
INDIA
Growth domestic product (GDP) of India is increasing at a steady rate of more than 7%. With
size of $1 trillion USD, IT industry contributed around 5% in 2008. Large government
project are in pipeline to be offered for IT sector in next few years.
"There are large opportunities in India. So we are definitely going to go after these kinds of
businesses very aggressively in India," Binod Rangadore, Senior Vice President and Head
India Business, told Reuters in an interview on 20 th August 2009. "We have a very healthy
pipeline right now."
Infosys Technologies, India's second-largest IT services exporter, has bid for more than 10
large government projects in India as part of a drive to lower its dependence on the US
market10.
Few large IT companies with few small and medium companies dominate Indian IT market.
Infosys has a tough competition with global as well as domestic IT companies in the
domestic turf. Being a late player in the domestic market, Infosys has lost first mover
advantage to global players like IBM, Accenture and domestic player like TCS.
10
REUTERS. (2009, 08 20). REUTERS News Report. Infosys trying hard to shed US dependence , p. 2.
(c) [15th September 2009] [Vipul Kaushik and Suryansh Manglik, EPGPM, MDI Gurgaon] All rights
reserved.
Infosys Technologies – International Strategy and Global Meltdown 22 | P a g e
According to recent study by lobby group NASSCOM and consultancy McKinsey, the
technology and business outsourcing services market in India will grow exponentially for
next 10 years. Indian market is expected to grow five-fold by 2020 to $90-$100 billion on the
back of a growing economy.
Rangadore said “The business from IT services in India was very small and bulk of the
revenue in India came from Finacle, the banking solutions and services unit of Infosys.”
Infosys won a contract to design, develop and support a portal for the ministry of commerce
and industry. The contract is valued at 150 million rupees ($3 million) for three years. It has
also won a project from the tax authorities for a project to enable electronic filing by
taxpayers.
Still there is a long way to go for Infosys. The Indian firms face competition from big global
players such as IBM Inc, Hewlett-Packard and Accenture that have raided their home turf as
they look for growth outside their mature markets. Infosys realised the importance on Indian
(c) [15th September 2009] [Vipul Kaushik and Suryansh Manglik, EPGPM, MDI Gurgaon] All rights
reserved.
Infosys Technologies – International Strategy and Global Meltdown 23 | P a g e
market by late 2007 and setup its India business unit as part of strategy to diversify its
revenue base. However, a few large companies dominate Indian IT market with presence of
number of medium and small companies.
JAPAN
Japan’s IT services market at USD 108 Bn is the second biggest in the world. Indian
companies are finding it very difficult to penetrate. India’s share in the market is between 1-
1.5 Bn. Off shoring is limited to 8 – 10 % and china is the biggest off shoring partner with
more than 50% share.
Analysis of industry spending on IT reveals that BFSI and Manufacturing are the highest
spenders in Japan. Only 8-10% of IT services are off-shored. The biggest factor for choice of
China for off-shoring is the cultural homogeneity however, the services off-shored are low
end IT services of coding, testing and BPO.
(c) [15th September 2009] [Vipul Kaushik and Suryansh Manglik, EPGPM, MDI Gurgaon] All rights
reserved.
Infosys Technologies – International Strategy and Global Meltdown 24 | P a g e
The key challenges Indian IT companies face in the Japan market are:
Struggling to offer the right value proposition and positioning themselves
Barriers to entry in terms of language & cultural compatibility.
o Low Japanese language skills available in India.
o There are around 71,000 Chinese students enrolled in Japanese universities as
against only 480 from India
Lack of focus: Far too busy serving US and UK
Struggling to cope with the perfectionist attitude of Japanese clients, long gestation
periods and undefined project management practices
Keiretsu11 Japanese business model doesn’t encourages entry of new players
Indian IT vendors are regarded high on technology & domain competence, with fast
ramp-up capabilities, low on cost and with a better IP protection environment.
11
A network of businesses that own stakes in one another as a means of mutual security, especially in Japan,
and usually including large manufacturers and their suppliers of raw materials and components.
(c) [15th September 2009] [Vipul Kaushik and Suryansh Manglik, EPGPM, MDI Gurgaon] All rights
reserved.
Infosys Technologies – International Strategy and Global Meltdown 25 | P a g e
Japan and China also suffer with the historical mistrust amongst the nations. Most
Japanese respect Indian culture and recognize the prowess of the Indian IT sector,
Indian IT companies and especially Infosys have high potential for success this market
because of its expertise in financial and manufacturing sector which constitutes major part of
Japan IT market. The major recommendations for Indian companies to succeed in this market
are:
1. Have a strategic long-term view of this market. Market is large and would need
patience to develop.
2. Establish right value proposition; start small and build trust. Understand the business
difference in contractual terms.
3. Showcase partnership based relationship for mutual advantage rather than client-
vendor model. Target transformational change projects
SOUTH KOREA
South Korea has developed an internationally recognized hi-tech industry. Korean
government is targeting a number of areas for industry development, supervised by Korea
Communications Commission (KCC) and Ministry of Knowledge Economy (MKE),
including Telecommunication, Information Security, E-Commerce, Wireless Technology,
Mobile Commerce, and Optical Fibre Technology, Software development, Circuit design and
Digital Content.
The rapid adoption of the Internet has generated a boom in Internet-related services. There
are over 100 registered Internet Service Providers, and companies offering web design and
(c) [15th September 2009] [Vipul Kaushik and Suryansh Manglik, EPGPM, MDI Gurgaon] All rights
reserved.
Infosys Technologies – International Strategy and Global Meltdown 26 | P a g e
content, e-commerce solutions and ASP services are proliferating. The government and
industry are placing considerable emphasis on developing Korea's e-commerce capability,
both business to business (B2B) and business to customer (B2C) and while this sector has
undergone significant rationalisation since mid-2000, opportunities continue to emerge for
companies with sound business fundamentals.
Historically, Korea’s software industries have not been as strongly developed as its hardware
manufacturing. Korea has developed a sophisticated manufacturing base for computer and
telecommunications hardware and, with the rapid adoption of the Internet; it has become one
of the leading information economies in Asia. This has created opportunities in a range of
areas for foreign companies that have internationally recognised technology and IT services,
including:
Internet-related services
Wireless applications
E-commerce applications including payment solutions
IT security
Digital content, including e-games and animations
Financial services applications and other industry-specific software
Network and systems integration services
Smart-card and intelligent traffic systems
Australian, USA and European companies have successfully established a market presence in
a number of these areas. Indian companies are lagging behind because of its business model
that suits to provide low cost IT services instead of value added IT products for
manufacturing industry. The major recommendations for Indian IT companies for South
Korean Market are:
1. Invest in research and development for IT products.
2. Business Model restructures to facilitate innovations.
3. Showcase partnership based relationship for mutual advantage rather than client-
vendor model.
4. Market is large and continuously growing in fast pace. Need to invest in research
and development to keep pace with ever changing technology.
(c) [15th September 2009] [Vipul Kaushik and Suryansh Manglik, EPGPM, MDI Gurgaon] All rights
reserved.
Infosys Technologies – International Strategy and Global Meltdown 27 | P a g e
Analysis Objective
“We want to be among the three largest IT services companies globally,” declares S. ‘Kris’
Gopalakrishnan, CEO& MD of Infosys. “We are changing the company to meet our
ambitious goals.12”
In such a scenario when global market is in turmoil and clients are cutting on their IT
spending, pricing is tough and tough competition from global as well as domestic IT
competitions, what are the steps needs to be taken to realise the goal? Its a million dollar
question for Kris.
2. Is International Strategy good enough to cater ambitious goal to enter in the league of
top International IT companies?
The Scope: Case primarily dealt with strategic issues in IT industry regarding International
Strategy and Business Model. Case is suitable to teach in the class of Strategic Management
with level of Medium to High.
12
http://businesstoday.intoday.in/index.php?
option=com_content&issueid=11300&task=view&id=10025§ionid=25&Itemid=1 (Sachitanand, 2009)
(Accessed on: 05/09/2009)
(c) [15th September 2009] [Vipul Kaushik and Suryansh Manglik, EPGPM, MDI Gurgaon] All rights
reserved.
Infosys Technologies – International Strategy and Global Meltdown 28 | P a g e
Infosys needs to change its business model to achieve its ultimate goal as declared by
its chief executive. Company prefers to play safe with striving for short term but high margin
contracts instead of going for large-volume, multi-year but ultimately lower margin contracts.
It provides base for quick growth while being bolstered by a stable, long-term revenue
stream.
Infosys should look beyond its India based delivery, even at the cost of margins. Its
major rivals, IBM and Accenture, have shops around the world. IBM has 400,000-plus
people in the market, with 150,000 of them in the US alone and as many as 5,000 in Brazil.
Accenture has over 50,000 people in India. In order to become a truly global company, it
needs to expand its offices around the world and hire international talent.
Infosys have always been a cautious player in Mergers and Acquisitions. With a
headcount of 100,000, Infosys is only a quarter of the size of IBM, but remains wary of
13
Big Hairy Audacious Goal
(c) [15th September 2009] [Vipul Kaushik and Suryansh Manglik, EPGPM, MDI Gurgaon] All rights
reserved.
Infosys Technologies – International Strategy and Global Meltdown 29 | P a g e
acquisitions— the only way for the company to achieve scale rapidly. Lost battle in AXON,
the German enterprise solutions vender, to its domestic rival HCL Technologies shows its
non-aggressive behaviour for inorganic growth.
“There is no point over-paying for assets…,” says Infosys CFO V. Balakrishnan. “We are not
a conservative company, we are realistic.”
Infosys should open up and be more aggressive on acquisitions and mergers to achieve
additional scale and its self-professed ambitions.
Infosys have been overly exploiting its Global delivery Model successfully since its
inception. It has given an edge to it in terms of cost effectiveness and availability of talented
manpower over its competitors but Infosys should look beyond this paradigm. As said by
Sudip Apte:
“We may be reaching the end of the current model favoured by Indian companies, who rely
on adding thousands of people to continue churning out projects and revenues. Companies
like Infosys need to delink headcount and revenue growth,” says Sudin Apte of Forrester
Research.
Infosys footprints are primarily in Western English speaking countries. The advantage of
English being a well-known language in India, global strategy proved successful until now.
To shed its overdependence on American and European market, Infosys needs to venture in
new emerging markets like India, Japan and South Korea. To go up the value chain and tap
opportunities in new markets, Infosys should change its business model from Global Strategy
to Multi-domestic Strategy. As the recommended markets are quite diverse politically and
culturally, global delivery model will not be able to fulfil customer expectations. Multi-
domestic strategy will unlock the hidden potential by decentralizing the strategic and
operating decisions making process. Strategic business units in each country can focus on
competition within each country by offering tailor made products to the local market.
(c) [15th September 2009] [Vipul Kaushik and Suryansh Manglik, EPGPM, MDI Gurgaon] All rights
reserved.
Infosys Technologies – International Strategy and Global Meltdown 30 | P a g e
BIBLIOGRAPHY
Cha, B.-S. (n.d.). Opportunities in Korea. Retrieved 08 24, 2009, from Autralia Govt Site:
http://www.austrade.gov.au/ICT-to-Korea/default.aspx
IAS. (2009). Basic Facts on Indian Software Industry. Industrial Analysis Services .
IDC. (2009). Worldwide IT Spending 2008-2012. The IDC report, Economic Crisis Response: Forecast
Update -- February 2009 Revision (IDC #216909) .
IDC, M. (n.d.). Article on World IT Spending. Retrieved 08 24, 2009, from IDC:
http://findarticles.com/p/articles/mi_m0EIN/is_2009_Feb_25/ai_n31378627/?tag=content;col1
REUTERS. (2009, 08 20). REUTERS News Report. Infosys trying hard to shed US dependence , p. 2.
Sachitanand, R. (2009, 2 4). Infosys Bold Global Ambition. Retrieved 11 12, 2009, from
businessindiatoday: http://businesstoday.intoday.in/index.php?
option=com_content&issueid=11300&task=view&id=10025§ionid=25&Itemid=1
Who We Are. (n.d.). Retrieved 08 20, 2009, from Infosys Technologies Corporate Website:
http://www.infosys.com/about/who-we-are/default.asp
(c) [15th September 2009] [Vipul Kaushik and Suryansh Manglik, EPGPM, MDI Gurgaon] All rights
reserved.