INFOSYS TECHNOLOGIES LIMITED

Transcription

1 INFOSYS TECHNOLOGIES LIMITED Infosys is the second largest foreign exchange earner in the software services business in India, with export earnings of more than US$ 1.3 billion. Background Infosys was founded in 1981 by seven software professionals with a vision to create a globally respected software company.the first ten years saw revenues reaching a modest US$ 2 million in However, post the economic liberalisation in India, growth at Infosys took wings. By 1999, revenues were US$ 121 million.the company got listed on NASDAQ in the same year.the NASDAQ listing was significant, as it not only helped to attract global investors and employees but also build brand equity that enhanced the company s visibility beyond India. In 2004, Infosys revenues crossed one billion dollars and within two years, revenues crossed two billion dollars in Today Infosys is a leading global Consulting and IT Services company offering a wide array of IT solutions customised for a range of key verticals and horizontals. In 2005, it was ranked as the number one IT Services company in the world by BusinessWeek Tech100. It was ranked number nine on the Wired 40 list of companies that are reshaping the global economy. It was ranked as the best managed company and the best company to work for in India. It was also ranked amongst the 100 most respected companies in the world by Financial Times PwC survey. As one of the pioneers in strategic offshore outsourcing of software services, it has become the second largest software services exporter in the country with export earnings of more than US$ 1.3 billion.the company is headquartered in Bangalore (Karnataka) and has 20 offshore development facilities located throughout India. Products Infosys designs and delivers IT-enabled business solutions for its clients.to do so, Infosys straddles the entire spectrum of IT services from strategy consulting to implementing IT solutions for customers.the company focuses on making its Company Products Established Founder Distribution Infosys IT services 1981 Seven software professionals 35 offices world-wide 65

2 Services Business level Process level Description Consulting, Modular Global Sourcing Process Re-engineering, BPO, Enterprise Architecture, Enterprise Security CAGR of net profits between 1999 and 2005 has been 56 per cent. Net margin has historically been more than 25 per cent, while its competitors have shown net margins in the range of per cent. The company exhibits higher return on net worth and capital employed vis-à-vis its key competitors. Application level Infrastructure Product engineering clients more competitive in a changing business world. It also develops and markets certain company owned software products. It has excellent domain competencies in verticals such as Banking and Capital Markets, Insurance, Healthcare, Life Sciences, Retail, Aerospace, Automotive, Transportation, Resources, Energy and Utilities, Communication Services Providers, Hi-tech and Discrete Manufacturing and Media. Financial analysis Packaged applications (evaluation, implementation, rollouts, upgrades, maintenance), custom applications (design, development, maintenance), Enterprise Application Integration, Independent Testing Services Planning, design, optimisation, support and maintenance Design, development, testing, maintenance In 1999, Infosys had revenues of only US$ 121 million, in 2005 revenues had increased to more than US$ 1.5 billion, thus exhibiting a healthy CAGR of 52 per cent between 1999 and 2005.The The company has been very conservative in its financial structure and has continued to remain debt free even though it could have improved its return on equity through gearing. Its internal cash accruals have more than adequately covered working capital requirements, capital expenditure and dividend payments. Infosys contribution in making Made in India global Infosys is indeed a global company in the true sense - 98 per cent of its revenues are derived from export earnings. It is associated with over 450 active clients across the world, many of them being Fortune 500 companies. It has over 58,000 software professionals belonging to 57 nationalities working in over 35 offices world-wide.the company has made significant investments in infrastructure to manage and execute projects in multiple locations with seamless integration. A customer-centric approach has ensured that the company derives 95 per cent of its revenue from repeat business (i.e. from a customer who also contributed to revenues during the prior fiscal year). Global presence 66 Americas USA Canada Asia-Pacific Australia China India Japan Mauritius UAE Middle east Belgium France Germany Italy Netherlands Sweden Switzerland United Kingdom

3 Since its inception Infosys has relied on overseas business, giving it a global perspective that many other Indian companies lacked at that time. In 1987, it opened its first international office in Atlanta, USA in partnership with Kurt Salmon Associates (KSA). KSA was responsible for sourcing projects while Infosys was responsible for providing software expertise and technical knowledge.the association with KSA helped Infosys build credibility in the US market.the partnership was terminated in 1995 after Infosys opened its own marketing office in the US and marketed its products under its own brand name. By this time Infosys was already serving reputed companies like Reebok, GE, Nestle, Holiday Inn and many others. Infosys opened its first office in Europe in the United Kingdom in In the following year, Infosys set up its office in Toronto, Canada. More offices were set up in Europe in 1999 (in Germany, Sweden and Belgium) as well as in Australia, in addition to two development centres in the US. One year later Infosys opened offices in France and Hong Kong and one global development centre each in Canada and UK and three more development centres in US. In 2001, it opened new offices in UAE and Argentina and a new development centre in Japan.The year 2002 saw the opening of new offices in Singapore, Netherlands and Switzerland. Over the years the company has established a wellbalanced and diversified global delivery model around new high-end service lines such as Consulting and Enterprise Solutions while ensuring adequate synergy with regular service lines.to develop business solutions with its clients, Infosys works with alliance partners that possess best-inclass technologies. Some of these partners are FileNet, IBM, Informatica, Intel, Mantas, MatrixOne, Microsoft, Netegrity Inc, Oracle, Pinnacle, SAP, 67

4 Siebel, Sun Microsystems, SupplyChainge,TIBCO Software Inc and Yantra. Factors fuelling Infosys global initiatives 68 With increasing competitor activity Infosys has leveraged its ability to ramp up its scale of hiring manpower as well as handling a large number of clients. Infosys has been recognised for its organisational learning and for transforming enterprise knowledge into shareholder value. Recently it became the first Indian company to be inducted into the global Most Admired Knowledge Enterprises (MAKE) hall of fame. It features among twenty-two other global organisations including Dell, General Electric, Hewlett Packard, Accenture, IBM and Microsoft. Key factors that have driven performance in the past are Attracting and retaining human capital The most important factor responsible for the success of Infosys has been its ability to attract, develop and retain outstanding human capital. Given the nature of its business, the company competes on the strength of its people and to this end has invested heavily in recruitment and training to constantly upgrade the knowledge and skills of its people. In a pioneering initiative, Infosys has opened a Global Education Centre to train technology professionals. The residential education centre is the largest corporate training centre in the world capable of training 4500 people at a time, ably supported by an infrastructure of 2350 residential units, 4700 beds, 58 training rooms, 183 faculty rooms and a well equipped library. Infosys has also launched Campus Connect, an industry-academia partnership initiative.the nationwide program focuses on aligning the needs of colleges, faculty and students with industry needs. The Employee Stock Offer Plan (ESOP) of the company has been an important factor to attract and retain high quality staff not only in India but also the talent competitive markets of US and Europe.To build a strong senior management, Infosys has implemented a structured three-tiered leadership development program.the Infosys Leadership Institute (ILI) facilitates the development of a cadre of global leaders with the competencies required to steer the company into the future.the three-tiered leadership structure also provides the foundation for managing structured succession planning. Delivery Excellence With a record 95 per cent of all projects delivered on time and within budget, Infosys is a leader in project management and reducing the cost of ownership for clients. Infosys effectively leverages CMMI level 5 quality and ongoing initiatives such as aligning with the Malcolm Baldrige framework and the six-sigma cross functional process mapping to deliver high quality solutions to clients. Infosys superior knowledge management system enables retention of knowledge within the project team and the organisation.the resultant efficiencies have helped it deliver value to clients at lower cost and with fewer defects. Technological superiority Infosys has brought together thought leaders within the organisation to form the Software Engineering and Technology Labs (SETLABS). SETLABs is the

5 research wing of Infosys consisting of specialists in software architecture, methodologies, emerging technologies and platforms. SETLABs mainly focuses on: Developing frameworks & methodologies to address critical points in solution lifecycle Leading edge technology watch and competence building Assimilating knowledge and building framework for enterprise software like the EAI framework Provide technology related services such as Architecture consulting and definition, Internet security consulting and capacity planning. Focus on customer value and satisfaction Infosys obtains client feedback through formal and informal means. Infosys, through an external agency, conducts an annual Customer Satisfaction Survey. This is aimed at obtaining formal, direct and honest feedback on its performance and ability to meet client expectations. In addition, there are informal and semi-formal events, such as its annual customer event Milan and analyst interactions, which provide an opportunity to gather information on trends, customer concerns and other competitive information.the feedback from customer surveys is analysed and the findings discussed by the Board of Directors to identify specific actions to improve customer satisfaction.there is a conscious attempt to identify and cross-pollinate best practices across business units and geographies. Moving up the software value chain Infosys has aggressively moved towards a higher revenue contribution from higher value added service lines like package implementation, engineering services and consulting.the contribution of these services to total revenue has grown from only 20 per cent in 2001 to 32 per cent in 2005, while regular service lines like application development and maintenance have seen a decline in contribution.this has been made possible by developing domain specific knowledge in a few industries like financial services, healthcare, telecommunications and engineering to become specialists in industry-specific technologies and applications and later developing expertise in newer verticals like retail, transport etc. Greater geographical diversification Infosys derives substantial revenues from the US, followed by Europe. Due to cost pressures faced by US businesses, IT spending continued to be controlled. On the other hand a stagnant European economy continued to drive the move towards external service providers from internal IT departments. Infosys has developed country-specific strategies in countries in Europe by developing local language skills and building a stronger local presence to serve these emerging needs. Maintaining an equitable client mix The company has recognised that de-risking its business model is very important for any IT company and has limited its dependence on any one customer. It has ensured that no single business segment accounts for more than 25 per cent of its revenues and no single client contributes to more than 10 per cent of the revenues. Such diversification is seen as critical not only in providing the company the flexibility to adapt to changing market conditions but also in attracting and retaining highly skilled professionals who seek the opportunity to learn new skills. In 2005 the company signed up 136 new clients taking the total client base to 438, as a result of which the share of 69

6 top 10 clients in total revenue has fallen from 43 per cent in 1997 to 33.6 per cent in 2005.The share of its largest client fell from 15.6 per cent to only 5.5 per cent in the same period. a head start over many domestic and international competitors with its one of the best de-risked business models in the industry and is well positioned to exploit this opportunity. Aggressive branding through media and events The company has received exclusive coverage in publications such as The New York Times, Business Weeks and Fortune, which has helped it to attain top-of-the-mind recall in the minds of senior global executives. It has also participated in, as well as held multiple events across the globe to demonstrate its domain expertise, capabilities and thought leadership to a large cross-section of Global 2000 companies. Future plans Infosys was recently in the news for receiving an IT outsourcing order worth US$ 140 million from Dutch bank ABN AMRO to develop, support and enhance a wide spectrum of applications over a period of five years.this is the company s single largest contract and has a potential to go up to US$ 250 million in the next five years. 70 The company is also planning to invest US$ 15 million in a new software R&D centre in Hangzhou, China and would spend US$ 10 million to expand its existing R&D centres. It plans to hire 6,000 engineers in China, up from the current 290 engineers on its rolls. With the Global Delivery Model gaining buoyancy, the company s recent focus on developing its business in verticals such as retail, transportation and manufacturing is expected to hold it in good stead. Indian software industry has been able to tap only 3 per cent of the US$ 600 billion global IT services market with its IT-ITES exports of US$ 17.2 billion in the year It has the potential to achieve US$ 50 billion by the year Infosys has Globalisation at a glance 98 per cent of Infosys revenues are derived from export earnings More than 450 active clients across the world, many of them being Fortune 500 companies Employees include over 58,000 software professionals belonging to 57 nationalities Over 35 offices world-wide