Executive Summary Infosys Technologies is a billion dollar company with over 58,000 worldwide and is rated as the Best Employer in India. In 2008 the Indian company had a successful turnover of more than $4 billion. Infosys operates in a number of business ventures ranging from banking to retail, and its services tend to encompass end-to-end IT solutions. The company is noted for using its low-risk Global Delivery Model (GDM) to accelerate schedules and reduce costs. As early as 2004 the company established strong brand equity and began looking at ways to combine its excellent reputation by launching a consulting unit.
Acquiring existing companies and establishing a new business model did not prove to be a viable option so Infosys abandoned the idea to later create its own brand – a wholly owned US based subsidiary called Infosys Consulting (ICI) which was founded in April 2004. ICI provides end-to-end business solutions with the aim of leveraging technology. At inception, the firm had more than 100 consulting engagements and by 2006 had it had over 200 employees. In its second year of existence, within the third quarter, ICI met both its planned revenue target and its targeted contributions to Infosys Technologies.
The company provides consulting and IT services to clients globally, and is driven to compete with consulting firms such as IBM and Accenture. Infosys Consulting in 2006 Introduction During the 1990’s, US companies were seeking opportunities to leverage high quality service at low price points from competent Indian companies they had been working with. Infosys Technologies refused to be left behind; therefore the company started expanding its foot print in infrastructure management, system integration, test package implementation and business process outsourcing (BPO).
Infosys Technologies saw an opportunity that would enhance its IT business by entering client relationship lifecycle early. Infosys would later decide to invest $20 million to launch an in house consulting unit. The consulting unit (Infosys Consulting) was constrained because of limited brand equity, investment allocation and recruiting capabilities. The inception of Infosys Consulting Company as a wholly owned US based subsidiary of Infosys Technologies took place in April 2004. At the time of its inception there were 5 key executives who were responsible for getting the operation off the ground.
The key people were as follows: -Raj Joshi (Founder) -Steve Pratt (CEO and Managing Director) -Paul Cole (COO and Managing Director) -Romil Bahl (Managing Director) -Ming Tsai (Managing Director) Infosys Consulting (ICI) provides end-to-end business solutions with the aim of leveraging technology. At inception, the firm had more than 100 consulting engagements and by 2006 had it had over 200 employees. Infosys Consulting is small compared to heavy hitter like IBM and Accenture which had already captured a nice portion of the IT consulting market.
In its second year of existence, within the third quarter, ICI met both its planned revenue target and its targeted contributions to Infosys Technologies. The company provides consulting and IT services to clients globally, and is driven to compete with consulting firms such as IBM and Accenture. IBM and Accenture are considered as the best in the business and information technology consulting industry. Even with the strong backing of its parent company, ICI is noted for having a few internal challenges.
The company faced the challenge of managing growth, leveraging Infosys Technologies, interfacing with their parent company, brand recognition, and managing and adapting HR management to continuous growing scale. Infosys is one of the trailblazers of strategic offshore outsourcing. While other software outsourcing companies were being crucified for moving jobs offshore for cheaper labor, Infosys was praised by Wired magazine for its unique offshore strategy in bringing jobs back to the US. Summary of Facts The market for information technology (IT) service industry is enormous and is expanding rapidly.
However market leaders like IBM and Accenture failed to capture the entire market share, thus leaving the door open for smaller competitors to enter the market to reap some of the harvest. Companies from India launched operations in the industry and because of this new competition, IT multinational giants had to increase their base salaries in India. IDC, a market intelligence provider, believes that worldwide spending for IT service could increase by 7 percent through 2009 and grow to a sum of approximately $804 billion dollars.
Even though IBM and Accenture were considered as market leaders, other companies like Wipro Technologies and Tate Consultancy Services (TCS) were also making a dent in the market. Because of increased opportunities (more global IT service companies in India) the attrition rates increased in this industry and thus caused companies like Wipro and Infosys to increase their base level salaries for mid-level workers. To remain competitive, Indian companies started giving employees stock-based compensation. ICI had complete autonomy to create its own culture, organizational structure, and recruitment strategy.
The leadership team set out the build this unique culture by adopting essential values from the parent company. But this was not without issues. Taking people from other careers – with no consulting experience and making them fit in this culture was a big issue. Therefore recruiting the right people (first rate personnel) for the culture was extremely important. ICI Business Strategy ICI’s primary strategy was to foster an environment that will deliver high quality business consulting and to discipline technology implementation.
To compete in the market place, ICI offered competitive price rates at approximately $100 per hour while the leading competitors (IBM and Accenture) offered rates from $175 to $225 per hour. Being covered under Infosys Technologies Global Delivery Model, ICI could created a unique culture that: 1) differentiates them from the rest of the consulting companies; 2) enables the recruitment of top rated clients; and 3) allows measurable values to be delivered to the client. ICI Global Delivery Model (GDM) More than 20 years ago, Infosys Technologies pioneered the Global Delivery Model.
This model can be thought of as a project management system by which each project is divided into components, and are executed independently and concurrently at client site or at remote development centers. GDM provides a number of benefits and they are as listed below. GDM Benefits are as follows: 1. Globally distributed teams. 2. Cuts cost by 30 percent. 3. Reduced time to market because of the 24/7 work day for teams around the world. 4. One ICI resource onsite, One Infosys Technologies resource onsite and Three Infosys Technologies resource offshore (1-1-3 model).
ICI used this model to integrate the business consulting and technology implementation lifestyle (“Infosys Consulting in 2006: Leading The Next Generation Of Business And Information Technology Consulting“, 2006, p. 8). GDM is the key differentiating factor of Infosys from its competitors. Competitor Analysis The market for IT industry was quite competitive with IBM and Accenture identified as the global leaders in the industry. Both of these global leaders have strong brand and a large customer base to which they offer business consulting, offshore services, technology implementation, customer relationship management and so-on.
These companies can be considered as one-stop-shops as they offer a multitude of services. IT market in India offered technical and business consulting with Tata Consultancy Services (TCS) which was the market leader in IT exports, and Wipro Technologies and Infosys as other major market players. TCS offered consultancy services, IT services, and asset based solution and so-on. Wipro was third largest IT provider with service offerings in IT consulting, BPO, and software solutions. Both companies had a strong global presence.
Infosys Technologies Global Delivery Model is the main reason why it has achieved its stellar status in business today. This strategic model enables Infosys to interact with customers directly providing them with fast, reasonably-priced and friendly means of service. SWOT Analysis of Infosys Using the data from the SWOT analysis, Infosys can develop marketing strategies can minimize the affect of its weaknesses and while maximizing its strengths. The company will also be informed of potential opportunities and threats within the market place and can adjust its strategy accordingly. Strengths •Ability to execute services is outstanding. The company has exceptional internal processes. •Cost Advantage. •Ease of scalability. •Quality and maturity of process. •Global and 24/7 delivery capability. Weaknesses •Low cost for less experienced talent pool. Infosys hopes to improve financially by paying small salaries for less experience. •Diversification of delivery capabilities to other offshore locations may be hindered because of heavy reliance on India. •Excessive dependence on USA for revenues. •High attrition rate. •Decreasing competitive advantages. Opportunity •Extend delivery and processes beyond the borders of India. •Greater scope for product innovation. Increased focus on high end consulting work. •Domestic demand for IT services will grow by 20 %. Threats •Competitors from other countries where there are large pools of low-cost labor, and developing educational infrastructures such as universities and technology colleges (“Infosys SWOT“, n. d. , p. 1). •Other global players that realized the low-cost benefits of working with India’s English speaking high-skilled labor force. •Competition may begin to undercut pricing which can result in significant financial impact for ICI. Investors will not be too happy because they expect a good return on their money. Customers may decide to switch to a cheaper offshore company. •Increased competition from low-wage countries like China, Indonesia, etc. •Rupee-dollar movement affects revenue and hence margins. •US Govt. against outsourcing. •The current Global economic crisis may continue for several years; therefore global spending on IT also decreases. Alternative Strategy ICI should use the structure of Porter’s Five Force Model to discover opportunities for improving upon its marketing strategies. ICI number one goal should be to develop a competitive edge over rival companies.
Porter’s Five Forces Model will help ICI leaders to better understand the industry context that they are operating in. When applying Porter’s model (Threat of New Substitutes, Bargaining Power of Customers, Barriers to Entry, Bargaining Power of Suppliers, and Rivalry among Firms (Porter, 1980)) to ICI we discovered the following: Threat of New Substitutes 1. Other offshore locations like China are coming on the scene with lower pricing and therefore pose a threat to Indian IT industry. 2. If the quality of the service or product is the same, low or competitive pricing may be the only differentiator.
Bargaining Power of Customers 1. Large number of IT companies vying for IT projects – resulting on high competition for projects. 2. Spending for IT expenditures reduced tremendously because of the recent financial crisis. 3. Current clients remaining with their old companies for existing products and services. Barriers to Entry 1. Low capital required for entry. 2. Large value chain – there is still some space for small enterprises. 3. Multinational corporations (MNCs) are increasing in capacity and employee strength. Bargaining power of supplier 1. IT future outlook is bleak because of the recent economic crisis. 2.
Demand and supply of IT professionals is reduced. 3. The talent pool is filled with new and experienced personnel. Rivalry among firms: High 1. Offering of goods and services 2. Because of low-cost there is little or no differentiation 3. Industry growth is High 4. Strong competitors – a few large companies (IBM and Accenture). Conclusion In the words of Steven Pratt, ICI has enabled the disruptive change in its business and the IT services industry through its unique approach and organization (“Infosys Consulting in 2006: Leading The Next Generation Of Business And Information Technology Consulting“, 2006, p. 18). Regardless f the current economic conditions, ICI should continue in this competition to gain its fair share of the consulting market. The company should continue to differentiate itself from the competition and should maintain its current process of recruiting first rate employees. I would advise ICI to continue business as usual. References Infosys Consulting in 2006: Leading The Next Generation Of Business And Information Technology Consulting. (2006). Retrieved from http://xanedu. com Infosys SWOT. (n. d. ). Retrieved from http://www. marketingteacher. com/SWOT/infosys_swot. htm Porter, M. (1980). Competitive Strategy. New York, NY: Free Press.