The Case includes Motivation and Learning Objectives. The Indian economic system is being strengthened by the expanding $50 Billion IT-BPO industry. A significant portion of this amount comes from outsourced work from developed markets, with the United States as the main contributor, followed by Europe. In the global IT industry, Indian companies face intense competition from countries like China, Mexico, Brazil, and Thailand. To sustain their growth path, Indian IT firms need to broaden their presence in new markets where they are not seen as strong rivals.
Infosys Technologies Limited announced a reorganization of its business units and an expansion of its senior management team in October 2007. This decision stemmed from the evolving dynamics and increased competition within the global IT industry. The main objective was to prioritize growth markets like India, enhance research and development efforts, commercialize intellectual property (IP), and strengthen consulting capabilities.
These changes were significant at the organizational level and warrant a comprehensive analysis. This analysis would help us comprehend how a leading IT company operates in terms of identifying new market opportunities. It would enable us to understand how a company assesses its own strengths and weaknesses and adjusts itself to leverage its strengths, exploit available opportunities, and mitigate the threats it faces.
IT Industry Development and Current Scenario
The changing economic and concern conditions, rapid technological invention, proliferation of the cyberspace, and globalization were creating an increasingly competitive market environment. This environment was pushing corporations to change the way they operate.
The role of engineering has evolved from corporate support to corporate shaping. Designing, creating, executing, and sustaining advanced engineering platforms and solutions that meet the needs of businesses and customers has become the key focus and competitive advantage for companies worldwide.
There is a growing importance in outsourcing the development, direction, and ongoing care of engineering platforms and solutions. Many companies now depend on offshore engineering service providers to fulfill their requirements for top-notch yet cost-effective engineering solutions. Consequently, these offshore providers have become indispensable in the industry and are continually gaining recognition and expertise.
The Indian IT companies offered advantages that others were seeking but were unable to achieve until now. These advantages include:
- High quality bringing
- Significant cost benefits
- Abundant skilled resources
In addition to the factors mentioned above, India is financially the most attractive country for IT compared to other potential destinations. This is due to the government’s favorable tax norms in various states, as well as special facilities like SEZ (Special Economic Zones). (Exhibit 1)
Success Factors
- Efficaciously integrate onsite and seaward executing capablenesss to present seamless, scalable services
- Increase deepness and comprehensiveness of service offerings to supply a one-stop solution in an environment where corporations are progressively cut downing the figure of engineering services sellers are utilizing
- Develop and maintain cognition of a wide scope of bing and emerging engineerings
- Demonstrate important sphere cognition to understand concern procedures and demands
- Leverage in-house industry expertness to custom-make concern solutions for clients
- Attract and retain high quality engineering, professionals, substructure ( or installations ) throughout the concern rhythm.
About Infosys Technologies Ltd
Established in 1981, Infosys Technologies Ltd. (NASDAQ: INFY) commenced operations with a team of seven and a capital of $250. Through the years, it has transformed into a prominent player in the “next generation” of IT and consulting, achieving revenues exceeding $4.5 billion.
Infosys provides a variety of technology-driven business solutions to Global 2000 companies, empowering them to thrive in an interconnected world. Moreover, Infosys leverages its industry expertise and collaborations with top technology providers to deliver a wide range of services.
Infosys revolutionized the sector by introducing the Global Delivery Model (GDM), which became widely favored with the increase in offshore outsourcing. This model is built on the idea of relocating tasks to regions with highly proficient professionals, where it offers economic advantages and entails minimal risk.
Infosys is a globally operating company with offices and development centers in various countries, such as India, China, Australia, the Czech Republic, Poland, the UK, Canada, and Japan. As of September 30th, 2009, Infosys and its subsidiaries have a workforce of 105,453 individuals spread across more than 50 locations.
The analysis of Infosys Technologies Ltd for its strengths, opportunities, and threats is as follows:
Organization Structure: Concept of IBU and its Success
Infosys primarily focuses on package application development and maintenance. It is most effective for software coders to specialize in a specific industry to make the most out of their past experience. To facilitate this specialization, Infosys implemented the industry business unit (IBU) as the primary organizational concept. In the beginning, an IBU may have served only one client.
The company assigned new employees to an IBU, where they typically stayed for many years. With various promotions, employees could eventually become history managers. These individuals were responsible for maintaining client relationships, ensuring customer satisfaction, and generating additional sales.
The construction effectively included a large number of small business units, making individuals feel empowered. Each IBU operated as a separate company, managing its own expenses, revenue, and employee compensation and benefits. This approach proved to be extremely successful and led to significant growth over the years.
Drivers for Change
The following section is based on the discussion with Mr. Altaf Vohra, a Senior Manager at Infosys:
There are two main factors that can be identified as driving the change:
The non-US and non-Europe markets present a growing range of opportunities.
The demand for increasing presence in the high-value-add section, such as Consulting.
Reduced Focus on US Markets
It was evident that the focus country for the US markets was non-existent. He mentioned two significant reasons for this.
The US market is known for its high openness, enabling participants from different states to easily enter. Consequently, the company encountered considerable challenges from emerging countries like China, Mexico, and Brazil. Despite having promising growth opportunities in the US, the company had a keen interest in expanding into other markets.
Previously, the European and Southeast Asian markets were closed to foreigners, posing a challenge for outsiders trying to enter. However, once these markets opened up, an advantageous opportunity arose for effortless capture, accompanied by a natural barrier that hindered easy entry by others.
Changing Business Model
Over time, Infosys has adjusted its Business Model to meet market demands and sustain impressive growth. However, the company cannot persist with the current model and must prioritize high-value-added services going forward. These services encompass SASS and Consulting.
Problems in Current Structure
The company’s current construction had inherent limitations that prevented them from capitalizing on new opportunities. These limitations include:
A closed IBU construction that did not contribute to the development of expertise within the sphere and was necessary for consulting services.
The company’s lack of expertise in dealing with the European markets resulted in their inability to negotiate or close trades, ultimately leading to their loss against rivals.
There is no section to record the increasing opportunities in the domestic Indian market.
Exhibit 6 highlights how the lack of significant IP ownership due to inadequate investment in research and development has hindered the ability to tap into markets in Southeast Asia.
Restructuring in 2007
Infosys has restructured itself to expand its client base and strengthen its current portfolio through scale benefits, in response to the challenges it has faced in its current construction. The new opportunities will utilize the strengths of the next generation of leaders at Infosys.
Highlights of the Changes Made:
Business units have been reorganized. There are 8 Industry Business Units (IBUs) and 5 Horizontal Business Units (HBUs). The HBUs span across all the IBUs.
The creation of the New Growth Engines (NGE) unit aims to expand business in various markets. These include Australia, China, Japan, the Middle East, Canada, and South America and Latin America.
The aim is to focus on India by creating a separate concern unit.
There is an increased emphasis on research and development and the commercialization of intellectual property.
Broaden Senior Management Team
The Finer Changes
Each of the 6 verticals from BCM to RETL had two separate divisions identified by the postfix D or X, which meant US and non-US units, respectively.
BCMD and BCMX were created to handle different markets. BCMD focuses on the US market, while BCMX focuses on non-US markets.
