Analysis of Infosys Technologies Limited

Infosys Technologies Ltd. was inaugurated in 1981 by seven people with US$ 250. Today, it is a global leader in the ‘next generation’ of IT and earning revenues of US$ 6.04 billion.

Infosys designs, defines and delivers technology-enabled business solutions for Global 2000 companies. Infosys provides a complete range of services by leveraging its dominion and business expertise and strategic alliances with leading technology providers.

The objective of this assignment is analysis of Infosys Technologies Limited which provides consulting and IT services. Infosys has been the first one in this field to offer innovative solutions to its clients. The company offers ample range of software services, namely application development and maintenance, independent validation services, infrastructure services, corporate performance management, packaged application services and product engineering and systems integration.

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Infosys established the Global Delivery Model (GDM), which emerged as a disturbing force in the industry leading to the rise of offshore outsourcing. The GDM is based on the formula of taking work to the site where the best talent is available, where it makes the best economic sense, with the least amount of acceptable risk.

Infosys has a world-wide footprint with 64 offices and 63 development centers in US, India, China, Australia, Japan, Middle East, UK, Switzerland, Germany, France, Netherlands, Poland, Canada and many other countries. Infosys and its subsidiaries have 130,820 employees working with it as on March 31, 2011. Infosys takes delight in building strategic long-term client relationships.

EVALUATING THE ENVIRONMENT

EXTERNAL ENVIRONMENT – PESTLE ANALYSIS

PESTEL ANALYSIS:

There are many features in the macro-environment with the intention of the conclusion of the executive of several organizations.

PESTEL ANALYSIS OF INFOSYS TECHNOLOGIES LTD.

The PESTEL analysis of Infosys Technologies Ltd. is as follows:

(P)olitical

While discussing PESTEL analysis of Infosys Technologies Ltd. firstly I discuss political aspect of PESTEL analysis of Infosys Technologies Ltd. As part of the countrywide movement and revolutionize, Infosys Technologies Ltd. is immediately one pattern of dense that are triumphant in equally types of business that is familial and worldwide commerce (2003). The positive aspects of the political analysis of Infosys Technologies Ltd. are that Indian political structure is considered stable enough expect the fact that there is a fear of hung parliament. Government owned companies and PSUs have decided to give more IT projects to Indian IT companies. The negative aspects of the political analysis of Infosys Technologies Ltd. are that U.S. government has declared that U.S companies that outsource IT work to other locations other than U.S. will not get tax benefit and terrorist attack or war.

(E)conomic

While discussing PESTEL analysis of Infosys Technologies Ltd. secondly I discuss economic aspect of PESTEL analysis of Infosys Technologies Ltd. The positive aspects of the economic analysis of Infosys Technologies Ltd. are that Domestic IT Spending(Demand): Domestic market to grow by 20% and reach approx USD 20 billion in 2008-09 – NASSCOM. Decline in real estate prices has resulted reducing the rental expenditures and due to recession, the layoffs and job-cuts have resulted in low attrition rate. Along with that economic attractivenessdue to cost advantage and other factors is also a positive factor. The negative aspect of the political analysis of Infosys Technologies Ltd. is of global IT spending trends.

(S)ocial

While discussing PESTEL analysis of Infosys Technologies Ltd. secondly I discuss economic aspect of PESTEL analysis of Infosys Technologies Ltd. The positive aspects of the economic analysis of Infosys Technologies Ltd. are that English is widely spoken language in India, English medium being the most accepted medium of education. Thus, India boasts of large English speaking population.Regarding educationa number of technical institutes and universities over the country offer IT education are there and working age population is also a constructive societal factor.

(T)echnological

While discussing PESTEL analysis of Infosys Technologies Ltd. secondly I discuss economic aspect of PESTEL analysis of Infosys Technologies Ltd. The positive aspects of the economic analysis of Infosys Technologies Ltd. are telephony that is India has the world’s lowest call rates (1-2 US cents). India expected to have total subscriber base of about 500 million by 2010. ARPU for GSM is USD 6.6 per month. India has the second largest telephone network after china. Tele-density – 19.86 %. Indian technology also give a chance to enterprise telephone services, 3G, Wi-max and VPN are poised to grow. Another positive aspect of Indian technology is the Internet Backbone. Due to IT revolution of „90s, Indian cities and India is well connected with undersea optical cables. Along with that new IT technologies like SOA, Web 2.0, High-definition content, grid computing, etc and innovation in low cost technologies is presenting new challenges and opportunities for Indian IT industry.

(L)egal

While discussing PESTEL analysis of Infosys Technologies Ltd. secondly I discuss economic aspect of PESTEL analysis of Infosys Technologies Ltd. The positive aspects of the economic analysis of Infosys Technologies Ltd. are that IT SEZ requirement ofIT companies can set up SEZ with minimum area of 10 hectares and enjoy a host of tax benefits and fiscal benefits. Contract / Bond requirements: Huge debates surrounding the bonds under which the employees are required to work, which is not legally required. IT Act like Indian government is strengthening the IT act, 2000 to provide a sound legal environment for companies to operate esp. related to security of data in transmission and storage, etc.Companies operating in Software Technology Park (STPI) scheme will continue to get tax-benefit till 2010.

(E)nvironmental

While discussing PESTEL analysis of Infosys Technologies Ltd. secondly I discuss economic aspect of PESTEL analysis of Infosys Technologies Ltd. The energy efficient processes and equipments that companies are focusing on reducing the carbon footprints, energy utilization, water consumption, etc.

PORTER’S FIVE FORCES MODEL (INDIAN IT INDUSTRY)

Threat of Substitutes:

While discussing the Porter’s analysis of Infosys Technologies Ltd. the very first point of discussion is threat of substitutes. Regarding threat of substitutes other offshore locationssuch as Eastern Europe, the Philippines and China, are emerging and are posing threat to Indian IT industry because of their cost-advantage. However, this should have an impact only in the medium to long term. Along with that pricequoted for projects is a major differentiator, the quality of products being same.

Bargaining power of supplier:

While discussing the Porter’s analysis of Infosys Technologies Ltd. the second point of discussion is bargaining power of supplier. Due to slowdown, the job-cuts, the layoffs and bleak IT outlook and supply of IT professionals is no longer that favorable to employees. Availability of vast talent pool that is fresher and experienced is also increase buying power of supplier.

Bargaining Power of Customers:

While discussing the Porter’s analysis of Infosys Technologies Ltd. the third point of discussion is power of buyers. Large number of IT companies vying for IT projects resulting in high competition for projects. On the other hand huge decline in IT expenditure: Indian IT sector is dependent on USA and BFSI in particular for majority of its revenues, and with the recent financial crisis, the new spending from these has reduced tremendously. However, for the existing products and services, the clients continue the old companies.

Barriers to Entry: Low

While discussing the Porter’s analysis of Infosys Technologies Ltd., the next point of discussion is a new entrant that isLow capital requirements and large value chain which provide space for small enterprises. Along with that MNCs are ramping up capacity and employee strength.

Rivalry among Firms: High

While discussing the Porter’s analysis of Infosys Technologies Ltd., the last point of discussion is rivalry among firms.Commoditized offerings, ‘low-cost, little-differentiation’ positioning, high industry growth and strong competitors like few numbers of large companies.

SWOT ANALYSIS OF INFOSYS

(S)TRENGTHS

• Leadership in sophisticated solutions that enable clients to optimize the efficiency of their business.
• Global and 24/7 delivery capability – excellent internet backbone and telecommunications facilities enabling companies to develop 24/7 delivery capabilities from India itself
• Commitment to superior quality and process execution – Infosys has quality standards such as CMM Level 5i to differentiate from other competitors
• Strong Brand and Long-Standing Client Relationships
• Status as an employer of choice
• Ability to scale
• Innovation and leadership.
• 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.

(W)EAKNESSES

• Excessive dependence on US for revenues – 67 % of revenues from USA.
• Excessive dependence on BFSI sector for revenues – 36 % of revenues from BFSI. Banking sector is facing a crisis globally and is going to spend less on IT.
• Weak player in domestic market. Only 1 % of revenues from India – low as compared to peers
• Low R & D spending as compared to global IT companies – only 1.3 % of total revenues
• Rising wage bill – 42.9 % to 44.8 % of revenues
• Low expertise in high end services like Consultancy and KPO.
• revenues to be hit hard for Infosys
• 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).

(O)PPORTUNITIES

• Domestic market set to grow by 20%.
• Expanding into new geographies – Europe, Middle East, etc
• Infosys is cash rich (Around US $ 1 Billion) – Acquiring companies to increase expertise in Consultancy, KPO and package implementation capabilities
• Opening offices and development centers in cost advantage countries such as those in Latin America and Eastern Europe.

(T)HREATS

• Intense competition in the market for technology services could affect cost advantages.
• High dependency on a small number of clients, and the loss of any one of the major clients could significantly impact business.
• Termination of Client contracts can typically be terminated without cause and with little or no notice or penalty.
• 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.

INFOSYS BCG MATRIX

INDIA

The Boston Matrix catalog occasion in collection which is total 4 groups, exposed on corporation of Market Growth and Market Share:

BCG MATRIX ANALYSIS OF INFOSYS TECHNOLOGIES LTD:

Dogs:

While discussing BCG Matrix for Infosys Technologies Ltd firstly Dogs are discussed. When market share as well as market growth both are low then the circumstances is known as dogs. If we apply this on Infosys Technologies Ltd none is applied under dogs.

Cash Cows:

While discussing BCG Matrix for Infosys Technologies Ltd. secondly cash cows are discussed. When market share is high and market growth is low then the situation is known as cash cows. Here, Infosys Technologies Ltd is this situation is applied on maintenance application and development software products.

Stars:

While discussing BCG Matrix for Infosys Technologies Ltd. thirdly Stars s are discussed. When market split and market enlargement both are high then the situation is known as stars. Here Infosys Technologies Ltd.BPO is come under stars.

Question Marks:

While discussing BCG Matrix for Infosys Technologies Ltd. fourthly and finally question marks are discussed. When market share is low and market growth is high then the situation is called question marks. Question marks are also known as problem child. Consulting KPO and package information are considered as question marks here.

McKinsey’s 7 S Model

Strategy

Infosys has adopted a client-focused strategy to achieve growth. Rather than concentrating on numerous small organizations, it concentrates on limited number of large organizations globally. In order to gratify its clients, the company stresses on custom-built software. Another contrasting factor for Infosys is that it commands premium margins. Company does not adjusts over margins beyond a certain point and sometime prefers to walk-out rather than compromise and adjust on quality for low-cost contracts. This has helped in establishing an image for quality driven model rather than cost-differentiating model.

• Increase business from existing and new clients
• Expand geographically
• Enhance solution set: Stresses on emerging trends, new technologies, specific industries and pervasive business issues.
• Develop deep industry knowledge
• Enhance brand visibility
• Pursue alliances and strategic acquisitions

Leadership Style

Infosys believes that leadership is one of the most primary and essential ingredients of organizational success which is provided by its Chairman, N R Narayanmurthy. Leadership is based on high business vision and prevailing supportive styles. There is attention on developing leadership qualities among employees. For this purpose, it has constituted “Infosys Leadership Institute”. Top management lays stress on open door policy, continuous sharing of information, takes inputs from employees in decision making, and builds personal empathy with employees.

Staff (Human Resources)

Since Infosys is in knowledge-based industry, it focuses on the quality of the human resources. Out of total employees of the organization, about 90 per cent are engineers. At the entry level, it lays stress on selecting candidates who find the company’s meritocratic culture satisfying, superior academic records, technical skills, and high level of learn ability. The company also stresses on training and development of its employees on constant basis and spends about 2.65 per cent of its profits on up gradation of employees skills, and around 50% as employee costs.

Shared Values

Values are essential part of Infosys’s organizational culture. In fact its tagline characterizes how much emphasis it lays on basic values.

The basic values are:

• Customer Satisfaction: A commitment exceeding customer expectations.
• Leadership by Example: A commitment to set principles in business and transactions and be an exemplar for the industry and teams.
• Integrity and Clarity: A commitment to be worthy, sincere and open in our dealings.
• Fairness: A commitment to be impersonal and transaction-oriented, thereby earning trust and respect.
• Quest of Excellence: A commitment to strive continuously, to regularly improve ourselves, our teams, our services and products so as to become the best.

Organizational Structure

The company has adopted a free form organization devoid of hierarchies. Everyone is known as assistant irrespective of his position in the company. Software development is undertaken through teams and the content of teams is based on the principle of flexibility. A member, who might have been team leader in one project, may be substituted with another member of the same team for another project. This system not only helps in developing the feeling of equality but also helps in developing project leaders.

Skills

From last year, Infosys has made it mandatory for every employee to clear a predefined certifications, domain as well as technical, in order to be eligible for appraisal. This is just one of the initiatives taken by Infosys which signifies the efforts taken for building competencies. Apart from internal initiatives like knowledge management, Infosys has been CMM-Level 5 certified for its process capabilities. Infosys has entered the Balanced Scorecard Hall of Fame for Executing Strategy for achieving breakthrough performance results using the Balanced Scorecard (BSC).

GRAND STRATEGIES

Ansoffs Matrix:

MARKET PENETRATION STRATEGY:

Current Markets: While discussing market penetration strategy the first point of discussion is current markets. For Infosys Technologies Ltd current markets are USA and Europe.

Products: While discussing market penetration strategy the second point of discussion is products. For Infosys Technologies Ltd products are ADM, BPO, KPO, consultancy services (in BFSI, manufacturing and retail) and software products (financial products).

Recommendation: While discussing market penetration strategy the third point of discussion is recommendation. For Infosys Technologies Ltd 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: While discussing market penetration strategy the last point of discussion is result of strategy. For Infosys Technologies Ltdthe result of strategy is unlikely to yield good results.

MARKET DEVELOPMENT STRATEGY:

New Market: While discussing market development strategy the first point of discussion is new markets. For Infosys Technologies Ltd new markets are India, Middle-east and Australia.

Current Product: While discussing market development strategy the second point of discussion is current product. For Infosys Technologies Ltd current products are ADM, BPO, KPO, consultancy services (in BFSI, manufacturing and retail) and software products (financial products).

Recommendation: While discussing market development strategy the third point of discussion is recommendation. For Infosys Technologies Ltd current markets 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: While discussing market development strategy the fourth point of discussion is result of strategy. For Infosys Technologies Ltd current markets are 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:

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 center for applied technology research in software engineering and enterprise technology. SET Labs conducted 24 Innovation Workshops with customers from the US and Australia, to identify research collaboration possibilities. Infosys promotes a favorable work environment that encourages innovation and meritocracy.

At the conclusion of this assignment I would like discuss the main points. 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.. this conclusion is based on the rigorous analysis and one can learn for the conclusion to expand into high end consulting. Consolidation and Strategic acquisitions are essential for future growth of revenues.Shift in focus from low cost advantage to high quality services. Quick adoption to high growth markets is necessary.