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Infosys Consulting In 2006 Ba401
1. Infosys Consulting in 2006 :
Leading the Next Generation of Business
and Information Technology Consulting
2. IT Service Industry : Overview
CAGR
7%
Fragmented market
• On-shore incumbents are
still larger: IBM, Accenture
• Off-shore players growing :
TCS, Wipro, Infosys
Technology
• 47% Annual growth
(2003 vs. 2004)
• Still 0.8% market share
3. Change in Customer Needs Change in Offerings
• More demanding in ROI
• Get more out of tech investment
• Rapid adaption /modification
• Specific point solutions
• Invest in new technologies on
faith and without strong links to
ROI measurements (Over-
purchase!)
• Off-shore IT services
• SOA (Service-oriented
Architecture) & Web services
• Applications as services
• Traditional enterprise application
packages
• Homogeneous infrastructure
IT Service Industry : Transformation
4. Infosys today is a global leader in the “next generation” of IT and Consulting
• Named India’s Most Respected Company in the Businessworld 2006
survey for the fourth consecutive time
• Adjudged “India’s Best Managed Company” in a study conducted by
Business Today and A.T. Kearney
• Forbes: “Infosys is a role model for companies everywhere in financial
transparency.”
• “Dream company to work for” in India and amongst the “100 best
places to work for in IT” in the US
• Amongst the first companies in world to be certified at CMMI Level 5
• BusinessWeek: Amongst the top 3 IT Services companies in the world
• Wired rated Infosys among its top 40 companies that have reshaped
the global economy.
Exceptional Financial Performance Increase in number of Active Clients Strong Growth in Employees
Revenue($M)
Employees
ActiveClients
6. Infosys is a global leader in Consulting and IT Services
Mejor empleador,
Mejor universidad
corporativa
Mejor gobierno
corporativo
Empresa mejor
gestionada
Líder en Tecnología
Bancaria
Recognition
Achievements:
USD 4bill. + global revenues (2008)
Europe represents over 25% of this figure
~ 32 billion USD market cap (NASDAQ:INFY)
Over 30% annual growth for the last 6 years
Global workforce of 100.000+
More than 450 clients, mostly Fortune 2000
companies
7 of the largest world companies are Infosys
customers
Over 87% of projects on-time on-budget
More than 90% recurring customers
Global leader in quality practices CMM5, 6-
Sigma, Malcolm Baldridge
7. Infosys is a global leader in Consulting and IT Services
199
284
389
551
775
1156
2002 2003 2004 2005 2006 2007
REVENUES FROM FINANCIAL SERVICES ($ M)
CAGR aprox.
40%
KEY FIGURES
More than 154 active clients (en su mayoría Global Fortune
2000)
More than 13.000 employees in 31 development centres
around the world
6 of the 7 largest US banks
4 of the 5 largest European banks
3 of the 4 largest Australian banks
Banking and
Capital Markets
Other Segments
37.8
%
37%
8. Infosys Technologies – Company Background
• Started in 1981 for $225
• Built up in 1980s and 90s through customized software
solutions, developed in offshore (Indian) development centers
• Also develops and markets software products
• Flagship product is ‘Finacle’, a modular banking solution
for retail, corporate and banks
• Grew mostly through new business contracts, acquisition of
smaller IT service providers, and alliances with larger
companies.
9. Infosys Technologies – Business Model
“The process of
breaking projects
down into their logical
components and then
distributing those
components to
locations (onsite,
nearshore,
or offshore) where
they can be delivered
at maximum value.”
Global Delivery Model
Definition
38 global development
centers
• 20 in India
• 18 in the US, the UK,
Australia, Canada,
China, Mauritius and
Czech Republic.
Lower Cost
Faster
Implementation
Lower Risk
Measurable
Vehicles
Modular Global Sourcing
Framework
Customer Value
1
2
3
Innovation
to Meet New
Customer
Needs
4
11. Infosys Technologies – Business Performance
Revenue by Industry Revenue by Geographic Market
12. Infosys Technologies – What are the Competitive Advantages?
Global Delivery Model
• Global development
centers
• Right Talents
Open/transparent &
performance-driven
culture
Excellent training
program
Customer
relationship
Flat organizational
structure
Right reward system
(stocks, career visions)
Domain
knowledge
Brand/
reputation
Abundant supply of
low-cost scientists and
engineers
Infosys Technologies
India
Cost & quality
advantage
coming from
GDM and low-
cost labor
13. Infosys Technologies –
Sustainable? : vs. Current Competitors
On-shore Incumbents Other Off-shore Players
• Trying to adapt GDM while
maintaining their existing
business model &
organizational structure
• Adding more off-shore
workforce through M&A
or expansion
• However…
• Can NOT completely migrate to GDM
because…
• It can jeopardize existing
businesses
• There is fundamental
organizational difference (i.e.
Hierarchic vs. Flat) which would
make it hard to attract right
talents for GDM
14. • Already offering the same
services by copying the
tangible part of business
model
• 24/7 services
• Global offices
• Competing for the same
talents
• However…
• Still behind Infosys in terms of
operational excellence because…
• Infosys’s core competency is
‘People’ and supporting system to
attract/keep talents
• Intangible assets and congruence
of the whole system are hard to
copy (e.g. Culture, HR,
reputation)
On-shore Incumbents Other Off-shore Players
Infosys Technologies –
Sustainable? : vs. Current Competitors
15. Gross
Margin
Net
Income
Margin
Infosys 42% 26%
Wipro 33% 19%
TCS 46% 22%
USD (Mil)
Performance Comparison
Infosys Technologies –
Sustainable? : vs. Current Competitors
On-shore Incumbents Other Off-shore Players
16. Infosys Technologies –
Sustainable? : vs. Potential Competitors
They are disruptive not only to incumbents but
to off-shore players
SaaS
Web 2.0
• Significantly easier &
faster implementation
• Very low up-front capital
investment
• User-focused, not buyer-
focused : self-service IT
• Very cheap or free funded
by Ad model
• No need to have
expensive IT service
providers
• Very low entry barrier
• Force incumbents to
change product &
pricing
Infosys’s competitive
advantages no longer
sustainable
17. Infosys Technologies – SWOT Analysis
Strengths Weaknesses
Opportunities Threats
Significance
of Impact
H High
M Medium
L Low
• Operational excellence to
deliver GDM
• Capability to attract &
keep talents
• Strong financial
• Strong relationship with
Large Corporations
• More cost/speed
conscious customers
• Market growth
• Higher awareness on off-
shore model
• Over-reliance on US
economy
• Limited position in value
chain (i.e. No presence or
relationship with
consulting business)
• Wage inflation due to
competition on talents
(15+% / year)
• Newer disruptive business
models (i.e. web services,
web 2.0)
H
H
H
M
M
M
H
M
L
L
M
18. IT Consulting Market Context & Structure
• Subset of overall IT services market
• Projected single-digit growth of 5%
• Largely fragmented market with 2 key segments:
• On-shore consulting and IT services players
(Accenture, IBM, Capgemini, EDS)
• Off-shore IT services players
(Wipro and TCS)
• Largest shares held by Accenture and IBM
19. Infosys Consulting – Company Background
• Started in April 2004 with initial investment of $20M
• Chose a wholly-owned subsidiary model
• Led by former leadership of Deloitte Consulting India
• Focused on the Global Delivery Model (GDM) and more cost-
competitive consulting rates
• Integrating the business consulting and technology
implementation lifecycles
• Engagements sourced from parent company and existing
client base of Infosys Technologies
20. Infosys Consulting – Company Organization
• Building a Unique Culture
• Recruiting the Right People
• Creating a Differentiated Approach
• Rewarding Employees
21. Infosys Consulting – Business Model
“Integrate the
business consulting
and technology
implementation
lifecycle. ‘1-1-3’
model gives one
client one ICI
resource onsite, one
Infosys Tech
resource onsite, and
3 Infosys Tech
resources offshore.”
“1-1-3” Model
Definition
• On-shore
management
consulting talent
•On-shore liasons
•Off-shore resources
Lower blended
rates
Faster
Implementation
Integration
Vehicles
“1-1-3”combined
with GDM
Customer Value
1
2
3
22. Infosys Consulting –
What are the Competitive Advantages?
“1-1-3” Model
•Blend on/off shore
•Cost efficient
Strong
operational
skills
Access to Infosys
Technologies clientsLarge supply of low-
cost IT/process
resources
Cost & speed
advantage
coming from
“1-1-3” and
GDM model
Unique,
blended model
Easier to
integrate
offshore with
onshore
23. Infosys Consulting –
ICI vs. Current Competitors
On-shore Incumbents Other Consulting Players
• Trying to adapt GDM while
maintaining their existing
business model &
organizational structure
• Adding more off-shore
workforce through M&A
or expansion
• However…
• Can NOT completely migrate to
GDM/”1-1-3” because…
• It can jeopardize existing
businesses
• May be brand equity erosion
24. ICI Experiencing Revenue Growth
Revenue (USD Mil)
$54
$36
$5.30
$0.00
$10.00
$20.00
$30.00
$40.00
$50.00
$60.00
FY05 FY06 FY07E
• High double-digit year on year
revenue growth
• Approximately 2/3rds of revenue
from the United States
• Key industries: Retail,
Transportation, High Tech, Banking,
Energy/Utilities
• Reflects steady growth in number
of clients:
• 25 clients in FY05
• 54 clients in FY06
• 89 clients in FY07
25. But Increasingly Dim Profitability Results
• Infosys still deems Infosys
Consulting to be in “investment
phase.”
• Potential causes:
•cheaper blended rates
•expensive on-shore resources
•Learning curve in managing
consulting business economics
Net Income & FCF
($8.10)
($9.40)
($28.20
)
($30.00)
($25.00)
($20.00)
($15.00)
($10.00)
($5.00)
$0.00
FY05 FY06 FY07
Net Income (Loss)
26. Infosys Consulting vs. Current Competitors
Operational Scale & Performance
On-shore Incumbents
Other Off-shore Players
ICI Accenture IBM BCS
Revenue ($M) $54 $11,856 N.A.
Employees 209 126000 60,000
ICI WCS TCS
Revenue ($M) $54 N.A. N.A.
Employees 209 5,000 34,000
Still a marginal player vis.a.vis
consulting units of both the
on-shore as well as off-shore
majors.
27. Infosys Consulting – SWOT Analysis
Strengths Weaknesses
Opportunities Threats
Significance of
Impact
H High
M
Medium
L Low
• Unique blended model
• Access to Infosys clients
• Strong in
operations
• More cost/speed
conscious customers
• Market growth
• Open up new segment of
market
• Low brand equity
• Inexperience with
consulting relationships
• Challenge attracting top
consulting talent
• Easy replicability of
model
• Increasing IBM/ACN
presence in India
• Culture clash with Infosys
Technologies
H
M
M
M
H
M
H
M
M
M
M H
28. Infosys Consulting: Cost or Profit Center?
Key
Challenges
Needed
Responses
• Approaching profitability or break even
• Collaborating effectively with Infosys Technologies
• Impending replication of ICI business model by others
• Find firm, differentiated place in industry value chain
• Revisiting pricing and/or cost structure
• Integrate client management with Infosys Technologies
• Use ICI to monitor client trends & the “next big thing.”
• Capitalize Infosys “flat world” aura to achieve positioning
What is ICI’s place in the Infosys Technologies Portfolio?
29. Moving forward… : Infosys’ Strategy
Infosys should leverage ICI ,
1) To strengthen its position in current market, and
2) To prepare for further industry transformation
ICI Infosys Technologies
More Value
from Existing
Customer
Base
Strategic
Alliance with
Emerging
Competitors
• More wallet share from
current customers
• Integration rather than
expansion
• Stronger relationship through
involving higher-level decision
making
• Provide more agile and
customized solutions
• Antenna to sense changes in
the market
• Influence customers’ strategic
moves
• Relationship building with
emerging players
• Acquire them as customers or
partners
• Develop capabilities to offer
right services/products in the
long-term
