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The Next 5 Years: A Successful Strategy for Infosys
The Next 5 Years: A Successful Strategy for Infosys
The Next 5 Years: A Successful Strategy for Infosys
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The Next 5 Years: A Successful Strategy for Infosys

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  • 1. TBR T E C H N O L O G Y B U S I N E S S R ES E AR C H , I N C . TBR COMMENTARY The Next 5 Years: A Successful Strategy for Infosys Patrick M. Heffernan (patrick.heffernan@tbri.com), Senior Analyst Bozhidar Hristov (bozhidar.hristov@tbri.com), Research Analyst Oct. 10, 2013 Infosys wants to change. Founder N.R. Narayana Murthy’s return to leadership last spring signaled Infosys’ willingness to change directions; the question is, will it work? Can the firm find a strategy that moves it closer to IBM and Accenture and widens any positive gaps between Infosys and its India-based peers? In July, after resuming his role as executive chairman, N.R. Narayana Murthy said the following about Infosys’ future: “The strategy is to focus on opportunities from consulting-led end-to-end solutions, leveraging technology for higher margins, developing intellectual property-based solutions to delink revenues from effort.” Murthy set three broad goals — improving sales efficiency, increasing automation and boosting employee productivity, and rationalizing cost — but early indications show Infosys making the third goal its priority as the company has been moving to a substantial onshore/offshore ratio shift. Currently at a 35-to-65 ratio, Infosys’ goal is a 10-to-90 ratio weighted to low-cost resources, ultimately to preserve margins as the company refocuses on large low-cost outsourcing engagements. After setting policy, Murthy oversaw executive-level personnel changes, letting go the leaders who had been in charge while Infosys’ India-centric peers outpaced the company (see following chart). Murthy kept some key initiatives, including Infosys 3.0, which could determine how close Infosys moves to market leaders Accenture and IBM. Launched in 2011, Infosys 3.0 is a long-term growth accelerator, especially as it melds transformational consulting with emerging technologies. However, Murthy and his new team must provide time and support, both in building the 3.0 engine and focusing on low-end commoditized engagements. TBR believes Infosys must take three strategic steps to achieve its long-term goals in current market conditions:
  • 2. TBR  Build up nearshore Americas capacity and capabilities Infosys needs to serve the U.S. market better, either with resources on the ground in the U.S. or nearshore in Latin America. The potential growth for any IT company in the U.S., Canada, Mexico and Brazil demands a substantial investment, and India-centric firms cannot rely on the vagaries of the U.S. visa system. Infosys tried to hire mid- to senior level, U.S.-based consultants in the 2000s, but the effort stalled when the company could not find the right people or receive permission from clients to engage in higher-level consulting work. Infosys opened a 200-person BPO center in Atlanta and a 100-person delivery center in Costa Rica in 2013; however, the company still lags in this critical market relative to peers.  Acquire consulting capacity in Europe Infosys can continue to serve European clients with outsourcing services based nearshore (in lower-cost European countries such as the Czech Republic and Poland) and offshore, but if Infosys wants to shift its consulting/outsourcing revenue ratio from 35-to-65 to closer to 50-to50, the company must gain more wallet share from EU clients. Infosys recognized the need to move upstream in Europe when it purchased Lodestone in 3Q12 and committed to reorganization on the continent in 2013, but the company must continue acquiring talent that buys permission to play in the management and technology consulting space.  Invest in IP Global leaders Accenture and IBM separate themselves from Infosys and its peers with IT innovation, bringing together strategy and emerging technologies to create tech-enabled solutions specific to customers’ needs. Infosys started down this path through the development of its Edge Platform suite, including BigData Edge, a comprehensive cloud-based offering for aggregating, analyzing and processing analytics data from internal and external sources; but absent a sustained strategic approach through customer-centric, acquisition-enabled or research-driven IP, the company risks seeing commoditization strip out every difference between Infosys and its India-centric peers. (Total global revenue of all four firms grew from 2010 to 2012, but Infosys’ share of that group’s revenue fell from 25% to 23%.) www.tbri.com pg. 2
  • 3. TBR Would this strategy work? Murthy wants change; if he wants successful, sustained change, he needs a strategy that tackles Infosys’ weaknesses — lack of breadth and scale to compete with Accenture and IBM, and a less aggressive acquisition pace relative to India-based peers — and plays to Infosys’ strengths in brand, innovation and cash on hand. Infosys also needs to decide if it is a global services vendor with a core presence in the U.S., or if the 10-to-90 onshore/offshore ratio is a long-term play to make India a profitability center, not just a resource pool. TBR will publish initial findings on Infosys’ quarterly earnings in its 3Q13 Infosys Initial Response report on Oct. 11, 2013. TBR also will include Infosys in the October 2013 edition of TBR’s Global Delivery Marketplace Landscape. Follow Patrick Heffernan and Boz Hristov on Twitter at @TBR_PatrickH and @boztbr, respectively, to learn more about their research and opinions on the global delivery market. Contact Alison Crawford, senior marketing manager, at alison.crawford@tbri.com or James McIlroy, vice president of sales, at mcilroy@tbri.com for more information on TBR’s professional services research. Technology Business Research, Inc. is a leading independent technology market research and consulting firm specializing in the business and financial analyses of hardware, software, professional services, telecom and enterprise network vendors, and operators. Serving a global clientele, TBR provides timely and actionable market research and business intelligence in a format that is uniquely tailored to clients’ needs. Our analysts are available to further address client-specific issues or information needs on an inquiry or proprietary consulting basis. TBR has been empowering corporate decision makers since 1996. For more information please visit www.tbri.com. ©2013 Technology Business Research, Inc. This report is based on information made available to the public by the vendor and other public sources. No representation is made that this information is accurate or complete. Technology Business Research will not be held liable or responsible for any decisions that are made based on this information. The information contained in this report and all other TBR products is not and should not be construed to be investment advice. TBR does not make any recommendations or provide any advice regarding the value, purchase, sale or retention of securities. This report is copyright-protected and supplied for the sole use of the recipient. Contact Technology Business Research for permission to reproduce. www.tbri.com pg. 3

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