Infosys Consulting In 2006 Ba401


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Infosys Consulting In 2006 Ba401

  1. 1. Infosys Consulting in 2006 : Leading the Next Generation of Business and Information Technology Consulting
  2. 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. 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. 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($M) Employees ActiveClients
  5. 5. Applying GDM+ across the services spectrum FY01 FY02 FY03 FY04 FY05 FY06 June 10, 2006 © Infosys Technologies Limited 2005-06 41.1% Application Development and Maintenance Management Consulting Business Process Management IT Outsourcing Systems Integration Enterprise Solutions Technology Consulting Technology-enabled BPR Software Re-engineering People Organization Infrastructure Process Quality Infosys Global Delivery Model 2006 2001 1981 1996 * New services is defined as services other than Application Development, Maintenance, Re-engineering and Products New services* as % of revenue 37.7% 35.4% 29.6% 24.9% 22.8%
  6. 6. Infosys is a global leader in Consulting and IT Services Mejor empleador, Mejor universidad corporativa Mejor gobierno corporativo Empresa mejor gestionada Líder en Tecnología Bancaria Recognition Achievements:  USD 4bill. + global revenues (2008) Europe represents over 25% of this figure  ~ 32 billion USD market cap (NASDAQ:INFY)  Over 30% annual growth for the last 6 years  Global workforce of 100.000+  More than 450 clients, mostly Fortune 2000 companies  7 of the largest world companies are Infosys customers  Over 87% of projects on-time on-budget  More than 90% recurring customers  Global leader in quality practices CMM5, 6- Sigma, Malcolm Baldridge
  7. 7. Infosys is a global leader in Consulting and IT Services 199 284 389 551 775 1156 2002 2003 2004 2005 2006 2007 REVENUES FROM FINANCIAL SERVICES ($ 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. 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. 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
  10. 10. Infosys Technologies – Business Performance CAGR 43% CAGR 45%/30% 33% 33% 32% 32% EBITDA Margin %
  11. 11. Infosys Technologies – Business Performance Revenue by Industry Revenue by Geographic Market
  12. 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. 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. 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. 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. 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. 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. 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. 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. 20. Infosys Consulting – Company Organization • Building a Unique Culture • Recruiting the Right People • Creating a Differentiated Approach • Rewarding Employees
  21. 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. 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. 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. 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. 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) $0.00 FY05 FY06 FY07 Net Income (Loss)
  26. 26. Infosys Consulting vs. Current Competitors Operational Scale & Performance On-shore Incumbents Other Off-shore Players ICI Accenture IBM BCS Revenue ($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. 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. 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. 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
  30. 30. Thank You Q&A