Infosys growth strategy - a case analysis

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Achal Raghavan's case analysis (along with those from other authors) published in Vikalpa (the IIM Ahmedabad journal) in Oct-Dec 2007. Deals with the challenges faced by Infosys in transitioning from low-end system maintenance jobs to high-end consulting / solutions projects. The analysis includes a strategy recommendation. Though published several years back, the analysis is especially relevant now, when the "Infosys 3.0" growth strategy is under increasing scrutiny.

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Infosys growth strategy - a case analysis

  1. 1. Case Analysis IJanaki AnantPrincipal Solution Architecti-flex solutions Ltde-mail: janaki.anant@iflexsolutions.comThis case has multiple dimensions of analysis to it. While there is certainlyan immediate short-term issue of winning the Ariba® e-procurement projectof the existing client, Prairie Four Square (PFS), and gaining an increasedshare of the customer’s business that the Infosys team is trying to address, thereis also an overall long-term strategic issue that needs to be addressed as well – thatof the pricing mechanism based on value that needs to be deployed for long-termsustainability and growth of the relationship. This case offers an insight into thevarious dimensions of moving up the value chain and increasing the economic valueof a customer relationship, identifying the differentiation strategy, communicatingthe positioning effectively, and the impact of local competition in the global scenario.The case also effectively illustrates the general growth path followed by most Indiansoftware services companies, the issues they face in this progression, the changingscenarios in the global competitive arena, and the relentless pressure to lower costsin a diminishing labour cost arbitrage advantage scenario.The Case Context: An OverviewInfosys Technologies Ltd. is a $2,979 million company, headquartered in Bangalore,India, providing full range of software services to a global clientele. A highlyrespected company in the Indian IT services space, Infosys employs over seventytwo thousand employees, and has been instrumental in building “Brand India” inthe global IT services space.Infosys evolved from inception in 1991 to become a giant in 2007, in four clearstages. Starting with an opportunistic mindset of leveraging global labour arbitrage,the company progressed into providing end-to-end solutions, and further on toInfosys Technologies Ltd.: GrowingShare of a Customer’s BusinessJames A Narus and D V R SeshadriDIAGNOSESpresents analyses of themanagement case byacademicians and practitionersThe April-June, 32(2),2007 issue of Vikalpahad published aManagement Case titled“Infosys TechnologiesLtd.: Growing Share of aCustomer’s Business,” byJames A Narus and DVRSeshadri. This issuefeatures responses on thecase by Janaki Anant,Achal Raghavan, AvinashMulky, Sudip Nandy,Shlomo Maital, andZillur Rahman.123VIKALPA • VOLUME 32 • NO 4 • OCTOBER - DECEMBER 2007 127127
  2. 2. domain excellence in the chosen business verticals (Fig-ure 1).Infosys has been associated with PFS for over fiveyears. In fact, PFS is one of its key customers. Infosyshas over 65 major contracts with it for IT maintenanceservices. PFS is a $27 billion company in the US, pro-viding insurance solutions in life insurance space andinsurance products for individual and group life, inaddition to other long-term care and disability insuranceproducts. It makes extensive use of IT to conduct itsbusinesses and uses the outsourcing model for theseservices. Its preferred ‘best of breed‘ approach awardscontracts to organizations most competent in the speci-fied area of work.In response to increasing market pressures to re-duce costs, PFS has embarked upon a pilot test of ‘solesourcing’ as opposed to its preferred approach. This wasbased on the premise that total cost of ownership wouldreduce due to reduction in downstream costs. The Ariba®e-procurement project is the one for which PFS is seekinga single vendor to handle the customization, implemen-tation, and post-implementation support and mainte-nance.Infosys–PFS Customer Relationship StatusThe following parameters of the strength of Infosys’relationship with the customer are evident from the case:• In the minds of PFS’ key decision-makers, (CIO,Robert Peters, from the IT side, and Purchasing VicePresident, Kay Bryan, from the business side), In-fosys has a very positive image.• Infosys has been acknowledged to have moved froman ‘unknown commodity’ to a trusted service pro-vider in the IT maintenance services area.• PFS is satisfied with the quality of the deliverablesthus far, by Infosys.• On all the key measurement criteria of PFS, Infosyshas exceeded the customer expectations. (Exhibit 2of the case)• PFS has pro-actively invited Infosys to quote for theJAVA-based Ariba® e-procurement system.The expectations from PFS, with respect to the projectproposal presentation were also quite well-articulated.These can be summarized as follows:• The competition is from two leading IT consultingfirms, Merrimac and Excalibur, who are also theexisting service providers, in the high-end consult-ing space.• Although US-based, these companies are setting updevelopment centres in India, and are thus capableof deriving the same cost advantages as Infosys.• There is an organization-wide drive in PFS, to reducecosts significantly; so, price will be a crucial deci-sion parameter.• Infosys will need to demonstrate capability to handleend-to-end solutions.KEY ISSUESInfosys PerspectiveWhile there are a host of issues that are faced by theInfosys PFS team, the overarching question is:How can Infosys present a compelling case to winthe deal without reducing their cost-plus targets?The associated issues that would need to be ad-dressed are:• No prior experience in the insurance space in theimplementation of Ariba®.• Possibility of competitor pricing being similar tothat of Infosys, given that this would be a predo-minantly ‘on-shore’ engagement.• While the current need is for end-to-end solution,IT maintenance services are what Infosys has beenoffering to PFS over the past five years. What is thebest way to demonstrate their capability in the end-to-end solution space, specifically in the high-endarea of consulting where competition has a distinctadvantage?• The unstated issues typically faced by Indian soft-ware companies. While Indian software companiesare perceived to be good outsourcing destination for124Desired positionwith Ariba projectCurrentposition at PFSGlobal labor arbitrageIT MaintenanceContractsEnd to EndSolutionsDomains ofExcellenceGreater Value-additionFigure 1: Stages of Infosys’ Evolution128 INFOSYS TECHNOLOGIES LTD.: GROWING SHARE OF A CUSTOMER’S BUSINESS128
  3. 3. labour arbitrage for the low-end services , therecould be potential issues arising out of outsourcinghigh-end strategic services such as consulting andsoftware design, given the perception that theseservices need a deeper understanding of the localcontext, and as such are best handled by localcompanies.PFS PerspectiveFrom a PFS perspective, the e-procurement project wouldbe a pilot project for testing the waters for sole sourcingend-to-end IT projects vs. the best of breed . The futureIT outsourcing strategy of PFS would hinge upon thesuccess of this project. In addition to price competitive-ness, PFS would therefore look for compelling evidenceof advantages of ‘sole sourcing.’Value AnalysisThe case clearly brings out the following four areaswhere Infosys has added demonstrable and quantifiablevalue through cost savings.Re-Engineering Project AssignmentsThis was a major accomplishment, in which five majormaintenance projects for PFS were redesigned, and theonsite-offshore resource mix was not only optimized,but also the resources were rationalized to achieveimproved productivity. The total quantifiable cost sav-ings on account of this were to the tune of $12,96,000.This achievement clearly illustrates how Infosys hasgone beyond just offshoring to increased efficiencies andeffectiveness in addition to being able to consolidate andhave a relook at the assignments.The graph below (Figure 2) shows the cost savingsand Table 1 shows the computational basis for the costsavings.Data Corruption Prevention SubroutineThis is another critical area where cost savings can beachieved through good diagnostic skills and solutionimplementation—The PFS batch system running after 5a m and the consequent data corruption events beingeliminated by Infosys identifying the problem, writing,and successfully implementing a system shutdownsubroutine.The pre- and post-scenarios of writing and imple-menting the subroutine and the associated costs are asshown in Table 2.Record Comparison AlgorithmInfosys team proactively wrote an algorithm that sig-125$24,000,000$24,000,000 $-$16,800,000 $7,200,000$11,040,000 $5,760,000$11,040,000 $-$- $5,000,000 $10,000,000 $15,000,000 $20,000,000 $25,000,000Year 1Year 2Year 3Year 4Year 5Total CostsCost Savings over previous yearFigure 2: Reengineering Project Assignments—Cost SavingsVIKALPA • VOLUME 32 • NO 4 • OCTOBER - DECEMBER 2007 129129
  4. 4. nificantly improved the record comparison efficiency by56 per cent and also reduced the processing time. Con-sidering that end of month is a critical time for a lot ofactivities, this release of CPU time could be used forsome other jobs.Given that a delay in regulatory reporting attracteda heavy penalty of approximately $360,000, the increasedefficiency reduced the probability of delay to just about1 per cent. While the available data does not lend itselfto proper quantification of the savings, one could ap-proximate it to $3,600 per month or $43,200 per annum.(computed as $360000*.01*12)This clearly demonstrates the commitment of Infosysin adding value proactively, as well as its capability toimprove and fine-tune process efficiency.Reduction in Disability Claims ReservesThe Infosys team re-engineered and automated somemanual processes in claims submissions, and payments,and streamlined the entire claims process. This resultedin a reduction of the claims reserves.While the data available is not adequate to comeup with any concrete numbers in cost savings, one couldsafely estimate that given the cost of capital at 10 percent, the reduction of $14,00,000 in reserves could createa saving of $1,40,000.What Infosys team demonstrated once again is theirability to re-engineer and streamline a business process.RecommendationsClearly, Infosys has delivered significant value in therelationship, much beyond the contractual terms. Thevalue proposition of Infosys and the proposal presen-tation should be predicated on bringing out the follow-ing points in a compelling manner:• Consistently high performanceDemonstrated by not just ‘meeting’ but ‘beating’customer performance targets on the three vitaldimensions of quality, timeliness, and reliabil-ity.• Customer commitment and delivery of valueDemonstrated by quantifiable cost savings inexcess of $13 million, over the five years ofrelationship• Pursuit of increased productivity at all times throughResource rationalizationRemoval of process inefficiencies• Organizational capabilities of providing end-to-endsolutionsExperience in other accountsCustomer testimonials in the other Ariba imple-mentations• People and process strength in JAVA• Globalization of their workforce and access to ex-pertise.To effectively address the concern of PFS on Infosys’ability to stretch and move up from maintenance ser-vices to more high-end consulting and process engineer-ing services, Infosys should illustrate effectively, howit has, in a limited yet powerful way, brought these skillsto board in each of the key accomplishments (Table 3).Further, Infosys could propose “Pilot” / “Proof ofConcept” approach to demonstrate the capability, to-gether with a pricing model and payment terms that are126Table1: Basis for ComputationYear Onsite Offshore Onsite Offshore Total Cost Savings overResources Resources Costs ($) Costs ($) Costs ($) Previous Year ($)Year 1 250 0 24,000,000 - 24,000,000Year 2 250 0 24,000,000 - 24,000,000 -Year 3 75 250 7,200,000 9,600,000 16,800,000 7,200,000Year 4 75 100 7,200,000 3,840,000 11,040,000 5,760,000Year 5 75 100 7,200,000 3,840,000 11,040,000 -Total Cost Savings 12,960,000FTE cost onsite FTE cost offshoreper annum ($) 96,000 per annum ($) 38,400Table 2: New Subroutine ImplementationBefore AfterNo. of corruption events 24 0PFS hours idled [ 125*4*24] 12,000 0Programmer repair hours [ 3*4*24] 288 0Technical assistant repair hours [ 1*1*24] 24 0CPU time in seconds [ 15*24] 360 0Cost savings ($)PFS staff Idle time ($) 504,000Programmer hours ($) 12,960Technical assistant hours ($) 960CPU time ($) 140.40Total cost savings 518,060130 INFOSYS TECHNOLOGIES LTD.: GROWING SHARE OF A CUSTOMER’S BUSINESS130
  5. 5. predicated upon the success of the “Pilot” module. Thiswould demonstrate Infosys’ commitment and confidence.Infosys should move up from “transaction selling”to “consultative selling” and instead of reducing itsThe “Value Chain” ImperativeIn many ways, this case is representative of the strategiccrossroads at which the Indian IT industry leaders findthemselves today. They clearly realize the need to climbthe value-chain, and break free from the commoditiza-tion that has inevitably taken place in the offshore out-sourcing and IT maintenance markets. They have beensuccessful so far in leveraging the cost arbitrage thatIndian manpower provided them; but rapidly escalatingwages in India, emerging shortages in talent, and thestrengthening rupee exchange rate have all combined tomake that model incapable of providing aggressive futurebusiness growth which is in line with past performance.The Indian IT giants now need a strategy to repo-sition themselves as firms which can play competentlyall across the value chain – from high-end consulting (ofthe Excalibur and Merrimac kind), down to “gettingtheir hands dirty” with maintenance jobs. Industryhistory is against them; customers like PFS have longfavoured the “horses for courses” approach – workingon the basis that the thorough-bred (and expensive) racehorses at the high end cannot (and should not) be usedfor “hauling the bulk load” of IT maintenance, whichis apparently best left to the mules of the industry.127Table 3: Key Accomplishments and BenefitsAccomplishments Benefits Skills DemonstratedReengineering project assignments Cost savings through increased Resource rationalization andproductivity rather than just offshoring productivity improvementData corruption prevention subroutine Cost savings through reduction in down time Problem diagnosis, analysis, and resolutionReduction in disability claims reserves Reduction in cash reserves Process re-engineeringRecord comparison algorithm Timely submission and release of Process improvement and fine-tuningend-of-month CPU timemargins in order to win the deal, should show the valuein quantifiable terms and all the other long-term benefitsthey bring to board and position themselves as “part-ners” rather than as an “outsourcing vendor.”Case Analysis IIAchal RaghavanVice President – Business DevelopmentSundram Fasteners LimitedBangaloree-mail: achalraghavan@yahoo.co.inThis case deals with the challenge Infosys is facingin terms of convincing its customer—Prairie FourSquare Insurance (PFS)—to entrust it with thecustomization, installation, and maintenance of a Java-based Ariba® e-procurement system. This project is atypical value-added, “end-to-end solution” assignmentthat Infosys would love to get its hands on, involvingboth consulting expertise and day-to-day operationalexcellence.Infosys has already established its credibility withPFS as an outstanding IT maintenance service provider,but has no track record with them as a “solution” pro-vider. It is competing with Merrimac Consulting andExcalibur Consulting – both of whom are leaders in theoperations consulting domain, and are among the top15 consulting firms worldwide. But they suffer from theconverse weakness – i.e., they do not have any experi-ence in IT maintenance, which is Infosys’ area of strength.Infosys now has to figure out a strategy and acommunication plan, aimed at convincing PFS thatInfosys can be entrusted with this critical high-end e-procurement project. Success in this project will unlocktremendous potential for larger jobs within PFS, and alsoact as a launch-pad for winning similar jobs with othercustomers. It is, therefore, a bid of high strategic signifi-cance for Infosys.VIKALPA • VOLUME 32 • NO 4 • OCTOBER - DECEMBER 2007 131131
  6. 6. The “Expanding the Pond” ImperativeRam Charan and Noel Tichy, in their excellent book,Every Business is a Growth Business1, have talked ofcompanies expanding their market (or “pond”) by look-ing out constantly for the emerging new needs of theirexisting, and new customers. They argue that this is thebest way for companies to ensure continuous and pro-fitable growth. If the companies continue to play in thefamiliar “current customers’ current needs” quadrant,they will inevitably succumb to commoditization andpricing pressures, and die.In this particular case, PFS has found that it needsa radical overhaul of its procurement practices andprocesses, in order to reduce costs and grow its businessprofitably. This is a “new need” felt by PFS, and Infosys,by virtue of its excellent track record in fulfilling thecustomer’s existing need for IT maintenance, has beeninvited to bid for the e-procurement project. If it suc-ceeds in this bid, Infosys would succeed in “expandingthe pond,” paving the way for future growth with PFSand other customers.The Challenge: “Strategic Repositioning”How does Infosys go about achieving a strategic repo-sitioning of its competencies in the eyes of Prairie FourSquare Insurance? Kay Bryan, Purchasing VP at PFS,says Infosys is delivering “outstanding maintenancework.” But she, and Robert Peters, CIO, PFS, need tobe convinced that Infosys can “handle the strategic andconceptual consulting portion” of the project. In a con-verse manner, they also wonder if Merrimac or Excaliburcan handle the maintenance portion, while they can dojustice to the consulting portion.Clearly, the tasks ahead for Infosys are the follow-ing:• Reinforcing the positives of the current brand equitywith PFS – as a maintenance expert• Putting across a compelling case which addressesall the anxieties of PFS with respect to Infosys’consulting capabilities.If Infosys succeeds in doing this, other things beingequal, its familiarity with the inner workings of PFS, thecredibility built over the years as “people who deliver,”and the working relationships established with variousPFS functions ought to swing the decision in its favour– assuming, of course, that the pricing is competitive.From PFS’ perspective, it is clear that while pricing isimportant, it is the end-to-end competencies which wouldultimately influence the choice of the vendor.The Strategic “Sales Pitch”Let us now look at the key elements of Infosys’ strategic“sales pitch” – the core communication, or “mantra”,that Rahul and Jaspal need to highlight in the criticalmeeting with Robert Peters and Kay Bryan just threeweeks away. What should be their overall communica-tion strategy?Here are the core elements of the “sales pitch”:Infosys’ evolution: Start with a crisp summarization ofthe four phases of Infosys’ evolution (or development)as an organization, each representing a “distinct marketoffering and value proposition”:• The first phase was during the 1980s – when Infosysrelied on the classical offshore outsourcing model,leveraging on the labour arbitrage available in India.• The second phase, in the early 1990s, saw Infosysmove up the value chain to maintenance contractsfor legacy systems. This included the programmingwork required to take care of the much-spoken about“Y2K” (Year 2000) doomsday scenario.• The third phase, in the late 1990s, was the periodwhen Infosys truly focused on the high-value “so-lutions” end of the business – offering consultativeservices such as design, customization, businessprocess reengineering, and installation.• The fourth (and current) phase is where Infosys ismoving further up into a high level of domain knowl-edge for specific industries – where Infosys is ableto leverage on its knowledge to offer highly custom-ized solutions. Typically, Infosys has been concen-trating on segments like insurance, healthcare, andretailing – where IT applications are crucial to theclient’s survival and growth.The key communication objective behind this intro-ductory pitch is to convince PFS that high-end consult-ing solutions are nothing new to Infosys; that the com-pany has been operating in this domain for nearly adecade; and that the e-procurement project that PFS isconsidering now is something akin to what Infosys hasbeen doing in the third phase of its evolution – from thelate 1990s.In short, PFS is not going to be the guinea pig forInfosys to practise on. More importantly, PFS can take1281Charan, Ram and Tichy, Noel M (1998). Every Business is a Growth Business,New York: Three Rivers Press.132 INFOSYS TECHNOLOGIES LTD.: GROWING SHARE OF A CUSTOMER’S BUSINESS132
  7. 7. comfort from the fact that Infosys has already beenfocusing on Insurance as one of its growth avenues forthe past several years.The competency pyramid: Represent (to PFS) the mix ofcompetencies required to do justice to the e-procurementproject as a pyramid with three layers; link each layerpowerfully with a corresponding strategic businessrequirement of the customer:• The bottom layer is the ability to design and set upa system which can maintain and process hugevolumes of data with fail-safe measures against abreakdown or data loss. Remember that PFS, as aninsurance company, depends on its ability to “pro-cess, analyse, and act upon tremendous amounts ofdiverse data on an ongoing basis”.• The middle layer is the ability to re-engineer existingmethods and processes, in order to respond to thecustomer faster, and at a lower cost. Remember thatPFS’ founder Stephen Neely and his partners builtthe company’s insurance business by “offering fairprices, personalized and friendly service, and promptand equitable resolution of all claims”. In the highlycompetitive insurance industry, PFS can only sur-vive and grow through relentless introspection, andcontinuous improvement in its speed of responseto customers.• The top layer is the capability to add value as aconsultant and business partner, who will help PFSsucceed in its business (insurance) through insightson emerging customer needs, benchmarking, andsaving money for PFS through operational optimi-zation techniques.The stability of the pyramid: Emphasize the fact thatthe stability of this pyramid primarily depends on therobustness of the bottom layer (huge volumes of data, tobe processed through fail-safe systems). If that layer is shaky,or if it crumbles under the weight of customer demands,the whole business model of PFS will be in jeopardy.An insurance company with data integrity issues is asgood as a plane flying with zero visibility, and all cockpitinstrumentation showing suspect readings. The middlelayer (reengineer for faster response, at lower cost) is thenext layer of stability, which depends on the robustnessof the data base below. The top layer (strategic consul-tancy and partnership) depends on the stability andstrength of the two layers below for its very existence.The top layer is clearly a vital competence – but for thelong term. The idea behind this portion of the pitch isto remind PFS that ground-level competencies are vitalto successful implementation of high-level strategies.The real life success stories: For each layer of this pyramid,illustrate Infosys’ suitability and competence with real-life examples from its work done in the past for PFS,or some other client. For example, Infosys has success-fully delivered results beyond PFS’ expectations in fivemajor re-engineering projects in the past. It has gonebeyond mere “offshoring” and has delivered improvedemployee productivity. Provide vital case data to rein-force this achievement. Focus also on some of the otherkey projects from the past – the data corruption preven-tion subroutine, the record comparison algorithm, re-duction in disability claims reserves, etc. In each case,show Infosys‘ exceeded customer expectations’ andadded value through the creative thinking of its people.The “rolling start”: Emphasize the advantage Infosysenjoys over Merrimac and Excalibur, in terms of its deep“insider’s knowledge” of PFS’ systems and processesfrom the past years of association. This familiarity trans-lates to zero time wastage in acclimatization, and a“rolling start” to the project. This means huge savingsto PFS.The right emphasis: Avoid over-emphasizing the excel-lent past track record in IT maintenance at PFS; this isalready a “given” as far as PFS’ evaluation of Infosysis concerned. Dwelling excessively on that domain willreinforce PFS’ concerns about Infosys’ ability to handlethe consulting end of the project, thereby sabotaging itschances of winning the order.Focus instead on the specific steps Infosys has beentaking to strengthen its in-house consulting talent poolin this domain. In the words of Robert Peters, the CIOat PFS, Infosys has been “hiring well-seasoned peoplefrom the top consulting firms as well as from the topMBA programmes worldwide.” Infosys has also been“bolstering their consulting resources and in-house train-ing”. Provide specific details of these steps, to giveconfidence to PFS that Infosys means business, and isconstantly working on enhancing its all-round capabi-lities. At an individual level, Rahul, the Infosys Engage-ment Manager, has acquired a decade of work experi-ence in Excalibur. Mention this fact at an appropriateplace.Execution excellence: Provide in-depth detail on howInfosys plans to organize its team both in the US andin India to work on this e-procurement project. Focuson the people and their track record and competencies.129VIKALPA • VOLUME 32 • NO 4 • OCTOBER - DECEMBER 2007 133133
  8. 8. IT solutions, ultimately, are people-intensive projects.Seeing is BelievingBy good coincidence, Laura Ewing, President, PFS, isvisiting Infosys at Bangalore shortly, along with a ven-dor management team. Lalitha, the Infosys DeliveryManager for PFS, is on the right track when she talksabout taking advantage of this visit to give PFS a com-plete tour of Infosys—its world-class training facilities,specific examples of JAVA projects executed in the past,and meetings with Infosys personnel with consultingexperience. Seeing, after all, is believing – even in therarefied atmosphere of IT consulting.ConclusionThis case brings out in good detail the nuances in-volved in large companies in the IT field moving upthe value chain. The Infosys example can very easilybe extrapolated to other Indian IT giants who are alsojockeying for a slot in the global consulting arena. Theexisting consulting firms of long standing would doeverything they can to prevent the entry and growthof the hungry newcomers. Success would ultimatelyaccrue to those companies which deliver lasting valueas partners, by helping their customers succeed in theirend markets.130Case Analysis IIIAvinash MulkyProfessor, MarketingIndian Institute of Management, Bangaloree-mail: avinashgm@iimb.ernet.inThis case describes an opportunity that InfosysTechnologies Ltd., has received, to bid for a newproject involving an end-to-end solution in thee-procurement area with one of their major currentclients—Prairie Four Square Insurance (PFS) — a large,US-based insurance company. Five years ago, PFS hadselected Infosys as a sole supplier for outsourcing ITmaintenance and had awarded it three pilot contracts.The contracted work involved routine tasks such ascleansing corrupted data, correcting software flaws, andrunning programme and system tests. Infosys hadperformed so well in these initial projects, that over thenext five years, it had received a total of 65 contractsfrom PFS which covered higher value maintenance worklike application development, business process reengi-neering, installation of some packaged solutions, etc.Although Infosys had an excellent reputation at PFS inthe area of maintenance projects, it had yet to make anentry into the prestigious, high margin, end-to-end“consulting” projects with this client. PFS had hithertofavoured a “best of breed” approach under which itawarded IT systems work only to those firms that itperceived as the most competent in the concerned cat-egories (system analysis, design, installation, and main-tenance).During the past few months, an internal white paperat PFS had pointed out that the company’s purchasingsystems and activities required urgent streamlining asthe costs of order processing at PFS were way above theindustry average. The white paper recommended thereduction of the PFS supplier base from 1,200 to just 300and the implementation of an e-procurement systemfeaturing Java-based Ariba software. Faced with intensepressure from various quarters to cut costs, PFS man-agers chose to drop the “best of breed” approach andinstead try out a single sourcing approach to select onevendor for the end-to-end solution of the e-procurementproject. They short-listed Excalibur and Merrimac, twoleading consulting firms who were well known for theirexpertise in applying IT to operations management. Sinceboth these firms were known for their preference for “bigpicture” projects, high cost structure and a weakness inthe maintenance area, PFS managers also included Infosysas the third vendor candidate for the e-procurementproject.Since its founding in 1981, Infosys has sought toconsistently improve its competence and reputation inhandling the higher end of the IT business. Over theyears, it has moved upwards from global labour arbitrageand IT maintenance contracts to end-to-end solutionsand excellence in the chosen domains. Strategic repo-sitioning of this kind must be implemented by capturingprojects with enhanced scope from both the existing andthe new clients. In other words, Infosys must increas-134 INFOSYS TECHNOLOGIES LTD.: GROWING SHARE OF A CUSTOMER’S BUSINESS134
  9. 9. and preference for partners or suppliers. When engagingin international marketing, it is important for firms toassess the culture in the target country and understandthe differences with respect to their own culture. Thiswill help them to adjust to the new culture and conductbusiness smoothly. The sociological literature containssome important ideas on how to work across cultures.Based on a landmark, multi-nation study, Hofstede 1reported that countries differed across five dimensionsviz. small vs large power distance, individualism vscollectivism, masculinity vs feminity, uncertainty avoid-ance, and long vs short-term orientation. Table 1 givesthe rankings on these dimensions for India, the US, andsome other countries in which Infosys may conductbusiness activities. Compared to India, in the US, thereis less acceptance of unequal power distribution (lesspower distance), higher expectation that people muststand up for themselves (greater individuality), greatercompetitiveness, assertiveness and ambition (moremasculinity), greater need to minimize uncertainty byfollowing rules and structure (greater uncertainty avoid-ance), and less long-term orientation.Infosys, which is based largely out of India, servesan international clientele located in the US, Europe, andother countries. Hence, training of employees in work-ing and managing across cultures is very important forthe firm. There is considerable evidence in the case thatInfosys prepares well for cross-cultural marketing. It hasrecruited US citizens for boundary spanning sales po-sitions. For example, Rahul Dev, the Infosys Engage-ment Manager, dealing with PFS, was a second genera-tion American of Indian origin who dressed, spoke, andacted like a typical Californian. Infosys also encouragesIndia-based employees to prepare adequately for cross-cultural interaction. Lalitha Krishnan, the DeliveryManager for PFS, based in Bangalore, had travelled inAsia, Europe, and the US. Although a devout Hindu,she consciously attempted to understand the culture ofingly migrate up the value chain in the IT solution space.An opportunity to do this has just arisen at PFS, whereInfosys is being bracketed along with two global con-sulting firms in the choice set for a major project. In thecase context, Infosys must now compete with Excaliburand Merrimac for the PFS e-procurement project. TheInfosys team must convince PFS management that thefirm is not only an excellent supplier of high valuemaintenance services, but it also has the competence andcapabilities to deliver an end-to-end solution compris-ing consulting, process reengineering, customization,and maintenance at a competitive price. The remainingpart of this analysis provides the background and ar-guments that the team can use to make a persuasivepresentation to PFS for obtaining the Ariba e-procure-ment order.Challenging Issues in Global MarketingThe marketing success of Infosys (and other leadingIndian IT firms) in attracting, satisfying, and retaininginternational clients is indeed significant and must beviewed against the backdrop of many hurdles which ITfirms from India face in the international arena. Somegeneral hurdles faced by firms from emerging marketsinclude cultural differences, threats of protectionism,and a strong currency. A particular hurdle for the IndianIT firms seeking value migration is competition fromglobal consulting majors who are currently well-en-trenched in the IT consulting space and are movingtowards cost competitiveness by developing their off-shore capabilities. In this section of the case analysis,data from the case will be used to understand howInfosys is dealing with each of these hurdles.Cultural DifferencesThere are cultural differences across countries affectingcommunication, general understanding, negotiation,attitude towards time and formalization of contracts,131Table 1: Hofstede’s Values for Selected CountriesCountry Power Distance Individuality Masculinity Uncertainty Avoidance Long-TermIndex Index OrientationChina 80 20 66 40 118Japan 54 46 95 92 80India 77 48 56 40 61United Kingdom 35 89 66 35 25Unites States 40 91 62 46 29Source: www.geert-hofstede.com/hofstede_dimensions accessed on 30th August, 2007.1Hofstede, Geert (2001). Culture’s Consequences, Comparing Values, Behaviors, Institutions, and Organizations Across Nations. Thousand Oaks CA:SagePublications.VIKALPA • VOLUME 32 • NO 4 • OCTOBER - DECEMBER 2007 135135
  10. 10. Dallas, proudly displayed a poster of the Dallas cow-boys—the American football team, and often caught upwith Dallas events on the website. To better understandthe American culture, she had taken courses at the InfosysLearning Academy. Through a planned rotation of off-shore and onsite assignments, Infosys ensured that alarge part of its workforce had exposure to internationalculture. Sensitivity to cultural aspects of doing businesswill be even more important to Infosys as it tries toreduce its large dependence on the US by focusing onmarkets in Europe and Asia.Threat of ProtectionismWhen Indian IT firms initially started getting businessfrom clients in the US and other developed nations, theircore advantage was their ability to offer high qualitywork at extremely competitive prices due to the hugedifference between the costs for local vs Indian employ-ees. The offshore model developed by Indian IT firmsfurther added to their cost competitiveness since onlya small onsite team needed to be maintained and the restof the work could be done offshore in India and else-where at a much lower cost. Spurred by the economicgains from the initial contracts, over the years, morework was outsourced from the developed countries,particularly the US, leading to some highly publicizedjob losses. This has created a backlash and at least onestate legislature in the US has passed a law preventingstate governments from outsourcing. Calls for abolitionof free trade agreements and the imposition of tariffs onimported services have also been heard. The issue isparticularly sensitive during periods of economic stag-nation or low growth and during election years.Like other Indian IT firms, Infosys must address theprotectionist sentiment. While continuing to use itsoffshoring strength, the firm must focus on communi-cating its service quality, timeliness, reliability, andsavings delivered and downplay its offshore activities.It should develop an excellent presentation and mounta public relations campaign describing how it is helpingto improve the competitiveness of the US firms. Infosysmust also highlight its investments in the US in termsof development centres, marketing offices, and the USnationals employed. Finally, Infosys may team up withother Indian IT firms under the NASSCOM banner tolobby with the Federal government for maintaining thestatus quo on free trade since many IT and consultingfirms of the US have themselves set up developmentcentres in India expecting to benefit from an openeconomy on the Indian side.Strong CurrencyThe Indian rupee has been appreciating against the USdollar since 2003. Until 2007, the rise was gradual, butin the recent quarter, the rupee has appreciated by morethan 7 per cent. Such a sudden rise is bound to affectthe bottom line of Indian IT firms including Infosys sincemore than half of their business comes from the US. Inorder to contain the impact of the rise in the rupeeagainst dollar, Infosys will need to increase its billingrates for new customers and new contracts by at least3-4 per cent. It will also need to bring down its depend-ence on the US market to under 50 per cent while in-creasing the customer base in Europe and other coun-tries. Another strategy to contain the effects of a risingrupee would be to slow down the rise in employee costs.Press reports indicate that the annual wage hike in theIT industry has been to the order of 13-15 per cent whichhas been managed through pricing. Further sharp risesin the rupee will put pressure on the ability to managewage hike impacts through pricing. Indian IT firms arealready exploring alternatives for slowing down theincrease in wage costs. Press reports indicate that somelarge IT firms are recruiting non-engineering graduatesand training them to fill positions usually offered toengineers since they believe that these graduates will bemore cost-effective.Moving Up the Value ChainThe development of the Infosys business over the yearsdisplays a conscious effort to move up the value chain.As it begins to target the very top end of the IT businesswhich is currently the stronghold of global consultingfirms like Excalibur and Merrimac, Infosys needs tosubstantially upgrade both its competencies and itsreputation for business consulting, especially for pro-viding end-to-end solutions. It must particularly increaseits capabilities in front-end analysis and system design,and improve its software knowledge. Infosys has al-ready started hiring experienced consultants from com-peting firms. In fact, Rahul Dev, who deals with PFS,was hired from Excalibur where he had worked for overa decade. It can continue with this strategy of hiringexperienced consultants from other leading firms afterputting in place socialization processes to orient newhires to Infosys values and systems. Infosys may alsoexplore inorganic growth in business consulting by132136 INFOSYS TECHNOLOGIES LTD.: GROWING SHARE OF A CUSTOMER’S BUSINESS136
  11. 11. 133acquiring a mid-sized firm which has a strong reputationin consulting.Cost Savings for PFSThe case provides data on four projects in which Infosyshas offered cost savings to PFS over and above thecontract terms. Let us calculate these cost savings byexamining the projects one by one (A to D).Re-engineering Project AssignmentsIn the course of the teleconference between the keymembers on the PFS team at Infosys, Jaspal Singhmentioned that he was particularly proud of the waythe team had redesigned project assignments so thatfewer personnel were required over the years startingfrom year 2 of the project. Table 2 provides the calcu-lation of the savings to PFS through reengineering projectassignments which work out to a substantial sum of$12,960,000Data Corruption Prevention SubroutineInfosys engineers had written a subroutine to shutdownthe PFS batch programmes at 5 a m. Earlier, PFS facedproblems whenever their batch processing continuedbeyond 5 a m as this corrupted data and online shutdownsystem led to idling of about 125 PFS employees for upto four hours. Calculations regarding the benefits of theInfosys’ initiative to PFS are shown in Table 3.Record Comparison AlgorithmInfosys engineers working on the PFS projects havewritten an algorithm which improved the PFS recordcomparison processing efficiency by 56 per cent andprocessing time by eight hours. This helps PFS in timelysubmission of reports to state insurance commissionsand reduces the probability of PFS being fined for lateTable 2: Savings to PFS from Reengineering Project AssignmentsYear 1 Year 2 Year 3 Year 4 Year 5Number of US-based employees 250 250 75 0 0Number of India-based employees 0 0 250 100 100Annual cost of US-based employees PFS 250 x $8000 x 75 x $8000 x12= $ 24 Mn 12 = $ 7.2 MnAnnual cost of India-based employees 250x $3200 x 100 x $3200 x 100 x $3200 x12 = $ 9.6 Mn(3) 12= $3.84 Mn (4) 12=$ 3.84 MnTotal employee cost during the year $24 Mn(1) $16.8 Mn (2) $3.84 Mn $3.84 MnSavings for PFS from transferring (1)–(2) = $ 7.2personnel to India Mn(5)Savings from reassigning (3)-(4) =$ 5.76personnel in India Mn (6)Total savings to PFS from A = (5)+ (6) =reengineering project assignments $12.96 Mnsubmissions. Table 4 shows the savings to PFS from therecord comparison algorithmReduction in Disability Claims ReservesInfosys has helped PFS to reduce the cash reservesrequired for paying the disability claims. This wasachieved by streamlining and reengineering the claimssubmission and claims payment process. The reductionin cash reserves was to the extent of $14 million. Thesavings to PFS in this regard are shown in Table 5.Knowledge Transfer Time Savings from Sole-sourcingIn case PFS decides to award the Ariba e-procurementproject to Infosys on a sole-sourcing basis, Infosys willbe involved with the Ariba software right from thebeginning of the project and will therefore not requireany knowledge transfer time to update their program-mers on the technical aspects of the system as they enterthe maintenance phase. Since it roughly takes 5 pro-grammers about 12 weeks to master an Ariba systeminstalled by someone else, the savings from the elimi-nation of knowledge transfer time are expected to be 5x (12/4 months ) x $8,000 per month which is equal to$120,000.Persuading PFS for Capturing IT BusinessAn analysis of the case data gives the impression thatalthough Infosys has offered great value to PFS in thecourse of its current projects, its share in the PFS’ ITbusiness is quite small. A stretch goal for Infosys maybe to capture at least 50 per cent of PFS’ IT spend. Inorder to achieve this, Infosys must be seen as a majorpartner by PFS. The sales approach required for achiev-ing a partnership relationship between a client and avendor has been termed as Enterprise Selling 2. TheVIKALPA • VOLUME 32 • NO 4 • OCTOBER - DECEMBER 2007 137137
  12. 12. Table 3: Savings to PFS from Data Corruption Prevention SubroutineCategory of Employees involved Programmers Technical Assistants PFS Workersin Data CorruptionNo. of employees involved 3 1 125No. of incidents 24 24 24Time involved per employee (hours) 4 1 4FTE costs per hour $45 $40 $42Savings from subroutine 3 x 24 x 4 x $45 = 1x 24 x 1 x $40 = 125 x 24 x 4 x $42=$12,960 (1) $960 (2) $504,000 (3)Total savings to PFS from subroutine B=(1) + (2) + (3) =(excludes minor saving in CPU time) $ 517,920enterprise selling approach requires immense trustbetween both parties based on a clear understandingthat partnering will bring significant mutual benefits.Enterprise partnerships are usually successful when thereis some match between the cultures of the two parties.Such partnerships are also more successful when the topmanagers of both firms are in touch and trust each other.Based on the stretch goals Infosys has in mind for itsbusiness from PFS, a case could be made that Infosysmust use enterprise selling techniques in getting theAriba e-procurement order. The top management ofInfosys has an opportunity to meet senior PFS managersduring their forthcoming visit to the Infosys campus inBangalore. Infosys board members must use this oppor-tunity to forge closer links with the PFS President anddiscuss the formation of a long-term partnership be-tween the two firms. At the same time, the onsite duoof Rahul Dev and Jaspal Singh must highlight to PFSin Dallas that the two firms have many value-basedsimilarities and that the savings of nearly $15 millionfor PFS over and above the contract terms are an indi-Table 4: Savings to PFS from Record Comparison AlgorithmMonthly penalties for late submission to State Commission $360,000Probability of late submission each month 0.01Amount saved per month $360,000 x 0.01 = $3,600 (1)Annual Savings from algorithm C=$3,600 x 12 = $43,200Table 5: Savings to PFS from Reduction in Disability Claims ReserveReduction in cash reserves $14,000,000Cost of capital for PFS (%) 10Annual savings from reduction in claims reserve D=$14,000,000x0.1=$1,400,000Table 6: Total Cost Savings to PFS over and above Contract TermsSavings from re-engineering project assignments (A) $12,960,000Savings from subroutine to prevent data corruption (B) $517,920Savings from record comparison algorithm $43,200Savings from reduction in claims reserve (D) $1,400,000Total savings to PFS ∑ A to D $14,921,120cation of the quality of concern for its client that Infosysbrings into a relationship.The Ariba project can also be seen as a situationwhere a consultative selling approach needs to be used.Consultative selling occurs when the salesperson bringssuperior knowledge and problem solving capabilities tothe sales opportunity in order to create superior valuefor the client. Superior value is created by thoroughlyunderstanding the client’s processes, constraints, andneeds and developing appropriate solutions. Such ac-tivities are akin to consulting and therefore this ap-proach is called the Consultative Sales Approach. RahulDev and Jaspal Singh must convince PFS that Infosyshas the required capabilities in the consulting arena toprovide an end-to-end solution using the Ariba soft-ware. Their presentation must highlight the backgroundsand project experience of Infosys consultants who willbe assigned to the Ariba project. They must highlightthe fact that the large number of maintenance projectsthat Infosys has carried out for PFS over the past fiveyears have provided Infosys employees with a great dealof knowledge about how PFS operates, knowledge thatwill come in extremely handy in the consulting phase2Rackham, N and DeVincentis, J (1998). Rethinking the Sales Force. NewYork: McGraw Hill.138 INFOSYS TECHNOLOGIES LTD.: GROWING SHARE OF A CUSTOMER’S BUSINESS138
  13. 13. 135of the project. Additionally, Dev and Singh must high-light the expertise that Infosys has acquired on Aribasoftware in the three ongoing projects for other clients.Finally, Infosys must quote the right terms whileseeking an order and use transactional selling tactics.The major items of discussion will be the terms compris-ing price, time schedule for completion, important mile-stones, and proposed commitment of staff both onsiteand offshore. Infosys will need to consider the risingrupee while presenting the pricing for implementationand maintenance. It may consider a hike in the imple-mentation price to about $2,075,000 and the maintenanceof the end-to-end solution to around $410,000 per an-num.Case Analysis IVSudip NandyChief Strategy OfficerWIPRO Ltd.e-mail: sudip.nandy@wipro.comIn the management case, Infosys is facing an inter-esting business situation. The company has beenperforming exceedingly well as an offshore ITservices vendor at Prairie Four Square (PFS) Insuranceover the last five years. Based on this strong track record,PFS is now considering Infosys as a potential partnerfor an end-to-end Ariba e-Procurement System Project.This is a chance for Infosys to establish itself as not justan offshore partner competing on cost advantage andquality of service delivery, but also as a thought partnerwith business skills to help the PFS managers respondto business challenges. This case analysis discusses var-ious aspects of the way the Infosys account team canrespond to this strategic growth opportunity at PFS.The PFS managers have two objectives while mak-ing the choice of an IT outsourcing partner for thisproject – one, to ensure that the IT partner has the skillsand the capability to implement an end-to-end solution,and two, to find the lowest cost at which this can be done.On the ground, Infosys already has a strong positionto convince PFS of its low cost and high service qualityproposition. However, the other two IT consulting com-panies are stronger in terms of showcasing a consultingcapability for end-to-end solution development.To win this business opportunity, Infosys needs todo away with the tendency of its managers to packageand present its excellent performance on ongoing PFSprojects – the performance metrics and case histories ofcost savings that Infosys teams have consistently broughtto PFS. To get to a winning position, the Infosys proposalneeds to pitch that it has developed consulting led end-to-end capability required to deliver on this project.In this context, the following need to be the keyelements of the Infosys proposal:Discuss the evolution of the Infosys business model – movingfrom labour cost arbitrage to focus on specific marketopportunities, to more complex business capability, andmost recently to specific industry ability/domain excel-lence. The PFS managers view Infosys as an outstandingvendor for ‘offshore outsourcing of IT maintenanceprojects.’ It is necessary to position Infosys as bringingspecific domain and consulting-led capability to deliverIT services. Infosys PFS account team needs to reach outinternally to collect relevant facts on consulting capa-bility at Infosys. The proposal should seek to first es-tablish this high level view in the minds of PFS man-agers.Discuss Infosys’ specific capability and experience at man-aging end-to-end e-procurement system projects over the lastone year. Discuss specific challenges faced in customi-zation, installation, and maintenance of the project andhow Infosys teams have responded to these challenges.Infosys PFS account team needs to collect relevant factsand prepare at least one case study from these ongoingprojects. The proposal needs to highlight the cross-in-dustry capability required to work on an e-procurementsystem project. This will help Infosys drive the point thateven though it may not have past experience of such aproject for an Insurance client, it has the expertise todeliver on other industry clients. It will be ideal if Infosyscould arrange a reference-check call with one of its clientson such a project.VIKALPA • VOLUME 32 • NO 4 • OCTOBER - DECEMBER 2007 139139
  14. 14. 136Discuss the operational cost savings possible for PFS in detail.The operational cost of the current PFS procurementsystems is $ 78 per order processed, much higher thanthe industry average of $ 45 per order processed. Theproposal needs to highlight the significant opportunitiesto cut operational costs for PFS. Infosys can bring in theperspective on how it has managed to bring cost savingsto PFS well in excess of their expectations. Specificnumbers will help:• 500 technical people are working at Infosys on thePFS account, at $ 4,800 per month differential costsper FTE between the US and India, and this savesPFS about $ 25-28 million a year. It is possible thatthe PFS IT budget will be at a 4-5 per cent of theturnover, which comes to well over $ 1 billion a year.Thus, Infosys has already brought a 2-3 per centreduction in the PFS IT budget through a successfulworking offshoring model. It is a saving not easyto match for the US-focused players like Excaliburand Merrimac Consulting, which are not experi-enced at working with the offshore model. Howev-er, this is a saving PFS would have expected fromInfosys. It is probably important to put a perspec-tive on how much has Infosys achieved in terms ofcost savings over and above this amount.• Using the data in Exhibit 2 would help. In addition,substantial cost savings from 150 Infoscions “freedup” through productivity gains brought by theInfosys delivery team. This means savings of about$ 6 million a year.• Another key initiative that Infosys has carried outat PFS is the reduction in average number of cor-ruption incidences from 24 to 0. From the dataavailable, this has meant savings of about $ 0.5million in terms of idle time of PFS employees dueto these incidents.• In addition, there is the saving by ensuring that thestate commissions do not penalize PFS for delay indelivering compliance analyses each month. Thesavings are not substantial from a number point ofview, but enable PFS to complete 1,800 jobs on thelast night of each month.• Taken in perspective, for every $ 25 million savingsPFS expects from handing work over to Infosys, ithas got an additional quantifiable saving of $ 6-7million, which is a substantial additional 25 per centover time!The company should not try to undercut on priceto win this project. There are two key reasons for sayingthis – one, the key challenge for Infosys to win thisproject is to manage the end-to-end customization andimplementation challenge, and not the cost challenge;and two, with its excellent track record at PFS, it doesnot need to give any strategic price discount to improveits chance of winning this project.It is likely, however, that in the first year, Infosys’price quote for this project will be close to the bids likelyto come in from Excalibur and Merrimac Consulting.This would be the case since a substantial part of theimplementation phase of the project would be doneonsite – where the cost differential between the two firmsmay be small. However, Infosys can beat the price quotedby the competitors for maintenance of the project, andalso justifiably claim that PFS will get additional costsavings every year.The one key point to highlight will be the businessgain for PFS from Infosys’ ability to cut down the ‘knowl-edge transfer time’ of the project. The gain for PFS willbe more from a faster deployment of the e-procurementsystem, and for PFS business managers, this will besubstantial. The point will clearly be in Infosys’ favoureven if the scientific estimation of business gain may notbe possible as part of this proposal.The Infosys team can do some thinking on theproposed team structure for this project. Infosys shouldinclude higher billing rate resource(s) from the consult-ing team of Infosys, and bill such resource(s) at higherconsulting charge-out rates.The proposal should men-tion the technical expertise of the Infosys team but notoversell that as PFS managers are already aware of it.The presentation strategy for Infosys should be tobring a senior Infosys consulting team member to jointhe account management team for this presentation. Itshould emphasize its philosophy of valuing long-termrelationships with customers and employees over theshort-term profits.With the above as the key tenets of its proposal,Infosys should keep the discussion focused, cut out theparts that the PFS managers already know, not over-emphasize the cost-saving aspect of working with Infosysas much as the part on the capability of Infosys forbringing the right skills to deliver on this project. Infosysis hosting a team from PFS on its campus in Bangalorebefore the presentation on this proposal to the CIO andPurchase Managers of PFS. It is important to resist thetemptation of taking the visiting PFS team through the140 INFOSYS TECHNOLOGIES LTD.: GROWING SHARE OF A CUSTOMER’S BUSINESS140
  15. 15. specifics of Infosys’ approach to this project. The PFSCIO and Purchase Managers should be the first ones toknow the Infosys proposal on this opportunity in detail.The Infosys team in Bangalore, however, can use thisvisit to make the point on consulting focus, trainingability, and new hires from consulting backgrounds atInfosys. It is all right as long as that pitch is generic,but Infosys should not talk of specifics during this visit.Looking beyond this project, the Infosys seniormanagement needs to think through the challenge ofmoving up the value chain at their established customeraccounts. Long-term customers like PFS have come torecognize Infosys and other top India-based outsourcingproviders such as Wipro and TCS, for their cost advan-tage, high quality of service delivery, and business modelsfocused on building long-term customer relationships.These companies have worked hard to establish thatposition with their long-term customers. These compa-nies are facing the marketing challenge of convincingtheir long-term customers of their consulting ability andindustry-focused domain strength. It is an interestingchallenge to bring together the low cost, IT servicedelivery model perfected by these companies, and thehigh-end consulting-led business model that focuses onbusiness value for the customer with cost being lessimportant. These companies are working hard at gettingthis transition right, and hope that they will eventuallyget there.Case Analysis VShlomo MaitalAcademic DirectorTIM-Tel Aviv, Israele-mail: smaital@mit.eduThe Infosys Case enables focused action-learningdiscussion of the theory and practice of threerelated topics: (a) implementing strategic changethat is both top-down and bottom-up; (b) definingcustomer value propositions to find powerful “reso-nance”; and (c) migrating the company’s strategy, com-petencies, and business model upward, away from thearea of commodities and into the area of high-marginservices. These topics, I believe, lie at the core of themanagement dilemmas that many global companies face.Let us begin with the issue of migrating up the valuechain.“Simplify,” Einstein admonished.To simplify: There are only two basic growth strat-egies.• Same to more: Sell the same product or service tomore people. This is what most organizations callas a growth strategy. It seeks to boost the share ofthe market.• More to same: Sell higher-value higher-marginproducts and services to the same clientele, to escapecommoditization. This is what Infosys seeks to doand this is what their bid for the PFS contract in-volves. The case embodies nearly all the key issuesinvolved in a “more to same” or ‘share of wallet’strategy.This is a difficult strategy to implement. It involvesradical change within the organization, to align capa-bilities with a new value proposition. And from myexperience, the hardest part is not gaining new higher-margin business from the existing clients, but gettingused to turning down business from new clients. Infosyshas to learn to do this regularly if it is to successfullyexecute this ‘more to same’ strategy. I believe, the com-pany is already doing this. I was told by a senior Infosysexecutive that Infosys has 400 clients and that it is ratherunusual for it to accept the new ones; the case must beexceedingly powerful for it to do so. This is “more tosame” in its highest form.Peter Drucker once said, business strategy is notwhat the organization does, but what it chooses not todo. By the same token, businesses are best judged notby their clientele, but by the customers they decline. Thekey benefit of ‘more to same’ is that it builds clientloyalty. It is known to be an order of magnitude moreexpensive to gain a new customer than to keep an oldone, in general. This is an important rationale for ‘moreto same.’Infosys has not only deliberately kept its focusprimarily on the existing customers, but has also single-mindedly focused on the key industries: banking, finan-cial services, insurance, healthcare, retailing. Inevitably,VIKALPA • VOLUME 32 • NO 4 • OCTOBER - DECEMBER 2007 141141
  16. 16. a ‘more-to-same’ share-of-wallet strategy must do this.Infosys’ customer value proposition is summarizedby Narus and Seshadri in three words: “Business domainexcellence”— “We understand your business, as well asor better than you, and we can prove it by helping youmake your business more smooth, efficient, and pro-fitable.” This excellence cannot be achieved everywhere,in all industries. It must be focused, and hard choicesmust be made. Infosys has made them. Many companiesdo not. And it must above all be proven in the field.The challenge for Infosys in winning the Aribacontract is to convince its PFS client that, once a ‘bodyshop’ operation for PFS, Infosys is indeed able to moveupward into ‘stratospheric’ regions dominated by heavy-weights like EDS, IBM, and Accenture. IBM once builtits advertising campaign around the slogan “You nevergo wrong with IBM.” PFS executives would incur sub-stantial risk by going with Infosys. The customer valueproposition has to be so powerful, so compelling, thatit would overcome this obstacle. In Robert Peters, PFSCIO, Infosys has an ally who likes their past work. Butcompetition is stiff. And a classic dilemma arises:Whether to compete head-to-head with competitors whomay price their bid on cost? The answer is: No. ‘Competeon value, not on cost. Create added value and chargefor it.’ Infosys has to find a way to communicate thevalue created by it in the past, well beyond its ‘contrac-tual obligations’ and establish that all this was possibledue to its superior domain competencies.What constitutes a compelling, winning value propo-sition? Anderson, Narus and Rossum (2006)**distin-guish between three types of value propositions (seeTable 1): (a) one that dumps all benefits on the table,like a smorgasbord buffet (an approach used by manycompanies); (b) favourable points of difference, an ap-proach that stresses key differentiators, running the riskthat the differentiator the client seeks is not preciselythe one being promoted by the selling organization; and(c) resonating focus – one or two key points of difference,that answer the question, “What is most worthwhile forour firm to keep in mind about your offering?” “Whatreally matters to you?” At times, clients cannot answerthat question. It takes a very good listener and observerto find out.“This (Ariba project) is as much a consulting projectas an IT project,” Purchasing VP, Kay Bryan, said. Infosys,led by Rahul and Jaspal, built the case for sole-sourcing.They understand the more-to-same share-of-wallet strat-egy and see veins of gold at PFS, in future contracts forERP, CRM, and financial systems. It is crucial that theoperations managers, not only senior management, atPFS, understand the strategy clearly. It is they, in theend, who will determine its success or failure.This case illustrates two issues that I believe areoften underplayed.One is the hidden value of the more-to-same strat-egy – it tremendously energizes the people in the sup-plier firm, by giving them major challenges and expect-ing them to rise to them. One sees it here in this case.Managers often oscillate between the two poles: the highstress of tackling jobs for which they may be under-qualified, and the boredom of tackling jobs they havedone repeatedly in the past. Faced with a choice, or-ganizations should pick the former. This case shows,in part, why.Two, it is the crucial point that by sharpening andhoning a resonant customer value proposition, not onlyis the organization more likely to win the bid, but it isfar more likely to succeed once it wins it, in supplyingwhat customers want and need and in ensuring thateveryone in the supplying organization knows what isneeded.While working with a global high-tech organiza-tion, let us call it XYZ Ltd., I recently had some of theirdevelopment managers do the following exercise:“Please stand. Take the role of a major customer.Say who you are (name any suitable manager of themajor customer). Now, state, in just a few words, whyyou buy the product of XYZ. What is the resonantfocus?”My managers had great difficulty. We then had along discussion about what data they lacked and needed,and how they could acquire it.It is clearly understood that ‘selling’ a resonantcustomer value proposition is only the first step. Thenext crucial step is to deliver what that propositionpromises. Infosys has a remarkable “Global DeliveryModel.” In service businesses, only if operations excel-lence is aligned with value propositions will the ‘more-to-same’ strategy truly work. This case is an indicationthat Infosys indeed can deliver what it promises PFS.The final key point made by Anderson, Narus, andvon Rossum (2006), is this: Defining customer value* Anderson, James C; Narus, James A and Rossum, Wouter van (2006).“Customer Value Propositions in Business Markets,” Harvard Business Review,March, 84(3), 1990-99.142 INFOSYS TECHNOLOGIES LTD.: GROWING SHARE OF A CUSTOMER’S BUSINESS142
  17. 17. 145144143142141140139Table 1: Types of Value Proposition— Towards “Resonating Focus”Value Proposition All Benefits Favourable Points of View Resonating FocusConsists of: All benefits customers receive All favourable points of difference The one or two points of differencefrom a market offering a market offering has relative to (and perhaps, a point of parity)the next best alternative whose improvement will deliver thegreatest value to the customer forthe foreseeable futureAnswers the customers’ Why should our firm purchase Why should our firm purchase your What is most worthwhile for ourquestions: your offering? offering instead of your competitor’s? firm to keep in mind about youroffering?Requires: Knowledge of own market Knowledge of own market offering Knowledge of how own marketoffering and the next best alternative offering delivers superior value tocustomers, compared with the nextbest alternativeHas the potential pitfall: Benefit assertion Value presumption Requires customer value researchSource: Anderson, Narus and van Rossum (2006).138137propositions is the job not solely of marketing manage-ment, but in fact, is the responsibility of senior manage-ment. Lurking in the background of this case, or perhapseven in the foreground, is the fine hand of the Infosysfounder and Chairman, Narayana Murthy. The combi-nation of top-down and bottom-up or middle-up busi-ness strategy is a winning one.The case covers the basic challenges and issues infront of Infosys Technologies Ltd. to compete forcustomization, installation, and maintenance ofa JAVA-based Ariba e-procurement system at PrairieFour Square (PFS) Insurance. PFS Insurance is one of theleading providers of individual life, group life, medicaland dental, and long-term care and disability insurancein the US. The PFS sales exceed $27 billion and it serves50 million individual, institutional, and corporate cus-tomers in the US. The problem started when there wasrelentless pressure from the Wall Street to cut costsdramatically; this led to the outsourcing of the offshorepart of its IT maintenance activities. Infosys was con-sidered for the project. The difficulties of the companyto prove its credibility is highlighted in the case.Challenging Issues in Global MarketingCross–Cultural DifferencesInfosys has to implement and maintain the project in theUS. The working culture of the US and India is differentand so, it may be difficult for the employees to gel withthe PFS employees. Similarly, if, the project was in Japan,understanding the requirement of the client would havebeen difficult for the Infosys employees because of thelanguage problem. They would have had to learn Jap-anese.Maintenance at Vendor’s SiteIn case the maintenance work has to be carried outentirely at the vendors’ end, it would be very expensivefor both the parties. It would incur more cost for PFSas it has to pay $8,000 in the US against $3,200 in Indiaresulting in a net increase of $4,800 per person permonth.• Acknowledgement. I am thankful to all students of marketing in MBA batchof 2008 for extensively discussing the issues involved. My special thanks toMr. Apoorv Bhatt of the same batch for helping me prepare this solution.Case Analysis VIZillur RahmanAssistant ProfessorDepartment of Management StudiesIIT Roorkeee-mail: yusuffdm@iitr.ernet.inVIKALPA • VOLUME 32 • NO 4 • OCTOBER - DECEMBER 2007 143143
  18. 18. Marketing at Vendor’s SiteMarketing at vendor’s site is not feasible as infosysemployees are not familiar with the US market and mayface difficulties. Also, cultural differences might posesome problems.Repositioning and Brand BuildingTill now, Infosys has been considered only as a main-tenance provider. These projects have been low value-adding and price-sensitive. Now Infosys needs to projectitself as a company providing end-to-end solution toPFS’ procurement process. Infosys does have experiencein similar projects in healthcare industry, which needsto be highlighted. This would help in gaining a greatershare of the customer’s IT expenditure.Global CompetitionPlayers like Excalibur and Merrimac Consulting areamong the top 15 consulting firms of the world parti-cularly when it comes to applying IT to ERP, processengineering, and logistics. Infosys needs to prove thequality of their work in the same field.Quantifiable Cost savingsTime to Market SavingsTime to market savings is saving the cost incurred intimely delivery. The target delivery time for PFS is 91per cent while that achieved by Infosys is 99.6 per cent.This timely delivery helps PFS to process and analysedata at the right time and on an ongoing basis. If thedata are delayed, the loss to the company would beenormous as it serves around 50 million customers whocould have switched to competitor on not receiving thetimely service. This is a great advantage for Infosys.Reduce Learning Curve TimeThe advantage of timely delivery by Infosys helps thePFS in reducing the Learning Curve which in turn canbe helpful in achieving an early completion of the projectthus reducing the cost to the company.Transfer of Surplus Infoscions to other PFS ProjectsThe transfer of surplus manpower is never mentionedin the contract. So, if Infosys is delegating the workforceto some other project, it is saving the cost of PFS as thecompany does not have to spend on manpower in thatproject.Saved Cash ReservesStreamlining and reengineering of the claim manage-ment process helped PFS complete the related tasksfaster and more accurately. Thus, through InsuranceRegulation, PFS was allowed to reduce its cash reservesby 10 per cent.Saving the Cost of Project ProposalsPFS is saving on time and cost incurred in choosing theright candidate for a proposed project by delegating eachproject to Infosys.Knowledge Transfer Time for Sole SourcingKnowledge transfer time is the time required to makea programmer up-to-date on technical details, if theyenter the project at the maintenance stage (not from thebeginning). It would take five programmers around 12weeks (with FTE costs being USD 8000 pm) to masteran Ariba e-procurement system that another vendor hadinstalled. The total costs involved in this case would be:5 programmer X 3months X $8,000 pm = $ 1, 20,000Thus, the knowledge transfer time saving for thecompany would be around $ 1, 20,000 due to sole sourcing.Infosys Team’s Ability to Deliver End-to-End SolutionCredibilityThe Infosys team can prove its credibility in the e-pro-curement software by showing their past records in themaintenance of software and client referrals.Saving on ProcurementInfosys can show the initiation of three e-procurementsoftware in one year including two for retailers and onefor a healthcare organization in the US and Europe. Theoutcome of the project is not yet known but the companyhas already been able to save $ 100,000 per year in thehealthcare organization by switching the company’schange order procedures.Effective ResourcesInfosys has effective resources for the implementationand maintenance of the e-procurement software as theywere already working on three projects of the samenature.Well-developed Training InfrastructureInfosys has a well-equipped training infrastructure whichcan be helpful in imparting training on the JAVA-basedAriba e-procurement software to the PFS employees.The company has an Education & Research Group whichorganizes training sessions and gives demonstration ofJAVA projects that they have successfully completed in144 INFOSYS TECHNOLOGIES LTD.: GROWING SHARE OF A CUSTOMER’S BUSINESS144
  19. 19. the past. This gives an edge to the company.Required Technical ExpertiseThe Infosys team comprises of people who can handlethe routine maintenance tasks such as cleansing corrupt-ed data, correcting software flaws, and running pro-gramme and systems tests. They would also be able tocomplete higher value maintenance-related work, suchas application development, business process reengi-neering, installation of certain packaged solutions, pro-gramme management, and technology consulting. Alsoeach project is completed under the guidance of a DeliveryManager, Engagement Manager, Account Manager, anda Senior Programmer. The required expertise is thusavailable with Infosys for looking after a project effi-ciently.Proven SkillsRedesigning the maintenance projects. Infosys has prov-en skills in the maintenance projects. By redesigning themaintenance projects, the company is able to reduce thesize of the development team from 250 to 75 (onsite) and100 (offshore) thus saving $12 million p.a. approximate-ly:250 members X $ 8,000 p.m. = $ 20,00,000 p.m.- 175 members X $ 8,000 p.m. = $ 14,00,000 p.m.+ 100 members X $ 3,200 p.m. = $ 3,20,000 p.m.Total savings = ~ $ 1 million p.m. = ~ $ 12 million p.a.Writing a subroutine. Writing a subroutine which au-tomatically shuts down the batch programmes at 5 a msaves around $ 500,000 spent to reconstitute the corrupt-ed data, the details of which are given in the case.Improved efficiency. The team has been able to improvethe record comparison processing efficiency by 56 percent and the processing time by eight hours. This againhas helped in building the brand for Infosys.It isn’t reasonable to ask that we achieve perfection. Whatis reasonable is that we never cease to aim for it.— Atul GawandeVIKALPA • VOLUME 32 • NO 4 • OCTOBER - DECEMBER 2007 145145

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