Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.
Industry Strategy and Analysis 
IT services and products
IT services and products Industry Strategy and Analysis | 2 
Group 3 
Group 3 
Atul Katiyar, B Siva Sankaran, K Aravind Re...
IT services and products Industry Strategy and Analysis | 3 
CONTENTS 
Executive Summary 5 
Key Success Factor of IT servi...
IT services and products Industry Strategy and Analysis | 4 
VRIO Framework Analysis 23 
Infosys 3.0 - Strategies 23 
SWOT...
IT services and products Industry Strategy and Analysis | 5 
Executive Summary 
The IT industry in India comprises two com...
IT services and products Industry Strategy and Analysis | 6 
Key Success Factor of IT service Industry 
1) Global IT offsh...
IT services and products Industry Strategy and Analysis | 7 
PESTEL Analysis of IT service Industry 
Political Factors 
• ...
IT services and products Industry Strategy and Analysis | 8 
Social Factors 
Every industry is affected by the social fact...
IT services and products Industry Strategy and Analysis | 9 
Environment Factors 
• Companies are focusing on reducing car...
IT services and products Industry Strategy and Analysis | 10 
EFE Matrix 
Group 3 
EXTERNAL FACTOR EVALUATION (EFE) MATRIX...
IT services and products Industry Strategy and Analysis | 11 
CPM Matrix 
Group 3 
COMPETITIVE PROFILE MATRIX 
TCS INFOSYS...
IT services and products Industry Strategy and Analysis | 12 
Store, Cloud Computing Provider). A single IT vendor may pla...
IT services and products Industry Strategy and Analysis | 13 
"Upstream" Infrastructure 
• The Hardware Vendors design, ma...
IT services and products Industry Strategy and Analysis | 14 
"Downstream" Delivery 
• The delivery tier is the most fragm...
IT services and products Industry Strategy and Analysis | 15 
Porter five forces analysis 
1) Factors Affecting Rivalry Am...
IT services and products Industry Strategy and Analysis | 16 
10. Large and/or infrequent 
sales orders? 
Group 3 
No, as ...
IT services and products Industry Strategy and Analysis | 17 
18. Entrants’ access to 
technology/know-how? 
Group 3 
Yes ...
IT services and products Industry Strategy and Analysis | 18 
3) Factors Affecting or Reflecting Pressure from Substitute ...
IT services and products Industry Strategy and Analysis | 19 
4) Factors Affecting or Reflecting Power of Input Suppliers ...
IT services and products Industry Strategy and Analysis | 20 
34. Are suppliers able to price 
discriminate among prospect...
IT services and products Industry Strategy and Analysis | 21 
39. Is price elasticity of demand 
of buyer’s product high o...
IT services and products Industry Strategy and Analysis | 22 
• Full Services Portfolio and GNDM: TCS adopted diversified ...
IT services and products Industry Strategy and Analysis | 23 
VRIO Framework Analysis 
Summary of VRIO, Competitive Implic...
IT services and products Industry Strategy and Analysis | 24 
• It has groups providing learning solutions and business pl...
IT services and products Industry Strategy and Analysis | 25 
VRIO Framework Analysis 
Summary of VRIO, Competitive Implic...
IT services and products Industry Strategy and Analysis | 26 
Comments on the changes in Business level strategies require...
IT services and products Industry Strategy and Analysis | 27 
Group 3 
deal pursuit team and 
aggressive sales investments...
IT services and products Industry Strategy and Analysis | 28 
Infosys 
Strategies Infosys 3.0 Comments 
Billing 
model 
Gr...
IT services and products Industry Strategy and Analysis | 29 
Group 3 
temporary slow pace as quoted by Infosys, lead to 
...
IT services and products Industry Strategy and Analysis | 30 
Group 3 
of large deals increased from $400 million to $731 ...
IT services and products Industry Strategy and Analysis | 31 
Group 3 
Infosys’ Business Strategy 
Diamond 
Arenas: 
1. Of...
IT services and products Industry Strategy and Analysis | 32 
Group 3 
TCS’ Business Strategy 
Diamond 
Arenas 
Staging Ve...
Upcoming SlideShare
Loading in …5
×
Upcoming SlideShare
VRIO Honda and general motors
Next

12

Share

Strategic assessment of IT services and Products Industry

Strategic assessment of IT services and Products Industry by IIM Indore PGP Students.

Related Books

Free with a 30 day trial from Scribd

See all

Strategic assessment of IT services and Products Industry

  1. 1. Industry Strategy and Analysis IT services and products
  2. 2. IT services and products Industry Strategy and Analysis | 2 Group 3 Group 3 Atul Katiyar, B Siva Sankaran, K Aravind Reddy, Mathan Anto Marshine P & S Harimanjunathan Mobile: +91 7506201026,+91 9619907287 Email: pm13atulk@iimidr.ac.in,pm13bsiva@iimidr.ac.in, pm13karavind@iimidr.ac.in,pm13pmathan@iimidr.ac.in,pm13shari@iimidr.ac.in
  3. 3. IT services and products Industry Strategy and Analysis | 3 CONTENTS Executive Summary 5 Key Success Factor of IT service Industry 6 PESTEL Analysis of IT service Industry 7 Political Factors 7 Economic Factors 7 Social Factors 8 Technological Factors 8 Legal Factors 8 Environment Factors 9 IT service Industry Analysis 9 EFE Matrix 10 CPM Matrix 11 Develop the value chain of IT industry ( general company specific) 11 Value Chain 11 Overview 11 Diagrammatic representation 12 "Upstream" Infrastructure 13 "Midstream" Application 13 "Downstream" Delivery 14 Conclusion 14 Porter five forces analysis 15 1) Factors Affecting Rivalry Among Existing Competitors 15 2) Factors Affecting the Threat of Entry 16 3) Factors Affecting or Reflecting Pressure from Substitute Products and Support from Complements 18 4) Factors Affecting or Reflecting Power of Input Suppliers 19 5) Factors Affecting or Reflecting Power of Buyers 20 Identify the Market leader and second rank company of the industry. Analysis of the business level strategies of each of the TCS and Infosys companies and VRIO framework for each of these companies. 21 TATA Consultancy Services (TCS) - Strategies 21 SWOT Analysis 22 Group 3
  4. 4. IT services and products Industry Strategy and Analysis | 4 VRIO Framework Analysis 23 Infosys 3.0 - Strategies 23 SWOT Analysis 24 VRIO Framework Analysis 25 Comments on the changes in Business level strategies required by these companies looking at the future trends in the industry 26 TATA Consultancy Services 26 Strategies 26 Billing model 26 Sales & Marketing 26 Key Verticals 27 Product line 27 Organization Structure 27 Infosys 28 Strategies 28 Billing model 28 Sales & Marketing 28 Key Verticals 29 Product line 30 Organization Structure 30 Business strategy diamond model (Arenas, Vehicle , Differentiation, stages and economic logic for 2012-13 and advice for the future) 30 Infosys’ Business Strategy Diamond 31 TCS’ Business Strategy Diamond 31 Group 3
  5. 5. IT services and products Industry Strategy and Analysis | 5 Executive Summary The IT industry in India comprises two components: IT Services and business process outsourcing (BPO). IT service management refers to the implementation and management of quality information technology services. IT service management is performed by IT service providers through people, process and information technology. Between April 2000 and June 2013, the computer software and hardware sector attracted cumulative foreign direct investment (FDI) of Rs 53,757.60 crores (US$ 7.97 billion), according to data released by the Department of Industrial Policy and Promotion (DIPP).Nasscom expects the IT services sector in India to grow by 13-14 per cent in 2013-14 and to touch US$ 225 billion by 2020. This report contains the results of a detailed study of the IT Services industry in India. The primary aim of this report was to analyze the IT Services Industry in India using strategic management tools and evaluate the performance of the industry in the past, the current trend in the industry and the prospects o f the industry. The strategic management tools that were used were: • Key Success Factor Analysis • Value Chain Development • PESTEL Analysis • Porter’s 5 Forces Analysis • VRIO Framework Analysis • Business Strategy Diamond Model This report also focuses on the analysis of the two major players in the IT Services industry in India – TCS and Infosys. Each of the two companies was evaluated using the strategic management tools listed above. The prospects for each of the companies have also been compiled and put forth. The future of the IT Services Industry in India is very promising. India's IT and BPO sector exports are expected to grow by 12-14 per cent in FY14 to touch US$ 84 billion - US$ 87 billion, according to Nasscom. Indian IT's core competencies and strengths have placed it on the international canvas, attracting investments from major countries. IT Services is not a story with a start and an end, rather it is an ever continuing process aimed towards excellence and as long as India and the major players continue to nurture a perfect environment for carrying out business, the Indian IT industry will continue its journey on its path to excellence. Group 3
  6. 6. IT services and products Industry Strategy and Analysis | 6 Key Success Factor of IT service Industry 1) Global IT offshore spending is expected to rise at a CAGR of 8.0 per 2) Global BPM spending is estimated to expand at a CAGR of around 7.0 3) Developing countries are expected to see high demand of IT related Group 3 Talent Pool 1) Industry has a strong mix of young and experienced professionals. 2) Approx 4.7 million graduates are estimated to have been added to India’s talent pool in IT service industry in FY13 . 3) The growing pool of talented people has the ability to drive the innovation and R&D activity in the industry. Infrastructure IT 1) Robust IT Infrastructure provided in various cities in India such as Bengaluru, Chennai, Hyderabad, Gurgaon etc. 2) Tier 2 cities being developed as new IT hubs to support major centres. 3) Distribution centres located across the world. Domestic Growth 1) Penetration of computer in the country. 2) More and more domestic companies expected to outsource their activities. 3) Government expected to become major contributor to the domestic demand in years to come. Global Demand cent during FY11-13. per cent during FY11-13 services in time to come Policy Support 1) Tax holiday declared for STPI and SEZs. 2) Initiation of IT-SEZs for developing for developing new IT hubs across the country especially in tier 2 cities. These cities provide required manpower and infrastructure at a lower cost.
  7. 7. IT services and products Industry Strategy and Analysis | 7 PESTEL Analysis of IT service Industry Political Factors • Politics and government plays supportive role when it comes to helping the IT industry. • Government is planning to set-up 15 new laboratories which will facilitate registration and testing Economic Factors Group 3 of IT products before they are launched in the market. • In the 12th Five Year Plan (2012-17), the Department of Information Technology proposes to strengthen and extend the existing core infrastructure projects to provide more horizontal connectivity, build redundancy connectivity, undertake energy audits of State Data Centres (SDCs) etc. • The Government of India has fast tracked the process of setting up of centres of National Institute of Electronics and Information Technology (NIELIT) in Northeast India • The Government of Brazil has liberalized the issue of short term work visas, a move which will make it easier for Indian IT professionals to take up assignments in Brazil • FDI up to 100 per cent under the automatic route is allowed in Data processing, software development and computer consultancy services; software supply services; business and management consultancy services, market research services, technical testing & analysis services. • Between April 2000 and June 2013, the computer software and hardware sector attracted cumulative foreign direct investment (FDI) of Rs 53,757.60 crore (US$ 7.97 billion), according to data released by the Department of Industrial Policy and Promotion (DIPP). • As most of the businesses have clients in different countries, their economic behaviour becomes important factors.
  8. 8. IT services and products Industry Strategy and Analysis | 8 Social Factors Every industry is affected by the social factors operating in the particular country. Few of those are given as: • Education system in India is producing labour force for the industry which is cheap and talented. Also they are able to communicate easily with people of other countries as the mode of education is English. • Availability of large no. of people in the working age group does not pose minimizes the risk of labour shortage Technological Factors • India has got low price mobile tariffs which add to the advantage of industry. • Advent of Smartphone, tablets, iPads, has added to the advantage and has increased the opportunity. • Disruptive technologies present an entire new gamut of opportunities for IT firms in India. • Cloud represents the largest opportunity under Social, Mobility, Analytics and Cloud (SMAC), increasing at a CAGR of approximately 30 per cent to around US$ 650–700 billion by 2020. Social media is the second most lucrative segment for IT firms, offering a US$ 250 billion market opportunity by 2020. Legal Factors • Govt. of India implemented amended form of Information Technology Act 2000 on 27th Oct. 2009. It provides additional focus to informational security. It has added several new sections on offences including Cyber Terrorism and Data Protection. Copyright protection and cyber laws were included in it. • Indian labor laws are flexible and mostly non-union workers are found in the IT sector due to the better working conditions, salaries and other job-related opportunities compared to employees in other sectors. • The Indian IT service benefits as participating firms enjoy minimal regulatory and policy restrictions Group 3
  9. 9. IT services and products Industry Strategy and Analysis | 9 Environment Factors • Companies are focusing on reducing carbon footprints, energy utilization, water consumption etc. • Environmental conservation and protection is an issue which has gained prominence because of deteriorating environmental balance which is threatening the sustainability of life and nature IT service Industry Analysis • The IT service industry in India has become a growth engine for the economy, contributing substantially to increases in the GDP, urban employment and exports, to achieve the vision of a powerful and resilient India. Indian firms, across all other sectors, largely depend on the IT service providers to make their business processes efficient and streamlined. Indian manufacturing sector has the highest IT spending followed by automotive, chemicals and consumer products industries. • India’s total IT industry’s (including hardware) share in the global market stands at 7 per cent; in the IT segment the share is 4 per cent while in the ITeS space the share is 2 per cent. The industry is dominated by large integrated players consisting of both Indian and international service providers. • Demand from emerging countries is expected to show strong growth going forward. Tax holidays are also extended to IT sector for software technology parks of India (STPI) and special economic zones (SEZs). Further, the country is providing procedural ease and single window clearance for setting up facilities. The country’s cost competitiveness in providing IT services, which is approximately 3-4 times cheaper than the US continues to be its USP in the global sourcing market. • Disruptive technologies present an entire new gamut of opportunities for IT firms in India. Cloud represents the largest opportunity under Social, Mobility, Analytics and Cloud (SMAC), increasing at a CAGR of approximately 30 per cent to around US$ 650–700 billion by 2020. Social media is the second most lucrative segment for IT firms, offering a US$ 250 billion market opportunity by 2020. Online shopping has increased with the emergence of internet retailing and e-commerce. Group 3
  10. 10. IT services and products Industry Strategy and Analysis | 10 EFE Matrix Group 3 EXTERNAL FACTOR EVALUATION (EFE) MATRIX S.No. EXTERNAL FACTORS WEIGHT RATING WEIGHTED SCORE Opportunities 1 Greater scope for innovation 0.14 4 0.57 2 Increased focus on high end work like consulting and KPO 0.11 1 0.11 3 Increase in demand for IT services 0.07 3 0.21 4 Greater scope to service domains like transportation, infrastructure 0.07 2 0.14 5 Helps client shape strategies to fight global recession 0.04 3 6 Expansion into new geographies 0.07 1 0.07 Threats 1 Global economic slowdown 0.11 2 0.21 2 US govt. against outsourcing 0.07 2 0.14 3 Shrinking margins due to rising wage inflation 0.04 1 0.04 4 Rupee - dollar movement affects revenue and hence margins 0.11 3 0.32 5 Increased competition from low wage countries like China, Indonesia etc. 0.07 2 0.14 6 Increased competition from foreign firms. 0.11 2 0.21 TOTAL 1.00 2.18
  11. 11. IT services and products Industry Strategy and Analysis | 11 CPM Matrix Group 3 COMPETITIVE PROFILE MATRIX TCS INFOSYS Critical Success Factors Weight Rating Score Weight Rating Score Employee competitiveness 0.11 2 0.22 0.11 4 0.44 Scalability 0.14 4 0.56 0.14 3 0.42 Technology/ Innovation 0.14 3 0.42 0.14 3 0.42 Financial position 0.08 5 0.42 0.08 3 0.25 Price Competitiveness 0.08 4 0.33 0.08 3 0.25 Process Quality 0.14 3 0.42 0.14 5 0.69 Client involvement 0.11 3 0.33 0.11 3 0.33 End - to - end solutions 0.08 4 0.33 0.08 3 0.25 Management 0.11 4 0.44 0.11 3 0.33 TOTAL 1.00 3.47 3.39 Develop the value chain of IT industry ( general company specific) Value Chain The value chain (or the more conventional supply chain) is one of the most fundamental and crucial structural concepts of any industry. In resources sector, the discrete steps are exploration, extraction, processing and distribution. In finished goods manufacturing sector, materials flow through procurement, production, distribution to retail stages. Curiously though, there is no single IT industry model that is widely accepted by technology professionals. This model is meant to conform to McKinsey's MECE principle (Mutually Exclusive Collectively Exhaustive). Given the intricacies of the model, it is almost futile to explain without the visual representation of the model. Please refer to the Value Chain model below Overview The Value Chain is made up of three discrete tiers: Infrastructure, Application and Delivery. There are a total of eleven Industry Roles, including the two recent additions to the delivery channels (i.e. App
  12. 12. IT services and products Industry Strategy and Analysis | 12 Store, Cloud Computing Provider). A single IT vendor may play one or more roles. For instance, Ingram Micro, the world's largest IT distributor, plays only the Retailer / Enterprise Reseller role. In contrast, Hewlett-Packard, which is the most comprehensive IT vendor, participates in at least seven roles. There are two Customer Segments: Business (B2B) and Government (B2G), and Consumer (B2C), which are served by overlapping channels. Diagrammatic representation Group 3
  13. 13. IT services and products Industry Strategy and Analysis | 13 "Upstream" Infrastructure • The Hardware Vendors design, manufacture, and market computing systems and equipment. Dell, Lenovo, Apple, Cisco and EMC are among the well-known names in this space. Supporting these vendors are global outsourced design and manufacturing providers (e.g. Foxconn, Compal, Flextronics) and component suppliers (e.g. Intel, TSMC, Qualcomm and Samsung). • There are only a handful of Operating System Vendors. As computing hardware is closely knitted with the operating system, they are usually bundled and sold together. Microsoft dominates the desktop arena while, in the server space, several hardware vendors offer their own proprietary hardware and operating system combination as an integrated package (e.g. Sun Microsystems servers running Solaris OS). • The Infrastructure Software Vendors primarily serves the B2B and B2G market. They provide heavy-duty and sophisticated software engines (e.g. databases, messaging, networking, and security) that are the backbone of enterprise computing. Major players include Oracle, CA, BMC, and VMWare. "Midstream" Application • Application Vendors develop software applications into standardized products which are then sold to customers. These vendors own the software code and brand names of these products. Classic examples are Microsoft (Office), Adobe (Photoshop), SAP (Business One) and Oracle (E-Business Suite). • Application Developers, on the other hand, provide application development services to enterprises for building highly customized systems. Accenture, Capgemini, TCS, and Infosys are notable application developers. Group 3
  14. 14. IT services and products Industry Strategy and Analysis | 14 "Downstream" Delivery • The delivery tier is the most fragmented as they are many paths to reach the customers. The retail channels through Retailers and App Store suits the B2C segment. B2B and B2G customers handle bulk licensing and large scale procurement through Enterprise Resellers and receive project-level support from Enterprise Class Vendors to deploy major solutions (e.g. enterprise resource planning). Vertically integrated companies such as Apple, Oracle, and IBM, operate their own delivery channels. Prominent cases of Enterprise Class Vendors are Salesforce.com, Google, Cognizant, IBM Global Services and Fujitsu. • The cloud-based delivery channel is a revolutionary innovation as it shifts computing power and complexity from the user to the vendor-managed cloud. As a result, the computing paradigm can finally migrate from an ownership/self-operate model to a utility-like/pay-per-use Group 3 system. Conclusion The Value Chain is an important foundation in the understanding of the IT industry structure. The eleven industry roles are useful classifications to group vendors based on similar business models, value creation processes and market behaviors. All IT companies, with rare exceptions, fall into one of these roles.
  15. 15. IT services and products Industry Strategy and Analysis | 15 Porter five forces analysis 1) Factors Affecting Rivalry Among Existing Competitors To what extent does pricing rivalry or non-price competition (e.g., advertising) erode the profitability of a typical firm in this industry? Group 3 Characterization (Current) Future 1. Degree of seller concentration? High Will increase with the increasing trend of startups 2. Rate of industry growth? Growth rate 7.4% over 2012-13 9-11 % 3. Significant cost differences among firms? Yes No 4. Excess capacity? No No 5. Cost structure of firms: sensitivity of costs to capacity utilization? No No 6. Degree of product differentiation among sellers? Brand loyalty to existing sellers? Cross-price elasticities of 1) High 2) Less 3) Less 1) High 2) Less 3) Less 7. Buyers’ costs of switching from one competitor to another? Yes Switching cost will be relatively less. 8. Are prices and terms of sales transactions observable? Yes Yes 9. Can firms adjust prices quickly? No In future high probability of dynamic pricing.
  16. 16. IT services and products Industry Strategy and Analysis | 16 10. Large and/or infrequent sales orders? Group 3 No, as IT spending is always huge and planned. No. 11. Use of “facilitating practices” (price leadership, advance announcement of price changes)? Yes, Industry has first mover advantage. Yes 12. History of “cooperative” pricing? No, it is not possible as market forces are highly competitive. No. 13. Strength of exit barriers? No, entry and exit is easy. No. 2) Factors Affecting the Threat of Entry To what extend does the threat or incidence of entry work to erode the profitability of a typical firm in this industry? Characterization (Current) Future 14. Significant economies of scale? Yes Yes 15. Importance of reputation or established brand loyalties in purchase decision? Yes Yes 16. Entrants’ access to distribution channels? Yes, there are strong players in each segment Tier-I,II and III companies. Yes 17. Entrants’ access to raw materials? Yes, resources are easily available. Yes
  17. 17. IT services and products Industry Strategy and Analysis | 17 18. Entrants’ access to technology/know-how? Group 3 Yes Yes 19. Entrants’ access to favorable locations? Yes, IT penetrated into tier II & III cities. Yes 20. Experience-based advantages of incumbents? Yes, Large corporate don't risk outsourcing to firms of relative smaller size. Yes 21. “Network externalities”: demand-side advantages to incumbents from large installed Yes Yes 22. Government protection of incumbents? No No 23. Perceptions of entrants about expected retaliation of incumbents/reputations of incumbents for “toughness”? Minimum, industry is diversified in terms of verticals and geography and people dependent. Minimum, industry is diversified in terms of verticals and geography and people dependent.
  18. 18. IT services and products Industry Strategy and Analysis | 18 3) Factors Affecting or Reflecting Pressure from Substitute Products and Support from Complements To what extend does competition from substitute products outside the industry erode the profitability of a typical firm in the industry? Group 3 Characterization (Current) Future 24. Availability of close substitutes? Not for all IT solution. Not for all IT solution. 25. Price-value characteristics of substitutes? Price of substitutes is generally high. Price of substitutes will be high. 26. Price elasticity of industry demand? High Will be high 27. Availability of close complements Yes, hardware Yes 28. Price-value characteristics of complements? Price of hardware is comparatively higher and most cases it is bundled with software. Price of hardware might be comparatively lower with the invention of cloud technologies.
  19. 19. IT services and products Industry Strategy and Analysis | 19 4) Factors Affecting or Reflecting Power of Input Suppliers To what extend do individual suppliers have the ability to negotiate high input prices with typical firms in this industry? To what extend do input prices deviate from those that would prevail in a perfectly competitive input market in which input suppliers act as price takers? Group 3 Characterization (Current) Future 29. Is supplier industry more concentrated than industry it sells to? Human Resources: High Hardware: Less Office space: High Human Resources: High Hardware: Less Office space: High 30. Do firms in industry purchase relatively small volumes relative to other customers of supplier? Is typical firm’s purchase volume small relative to sales of typical supplier? Human Resources: No, Yes Hardware: Yes, Yes Office space: No, No Human Resources: No, Yes Hardware: Yes, Yes Office space: No, No 31. Few substitutes for suppliers’ input? Human Resources: High Hardware: Less Office space: High Human Resources: High Hardware: Less Office space: High 32. Do firms in industry make relationship-specific investments to support transactions with specific suppliers? Human Resources: Yes Hardware: Yes Office space: Relatively no, being SEZ mostly with government. Human Resources: Yes Hardware: Yes Office space: Might be yes, being SEZ is seen as not viable option to continue by 33. Do suppliers pose credible threat of forward integration into the product market? Yes, increasing cases of supplier/sub contractors establishing relationship directly with customers. Relatively less, as increasing contractual norms and regulation in contracts.
  20. 20. IT services and products Industry Strategy and Analysis | 20 34. Are suppliers able to price discriminate among prospective customers according to ability/willingness to pay for input? Group 3 Yes Yes 5) Factors Affecting or Reflecting Power of Buyers To what extend do individual buyers have the ability to negotiate low purchase prices with typical firms in this industry? To what extent to purchase prices differ from those that would prevail in a market with a large number of fragmented buyers in which buyers act as price takers? Characterization (Current) Future 35. Is buyers’ industry more concentrated than industry it purchases from? No, as large number of verticals and geographies. No 36. Do buyers purchase in large volumes? Does a buyer’s purchase volume represent large fraction of typical seller’s sales revenue? 1) Yes, normally IT deals are large 2) Yes. 1) Yes, normally IT deals are large 2) Yes. 37. Can buyers find substitutes for industry’s product? Very less, as substitutes are normally inefficient and difficult to sustain. Very less. 38. Do firms in industry make relationship-specific investments to support transactions with specific buyers? Yes, Customer relationship management is very valuable in this industry. Yes, Customer relationship management is very valuable in this industry.
  21. 21. IT services and products Industry Strategy and Analysis | 21 39. Is price elasticity of demand of buyer’s product high or low? Group 3 Price elasticity is high Price elasticity is high 40. Do buyers pose credible threat of backward integration? No, as outsourcing is cheaper. No 41. Does product represent significant fraction of cost in buyer’s business? Yes Yes, hardware and software cost reduced by cloud technologies 42. Are prices in the market negotiated between buyers and sellers on each individual transaction or do sellers “post” a “take-it-or-leave it price” that applies to all transactions? No, normally services are negotiated. No Identify the Market leader and second rank company of the industry. Analysis of the business level strategies of each of the TCS and Infosys companies and VRIO framework for each of these companies. TATA Consultancy Services (TCS) - Strategies • Company strategy of strengthening the current business and investing in future revolves around 1) Customer centricity 2) Global Network delivery model (GNDM) 3) full services portfolio 4) non-linear business models and 5) experience uncertainty. • Customer Centricity: It is about 1) staying relevant to the customer and 2) Helping customers to define their future i.e.co-creation model.
  22. 22. IT services and products Industry Strategy and Analysis | 22 • Full Services Portfolio and GNDM: TCS adopted diversified portfolio of software offerings across geographies and balanced the dependency across its market and portfolio of offerings.TCS has adopted a model of strong penetration into new geographies and new service lines, through acquisition of local companies in that region. • Non-linear business model: TCS non-linear growth model by offering solutions as product Ex: TCS Bancs(Banking) and mpos (Retail), platform Ex: fully integrated IT as service model and services Ex: Large number of industry solutions. • Experience Uncertainty: It is TCS brand promise to customers.TCS helps customers experience the certainty by reliably delivering business results, providing leadership to drive transformation and partnering for success. SWOT Analysis Strengths Ability to win and execute large, billion-dollar outsourcing contracts, increasingly viewed by customers in the same league as IBM and HP. Group 3 Weakness Made progress in commoditised services, but still lags some peers and multinational rivals in high-end consulting offerings. Opportunity Best positioned among all Indian vendors to disrupt the global league of IBM-HP-Accenture. Threat People-led linear growth means Cognizant can beat it, and there are no visible leaders beyond N Chandrasekaran. That could pose a big challenge.
  23. 23. IT services and products Industry Strategy and Analysis | 23 VRIO Framework Analysis Summary of VRIO, Competitive Implications, and Economic Implications Parameter Valuable? Rare? Group 3 Costly to Imitate? Organized Properly? Competitive Implications Economic Implications Global consulting and Domain Consulting practices Yes Yes Yes No Temporary Advantage Above Normal (at least for some amount of time) Geographical penetration Yes Yes Yes Yes Sustained Advantage Above Normal Human Resources Yes Yes Yes Yes Sustained Advantage Above Normal Strategic Alliances Yes No Competitive Parity Normal Advanced Technology Yes Yes No Temporary Advantage Above Normal Reputation Yes Yes Yes Yes Sustained Advantage Above Normal Infosys 3.0 - Strategies • Infosys aims to transform into a business solutions provider. The company will not merely provide software services and solutions, but also do a lot of transformational projects. Along with the IT services it will also work with the business side of clients. • The company is focusing on several new solutions, like cloud computing, Enterprise Mobility and Sustainability, based on current market needs.
  24. 24. IT services and products Industry Strategy and Analysis | 24 • It has groups providing learning solutions and business platform solutions. These along with country focused teams are the main engines for future growth • It has consolidated its verticals into four -- Financial Services & Insurance; Manufacturing; Energy, Utilities, Communications and Services; and Retail, Logistics and Life Science. Infosys removed of horizontal structure of focusing on specific areas like ERP,CRM, Data Analytics within the verticals. • It also has another vertical, Infosys Public Service subsidiary, which will essentially scout for US government public service work. • It has grouped its offerings into three groups -- Business Transformation (consulting work, systems integration, enterprise solutions etc.); Business Operations (application development, maintenance, infrastructure management etc.); Business Innovation (products, platforms and solutions). These will be focus areas SWOT Analysis Strengths Early positioning as high end differentiated player thanks to Nandan Nilekani and NR Narayana Murthy, investors and customers prefer the company for its established processes and predictability. Group 3 Weakness Lagging peers in making strategic, 'game-changing acquisitions, consulting business has not delivered the results, losing price premiums, lost its No.2 position in the US market to Cognizant last year. Opportunity Best positioned to replicate the Accenture model from offshore, a game-changing acquisition in a new geography could help the company raise its profile. Threat Ongoing visa abuse case and federal investigations in the US could affect brand and business, management transition from founders to professionals, rival Cognizant could overtake the No. 2 position.
  25. 25. IT services and products Industry Strategy and Analysis | 25 VRIO Framework Analysis Summary of VRIO, Competitive Implications, and Economic Implications Parameter Valuable? Rare? Group 3 Costly to Imitate? Organized Properly? Competitive Implications Economic Implications Global consulting and Domain Consulting practices Yes Yes Yes Yes Sustained Advantage Above Normal Geographical penetration Yes Yes Yes No Temporary Advantage Above Normal Human Resources Yes Yes Yes Yes Sustained Advantage Above Normal Strategic Alliances Yes No Competitive Parity Normal Advanced Technology Yes Yes No Temporary Advantage Above Normal Reputation Yes Yes Yes No Temporary Advantage Above Normal
  26. 26. IT services and products Industry Strategy and Analysis | 26 Comments on the changes in Business level strategies required by these companies looking at the future trends in the industry TATA Consultancy Services Strategies TATA Consultancy Group 3 Services Comments Billing model Transition from Time and Material model -> Fixed pricing model -> Transaction based pricing model. Currently 80% of TCS revenue is on fixed price model, they gave with traditional Time and Material model post 2008 global slowdown and identified huge potential of increasing margins. TCS CEO N.Chandrasekaran recently announced that their next strategy in billing model is to obtain 70% of revenue through Transaction based pricing. Example: In transaction based pricing TCS will get billed for each phone call or loan application processed in TCS infrastructure and software application. Complexity of this model to IT service provider is their success is much more closely linked with the success of their customers in their own business. Sales & Marketing TCS model of going into new geographies and new service lines, which is paying off now. This is evident from the broad-based growth that the company has witnessed across geographies like the UK and Europe, growth markets like India, Asia-Pacific, Latin America and the Middle East and across verticals like financial services, retail, manufacturing and telecom. It's a one stop shop for anything in the outsourcing chain. Be it call centre work, testing, application management, infrastructure management or any other service. This helps it win multi-year, billion dollars contracts of the kind that global IT providers like IBM and EDS used to win in late nineties and early part of 2000. Need to adopt relationship based approach, high quality Infosys will not enter into a deal if it feels at the outset that it will not give them high margins, while TCS will accept the deal but will work at getting higher
  27. 27. IT services and products Industry Strategy and Analysis | 27 Group 3 deal pursuit team and aggressive sales investments. margins, by increasing work offshore or increasing productivity. Key Verticals Extending arm to customers during global financial crisis by adopting flexible pricing. TCS was flexible with clients when the industry was hit by recession. It was the first company to come out and say that two of its banking accounts were in trouble and hence we are adopting a unique pricing mode to continue work with them. Today, it has managed to get a larger wallet share from these players. Providing service for both high and low business customers There are two ways of growth. Either take a bet on the high- value business and let go of bread-and-butter business. Or you may focus on both. TCS chose the latter strategy. And this is working well for them Product line TCS banc's - product suite for all types of financial institution. TCS has to improve its offerings in product portfolio in banking products especially to win deals of multinational banks abroad. Acquiring domestic IT opportunities. TCS Banc's should focus on winning core banking deals with new banks which will be licensed to operate by RBI. Core banking transformation success in State Bank of India and India post would help to compete with Infosys Finacle. Organization Structure Restructure big accounts/verticals into individual units with authority to take decision. TCS is more global and has deep penetration in its geography. The company was restructured into smaller units of USD 250 million each. In all these cases, the restructuring was done to make the individual parts grow faster. There was no big change in the direction Only eight senior executives were to report to the CEO directly. What this revamp has done is to allow TCS to remain agile, make quick decisions and move forward with a clear strategic direction. Adapting to new visa rules and regulation. New visa regime rules in United states will burden the IT organization. There will be dynamic shift in the work force deployed across geographies. TCS will be able to handle the new dynamics due to deep penetration in any geography.
  28. 28. IT services and products Industry Strategy and Analysis | 28 Infosys Strategies Infosys 3.0 Comments Billing model Group 3 Recruiting more business and functional consultants, so that prospects for billing increases. Infosys aims to transform into a business solutions provider. This initiative dint yield expected results in the period of global downturn. May be future, it would increase the revenue earned from each infoscion. Sales & Marketing Building tomorrow's enterprise. The Infosys sales team was selling a vision of the future, laying down emphasis how the emerging technology trends will change their business, and why they should partner with Infosys to get ready for that change. Infosys changed its tagline to ‘building tomorrow’s enterprise’. But all this happen when companies were trying to save today's enterprise post economic crisis. Companies which were flexible on pricing could grab maintenance contracts when they came up for renewal, like HCL,TCS did. On the blueprint, Infosys’s new matrix structure should have ensured that the team pursued tomorrow’s opportunities as well as today’s business. But, in reality, that did not happen. The company lost the opportunity on the core business - Renewal of existing maintenance contract. Hence Infosys should focus on retaining existing client to build the tomorrows enterprise. Strategy of acquiring more IT projects from existing customers to reduce sales and marketing expense. Infosys desired too much for profitability that they spend less in sales and marketing (S&M). While they are spending couple of millions more and percentage has gone up from 4.8 percent few quarters back to just about 5, it’s still much less than what their top three peers spend. Further, not only the improvement in S&M—both spend and client outreach activity—is improving only a bit, its pace is also very low. We believe both the increase in S&M and pace are falling short of what is require. However Infosys believes that when demand conditions get better, it will get the growth back, without compromising its profits. That, in fact, is the promise of Infosys 3.0. With the new strategy, it is possible to be both a growth leader and a margin leader. However
  29. 29. IT services and products Industry Strategy and Analysis | 29 Group 3 temporary slow pace as quoted by Infosys, lead to increase in attrition compared to its peers. With huge accumulation of cash in hand, they need not compromise on spending on S&M to drive current profit vs. future growth. Retaining large client and increasing the ability to execute large project. Infosys's sales team was asked to pursue Infosys 3.0 opportunities (of creating tomorrow’s enterprise), as well as make the sales in existing businesses (maintenance, testing and business process outsourcing). The numbers show the sales team was getting carried away with 3.0. As a result, it was losing its edge in core markets. In North America, the biggest market for all Indian IT services companies, Infosys fell behind Cognizant in March 2011 quarter. (Cognizant’s quarterly revenues grew from USD 1,012.1 million to USD 1,069.9 million that quarter, while Infosys revenues shrank from USD 1,025.5 million to USD 1,020.5 million.) A quarter later, it happened in its largest vertical, banking and finance. The inevitable happened a year later: Cognizant overtook Infosys in overall revenues too. Infosys was losing out on another of its traditional strengths, dealing with large clients. The number of USD 100-million clients went from 13 to 15 in the last two years. At the same time, for TCS, it went up from 8 to 16, and even for underperforming Wipro it went from 3 to 10. Infosys should focus on its traditional strength of dealing large client, where they get repeat businesses and multiple deals. Key Verticals Increasing alliance with local geographic infrastructure providers. Infrastructure contracts usually involve data centre operation, services such as desktop management, local and wide area network operations management, and system integration work. Infosys has forged ties with cloud service providers to service infrastructure clients. This makes infrastructure deals asset-light and there is no need to use the balance sheet. Infosys is also willing to take over assets in small proportion, The change in strategy appears to be paying off. Infosys has almost doubled its large deal wins (greater than $50 million) from 5 in the Jan-March quarter of 2012-13 to 8 in the October-December quarter of the year. The total value
  30. 30. IT services and products Industry Strategy and Analysis | 30 Group 3 of large deals increased from $400 million to $731 million in the same period. Some of the big wins included those from the BMW Group and Harley Davidson, both of which were infrastructure services led. Increasing revenue from high-value business customers. There are two ways of growth. Either take a bet on the high- value business and let go of bread-and-butter business. Or you may focus on both. Infosys chose the former strategy. We have to wait to see the results. Product line Increasing finacle reach into North America and Europe. As spending on IT by bank seems to increase among US and European banks, Infosys should focus winning more deals for its banking product suite finacle in western nations apart from its traditional sales regions such as South Asia, Southeast Asia, Africa and Australia. Infosys strong sales experience for its services business in western nations will help in capturing the market. Acquiring domestic IT opportunities. Infosys should focus on winning core banking deals with new banks which will be licensed to operate by RBI. Though Infosys finacle is best suited for Indian banks, it should not forget the critical deals it lost to TCS i.e. Core banking transformation of State Bank of India Organization Structure Revamping the organisation structure and founder returning back as Chairman. Reorganisation is not new at Infosys, but current one at a cost of many veterans damaged the image and stability of organisation. However return of Founder Mr.Narayanan Murthy increased the confidence and moral among all its stake holders. Adapting to new visa rules and regulation. New visa regime rules in United states will burden the IT organization. There will be dynamic shift in the work force deployed across geographies. Apart from that Infosys law suit on illegal use of visa's will affect its brand image. Infosys needs a comprehensive branding strategy to position itself stronger. Business strategy diamond model (Arenas, Vehicle , Differentiation, stages and economic logic for 2012-13 and advice for the future)
  31. 31. IT services and products Industry Strategy and Analysis | 31 Group 3 Infosys’ Business Strategy Diamond Arenas: 1. Offers End to end enterprise risk management solutions. 2. Provides Social CRM and IT Shared Support Services. 3. Leader in various banking and e-commerce services. 4. Provides platform for Distribution, Procurement & Talent Management. 5. Services 798 clients across 30 countries. Vehicles: 1. Its acquisitions of the Portland Group (procurement space) and McCamish Systems LLC (insurance space) are aligned to its strategy of developing business platforms through partnerships and acquisitions. 2. A partnership between Infosys and P&G began in 2007 moving the cost structure from being capex intensive to opex based and reducing cycle time of realizing the return on investments. Arenas Economic Logic Staging Vehicles Staging: 1. Strengthen its strategic partnership with clients. 2. Increase its relevance with customers by offering end to end solutions. 3. Its vision is to become the most respected Consulting and Systems Integration firm in the world. 4. Focus on building custom software solutions for specific industries. 5. Plans to invest heavily in infrastructure and employees. Differentiator Differentiators: 1. Infosys is the first ‘IT Services / BPO organization’ in India, covering multiple locations across India, to receive the ISO 22301 accredited certification awarded by British Standards Institution. 2. Capable of providing end to end solutions. 3. Possesses SAP CPM, BO and RSC CoEs. 4. Provides in-house technical and domain certifications for sustained people development. 5. Capable of providing global deployment. Economic Logic: 1. The company is focused on “long-term growth opportunities” to “deliver higher business value.” 2. Infosys has nearly Rs 20,000 crores, or about $3.8 billion as cash. Too much cash in the bank makes it ultra-conservative. 3. The company has shown excessive risk-aversion, as revealed in the high cash balances of nearly Rs 19,752 crores. Infosys has been conservative in its growth strategy.
  32. 32. IT services and products Industry Strategy and Analysis | 32 Group 3 TCS’ Business Strategy Diamond Arenas Staging Vehicles Economic Logic Differentiator Arenas: 1. TCS currently has offices in North America, South America, UK & Ireland, Europe, Asia Pacific, Middle East & Africa, and India. 2. TCS includes Application development and maintenance, BPO, Enterprise Solutions, IT IS in its service line. Vehicles: 1. By acquiring Computational Research Laboratories TCS has acquired expertise in High Performance Computing (HPC) applications and Cloud services. 2. By acquiring Alti SA TCS has gained Access to blue-chip French and European clients in banking, luxury, manufacturing sectors. Staging: 1. Its strategy for long-term profitable growth is based on continuously scaling its core IT services business, while investing in new customers, services, markets and industries. 2. The Company’s strategy of strengthening the current business and investing in the future revolves around Customer centricity, Full services portfolio, Global network delivery model (GNDMTM), Non-linear business models. Differentiators: 1. Innovation Labs and Co-innovation network (COIN) helps clients achieve and maintain a competitive advantage by offering research-based solutions. 2. TCS’ full services portfolio combines traditional IT and Remote Infrastructure services with knowledge-based services such as Consulting & Business Process Outsourcing. 3. TCS’ global engagement model allows clients to choose the sourcing strategy best suited to your business needs by taking the follow-the- sun approach. Economic Logic: 1. On an annual basis, TCS has delivered 277 basis points improvement in operating margins to 26.5 per cent (as per US GAAP) and 429 basis points in terms of net margins to 22.88 per cent. 2. TCS continues to invest in its business by maintaining pricing discipline and improving internal efficiency. And now, as growth returns to the industry, the cost discipline will give it an operating leverage.
  • DharaniKumar74

    Mar. 31, 2019
  • samuellucas520900

    Sep. 25, 2017
  • naycheoo

    Jan. 22, 2017
  • mblt1972

    Nov. 14, 2015
  • fatehveersingh54

    Oct. 18, 2015
  • hahimive1

    Oct. 9, 2015
  • RichaTupsakhare1

    Sep. 11, 2015
  • AbhirajPurohit

    Sep. 3, 2015
  • rutujaladkat

    Mar. 11, 2015
  • HamzaAmara1

    Dec. 21, 2014
  • harisbudiman2

    Dec. 20, 2014
  • janmejayrathore

    Nov. 2, 2014

Strategic assessment of IT services and Products Industry by IIM Indore PGP Students.

Views

Total views

8,015

On Slideshare

0

From embeds

0

Number of embeds

23

Actions

Downloads

0

Shares

0

Comments

0

Likes

12

×