Internationalization Infosys-KSA parnership Infosys-KSA collapse

1. INFOSYS – KSAINFOSYS – KSA
Internationalization
AMITY BUSINESS SCHOOL
4th
March 2009

2. GROUP MEMBERS
• V.Karthik
• Himanshu
• Paritosh
• Kshitij
• Vivek

3. INFOSYS Targets USA
Narayan Murthy along with 6 professionals founded Infosys in 1981
He focused on the world's most challenging market - the US.
2 reasons for this
1. First, there was no market for software in India at the time. He
believed that Indian software companies should export
products in which they had a competitive advantage
2. The second feature of the strategy was "moving up the value
chain" – which meant getting involved in a software
development project at the earliest stage of its life cycle

4. INFOSYS – KSA Partnership
• 1987: Infosys entered into a joint venture with Kurt
Salmon Associates (KSA), a leading global management
consultancy firm KSA-Infosys was the first Indo-
American joint venture in the US.
• In 1988-89, Infosys set up its first office in the US
• But Infosys increased its share from 40% to 50% stake
in 1993. The name of the new company was changed to
Software Sourcing Corporation
• KSA was responsible for sourcing projects for the joint
venture and Infosys provided the software expertise and
technical knowledge

5. Between 1987 and 1994 he headed the technical
operations of KSA/Infosys ( joint venture between
Infosys and KSA as Vice President (Technical)
Was responsible for managing the relationship
with KSA
“At that time, this joint venture allowed us to build
credibility in a market where we were relative
newcomers and gave us access to a number of
opportunities we would not have otherwise had”
S. Gopalakrishnan

6. INFOSYS projects
• Reebok of France was looking for a software system to
handle its distribution management at the same time
• The project involved designing and building an automated
ordering and distribution system that would track and
maintain Reebok orders worldwide. The project team
overcame many hurdles, including the language barrier
(many of the project specifications were provided in
French) and completed the project ahead of time, which
won it accolades and a new customer for life.
• In 1989, Infosys bagged another major contract from
Digital Equipment.
• By 1993, it worked on projects for GE, Nestle, Holiday Inn,
and many other firms

7. 1991 Economic reforms
• In 1991, the Government of India announced a number of measures
to address the economic and financial difficulties the country had
been facing.
• The package contained policies that were aimed at stimulating
investment in many industries and included favorable incentives
designed to foster the growing Indian software industry
• Manmohan Singh facilitated Infosys’ IPO in early 1990s
• In the early 1990s, with the opening up of the Indian economy, many
export-oriented software companies were set up in India that
created the momentum
• By mid-1990s, Infosys was competing not only with Indian software
majors like TCS & Wipro, but also with overseas players like
Cambridge Technology Partners and Sapinet, which offered
software solutions

8. PARTNERSHIP DISSOLVED
• In 1989 the JV with KSA almost collapsed
• Infosys planned to wind up in 1989
• In early 1990s Manmohan Singh facilitated Infosys’ IPO to issue its shares at
a premium
• In 1994, the joint venture with KSA was dissolved with Infosys keen to have
direct access to clients and branch out into other sectors
• In 1995 set up it’s own subsidiary -> the entry mode that affords highest level
of control & also presents highest level of risk
• Infosys got support from both domestic & US govt to set up wholly owned
subsidiary in US
• Infosys started a marketing office in the States and marketed its products
based on its own brand name
• Infosys transferred managerial expertise & technological skills to their
subsidiaries operating in USA

9. Contd…….
x
19871987
19941994

10. The collapse of the KSA joint venture led Infosys to
its first crisis. The company was on the verge of
collapse.
But Murthy had the courage of conviction. 'If you all
want to leave, you can. But I am going to stick
(with it) and make it,' Murthy told them.
The other partners decided to stay. And thus began
to germinate the seeds of Infosys' enormous
growth.
Collapse

11. Before & After

12. A successful joint venture can offer:
• Access to new markets and distribution
networks
• Increased capacity
• Sharing of risks and costs with a partner
• Access to greater resources, including
specialised staff, technology and finance

13. The risks of joint ventures
• Partnering with another business can be complex
• It takes time and effort to build the right relationship
• Who has effective control?
• Whether operations should conform to foreign firm’s standards or
domestic
• the objectives of the venture are not 100 per cent clear and
communicated to everyone involved
• the partners have different objectives for the joint venture
• different cultures and management styles result in poor integration
and co-operation

14. CONTROL
OWNERSHIP
OWNEDEQUITYFUNDINGRESOURCES
WHOLLYSHAREDCROSS EQUITYSHAREDSHARED
NO
LINKAGE
RISK
COMMITMENT
INFOSYS
SUBSIDIARY
KSA /
INFOSYS
LEVEL OF
WHOLLY-
OWNED
19951987
JV
ENTERPRISE SEGMENTATION MATRIX