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Premium member Presentation Transcript Strategic Analysis Of Infosys : Strategic Analysis Of Infosys Presented by: GROUP 4 Jinoj G R PGP/13/23 Mohamed Sabir PGP/13/30 S M Sundarajan PGP/13/40 Sachin Kumar PGP/13/43 Vikas Yadav PGP/13/61 Shashank Murthy PGP/13/63 Agenda : Agenda IT Industry Overview PESTLE Analysis Market Size, Share, Customer Profile PORTERS Five Forces SWOT Analysis Infosys Introduction McKinsey’s 7 S Model SWOT Analysis Business Model BCG Matrix Analysis of Strategy using Ansoff’s Matrix Recommendations INDIAN IT INDUSTRY OVERVIEW : INDIAN IT INDUSTRY OVERVIEW INTRODUCTION Indian economy impacted by recessionary trends, Slowdown in GDP growth to seven per cent, IT-BPO industry in India is become a growth engine for the economy, During the year, the sector maintained its double digit growth rate and was a net hirer, Growth has been fuelled by increasing diversification in the geographic base and industry verticals. Slide 4: Indian IT-BPO industry is estimated to achieve revenues of USD 79.7 billion in FY2010, Direct employment is expected to reach nearly 2.23 million, Indirect job creation is estimated to touch 8 million, Software and services exports (including BPO) are expected to account for over 99 per cent of total exports, While the current mood is that of “cautious optimism,” the industry is expected to witness sustainable growth over a two-year horizon, going past its USD 60 billion export target in FY2011. INDIAN IT INDUSTRY OVERVIEW-(Cont.) ENVIRONMENTAL SCANNING : ENVIRONMENTAL SCANNING EXTERNAL ENVIRONMENT PESTLE ANALYSIS : EXTERNAL ENVIRONMENT PESTLE ANALYSIS Slide 7: 1. Political stability: Indian political structure is considered stable enough expect the fact that there is a fear of hung parliament‟ (no clear majority). 2. U.S. government has declared that U.S companies that outsource IT work to other locations other than U.S. will not get tax benefit. 3. Government owned companies and PSUs have decided to give more IT projects to Indian IT companies. 4. Terrorist attack or war. Positive Deep -ve Positive Negative Political Slide 8: Economic Global IT spending (demand) 2. Domestic IT Spending (Demand): Domestic market to grow by 20% and reach approx USD 20 billion in 2008-09 - NASSCOM 3. Currency Fluctuation 4. Real Estate Prices: Decline in real estate prices has resulted reducing the rental expenditures. 5. Attrition: Due to recession, the layoffs and job-cuts have resulted in low attrition rate. 6. ECOMONIC ATTRACTIVENESS due to cost advantage and other factors. Negative Positive Negative Mildly +ve Mildly +ve Positive Break up of Total Global IT Spending : Break up of Total Global IT Spending The Global IT spending is expected to decline steeply below the expected levels of $869 billion by 2010. Financial Attractiveness of Top 5 Global Services Locations on a scale of 4 : Financial Attractiveness of Top 5 Global Services Locations on a scale of 4 India continues to the leader in terms of “Financial Attractiveness” Slide 11: Social Language spoken: English is widely spoken language in India, English medium being the most accepted medium of education. Thus, India boasts of large English speaking population. 2. Education: A number of technical institutes and universities over the country offer IT education. 3. Working age population Highly +ve Highly +ve Positive Number of IT graduates in India : Number of IT graduates in India India creates a large pool of skilled IT professionals each year, to meet industry requirements Working Population as a percentage of Total population : Working Population as a percentage of Total population As per NASSCOM Strategic Review report, India is one of the few countries to have an increasing share of working population. Slide 14: Technological Telephony: India has the worlds lowest call rates (1-2 US cents). Expected to have total subscriber base of about 500 million by 2010. ARPU for GSM is USD 6.6 per month. India has the second largest telephone network after china. Teledensity – 19.86 % Enterprise telephone services, 3G, Wi-max and VPN are poised to grow. 2. Internet Backbone: Due to IT revolution of „90s, Indian cities and India is well connected with undersea optical cables. 3. New IT technologies: Technologies like SOA, Web 2.0, High-definition content, grid computing, etc and innovation in low cost technologies is presenting new challenges and opportunities for Indian IT industry. Highly +ve Positive Positive Slide 15: Legal 1. IT SEZ requirement: IT companies can set up SEZ with minimum area of 10 hectares and enjoy a host of tax benefits and fiscal benefits. 2.Contract / Bond requirements: Huge debates surrounding the bonds under which the employees are required to work, which is not legally required. 3.IT Act: Indian government is strengthening the IT act, 2000 to provide a sound legal environment for companies to operate esp. related to security of data in transmission and storage, etc. 4. Companies operating in Software Technology Park (STPI) scheme will continue to get tax-benefit till 2010. Positive Negative Positive Mildly +ve Slide 16: Environmental Energy Efficient processes and equipments: Companies are focusing on reducing the carbon footprints, energy utilization, water consumption, etc. Positive OPERATING ENVIRONMENT : OPERATING ENVIRONMENT Current Position of IT – ITES Sector of India INDIAN IT INDUSTRY SECTOR : INDIAN IT INDUSTRY SECTOR Figures in US $ Billions FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 IT Services 10.4 13.5 17.8 23.5 31.0 Exports 7.3 10.0 13.3 18.0 23.1 -Domestic 3.1 3.5 4.5 5.5 7.9 BPO 3.4 5.2 7.2 9.5 12.5 -Exports 3.1 4.6 6.3 8.4 10.9 -Domestic 0.3 0.6 0.9 1.1 1.6 Engineering Services & R&D, 2.9 3.8 5.3 6.5 8.5 -Exports 2.5 3.1 4.0 4.9 6.3 -Domestic 0.4 0.7 1.3 1.6 2.2 Total Software & services revenues 16.7 22.5 30.3 39.5 52.0 -of which Exports are 12.9 17.7 23.6 31.3 40.3 1. MARKET SIZE: : 1. MARKET SIZE: Revenues from domestic and export (in USD billion) More than 80% of revenues come from Exports and only 20% from domestic business Slide 20: Contribution of IT industry to Indian GDP Number of employees in IT Sector (Direct employment) IT industry contributes to around 5.2% to Indian USD 1 trillion GDP. IT industry provides direct employment to more than 20 lakh people, indirect employment number goes far beyond..!! 2. MARKET SHARE: : 2. MARKET SHARE: Indian IT industry Revenue Break-up by company Indian IT market is dominated by a few large companies with presence of a number of small and medium companies Sources of Revenue: : Sources of Revenue: Indian IT industry Revenue Break-up by sector IT industry is largely dependent on Banking and financial industry. With the decline in these sectors, the revenue from these is expected to decline, hurting the bottomline of IT majors. This calls for exploring new verticals. Slide 23: Revenue By Geography Indian IT industry Revenue Break-up by Country of Presence (Geography) R&D Spending of IT majors. The Americas and Europe continue to be the key markets for the Indian IT-ITeS sector. As compared to International IT giants, Infosys and other Indian companies are lack in R&D spending. 3. CUSTOMER PROFILE: : 3. CUSTOMER PROFILE: BT (British Telecom) is Infosys’ largest client – contributing 6.9% to Infosys revenue. Recent Announcement of Large IT Projects:- : Recent Announcement of Large IT Projects:- Region / Company Most Likely IT Players/ Short – listed Companies AUSTRALIA – Telstra, Qantas, Infosys, Satyam, IBM, EDS National Australian Bank JAPAN – Nissan Motor Corp TCS, Wipro, Infosys, Patni INDIA – LIC TCS, Infosys, Wipro, L&T Infotech UK – Dept. of works & pensions, HM Revenue and Customs, TCS, Infosys, Wipro, Ministry of Justice Accenture, Atos Origin (Worth US $ 2-3 Billion ) PORTER’S FIVE FORCES MODEL (INDIAN IT INDUSTRY) : PORTER’S FIVE FORCES MODEL (INDIAN IT INDUSTRY) Slide 28: Other offshore locations such as Eastern Europe, the Philippines and China, are emerging and are posing threat to Indian IT industry because of their cost-advantage. However, this should have an impact only in the medium to long term. Price quoted for projects is a major differentiator, the quality of products being same. Large number of IT companies vying for IT projects – resulting in high competition for projects. Huge decline in IT expenditure: Indian IT sector is dependent on USA and BFSI in particular for majority of its revenues, and with the recent financial crisis, the new spending from these has reduced tremendously. 3. However, for the existing products and services, the clients continue the old companies. Low capital requirements. Large value chain, space for small enterprises. MNCs are ramping up capacity and employee strength. the clients continue the old companies. Due to slowdown, the job-cuts, the layoffs and bleak IT outlook. Demand and supply of IT professionals is no longer that favourable to employees. Availability of vast talent pool – fresher's and experienced. RIVALRY AMONG FIRMS: High Commoditized offerings 'low-cost, little-differentiation' positioning. high industry growth Strong competitors – few numbers of large companies. SWOT ANALYSIS : SWOT ANALYSIS STRENGTHS : STRENGTHS Cost advantage – most financially attractive country in a study by A T Kearney on global IT destinations Breadth of service offering – end to end solutions including high end services like IT consultancy and KPO Ease of scalability – more than half of India's population is less than 25 years old. English speaking IT – ITES professionals growing at a good pace Quality and maturity of process – many players have quality standards such as CMM to differentiate from other low cost advantage countries Global and 24/7 delivery capability – excellent internet backbone and telecommunications facilities enabling companies to develop 24/7 delivery capabilities from India itself WEAKNESSES : WEAKNESSES Excessive dependence on USA for revenues – US Companies are cutting down IT budget hence revenues to be hit hard of Indian IT firms Excessive dependence on BFSI sector for revenues – Banking sector is facing a crisis globally and is going to spend less on IT High rates of attrition – Although slowdown in global economy has lowered attrition rate but the industry still faces high attrition rates as compared to other sectors Decreasing competitive advantage – rising salary expenses is taking away the cost advantage enjoyed by India. OPPORTUNITIES : OPPORTUNITIES Greater scope for product innovation Increased focus on high end work like consulting and KPO Domestic demand for IT services is to grow at 20 % Greater scope to service domains other than BFSI such as Transportation, Infrastructure, etc. Satyam fiasco – Likely to have positive impact on business considering corporate governance, possibility of shifting of business, getting higher incremental business from overlapped clients, and winning new business from new clients THREATS : THREATS Global economic slowdown may continue for several years – hence low IT spending globally US Govt. against outsourcing Shrinking margins due to rising wage inflation Rupee-dollar movement affects revenue and hence margins Increased competition from foreign firms like Accenture, IBM etc. Increased competition from low-wage countries like China, Indonesia etc. Infosys : Infosys Founded in 1981 by Narayana Murthy and six others. Second Largest IT company Offices in 22 countries Development Centers in India, China, Australia, Uk etc. Went Public in 1993 Total No:of employees – 109882 Revenue – USD 4.6 billion Total No:of clients 568 INFOSYS : INFOSYS Vision "To be a globally respected corporation that provides best-of-breed business solutions, leveraging technology, delivered by best-in-class people." Mission "To achieve our objectives in an environment of fairness, honesty, and courtesy towards our clients, employees, vendors and society at large." SHAREHOLDING PATTERN - 2009 : SHAREHOLDING PATTERN - 2009 FINANCIAL SUMMARY : FINANCIAL SUMMARY Infosys Stock performance on NSE over last one year : Infosys Stock performance on NSE over last one year Infosys always beats stock market expectations. It believes in “delivering more than expectations” Revenue Break up by Geography - 2009 : Revenue Break up by Geography - 2009 Infosys is highly dependent on North American and European markets for 90% revenues…!! Revenue growth from different geographical segments over years : Revenues from US have declined and that from Europe improved. Revenue growth from different geographical segments over years Revenue Break up by Industry Segment- 2009 : Revenue Break up by Industry Segment- 2009 BFSI and Telecom contribute more than 50% to revenues. Revenue growth from Industry segments over years : Revenue growth from Industry segments over years Focus must shift from BFSI sector to other sectors. Revenue Break up by Services offered- 2009 : Revenue Break up by Services offered- 2009 Infosys must move up the value chain – concentrate more in consulting, BPO and KPO business. McKinsey’s 7 S Model : McKinsey’s 7 S Model Leadership Style: : Leadership Style: Infosys believes that leadership is one of the most essential ingredients of organizational success Leadership is based on high business vision and predominantly supportive styles Company has established “Infosys Leadership Institute”. Top management emphasizes on Open door policy, Continuous sharing of information, Takes inputs from employees in decision making, & Builds personal rapport with employees Staff (Human Resources): : Staff (Human Resources): Infosys is in knowledge-based industry, it focuses on the quality of the human resources At the entry level, it emphasizes on Selecting candidates who find the company's meritocratic culture satisfying, Superior academic records, Technical skills, and High level of learn ability. The company emphasizes on training and development of its employees on continuous basis Strategy: : Strategy: Infosys has adopted a client-focused strategy to achieve growth Focuses on limited number of large organizations throughout world Infosys commands premium margins Company has a image of quality driven model rather than cost-differentiating model Increase business from existing and new clients Slide 50: Expand geographically Enhance solution set It has added new service offerings, such as consulting, business process management, systems integration and infrastructure management, which are major contributors to its growth. Develop deep industry knowledge Enhance brand visibility Pursue alliances and strategic acquisitions Strategy (Cont.) Shared Values : Shared Values C-LIFE Values are important part of Infosys organizational culture Customer Delight Leadership by Example Integrity and Transparency Fairness Pursuit of Excellence Organizational Structure : Organizational Structure The company has adopted a free form organization devoid of hierarchies. Everyone is known as associates irrespective of his position in the company. Software development is undertaken through teams and the constitution of teams is based on the principle of flexibility. A member, who might have been team leader in one project, may be replaced by another member of the same team for another project. Skills : Skills Mandatory Technical and Domain Certifications Infosys has been CMM-Level 5 certified for its process capabilities Entered the Balanced Scorecard Hall of Fame for Executing Strategy for achieving breakthrough performance results using the Balanced Scorecard (BSC). SWOT ANALYSIS OF INFOSYS : SWOT ANALYSIS OF INFOSYS STRENGTHS : STRENGTHS Leadership in sophisticated solutions that enable clients to optimize the efficiency of their business Proven “Global delivery model” Commitment to superior quality and process execution Strong Brand and Long-Standing Client Relationships Status as an employer of choice Ability to scale Innovation and leadership WEAKNESSES : WEAKNESSES Excessive dependence on US for revenues – 67 % of revenues from USA Excessive dependence on BFSI sector for revenues – 36 % of revenues from BFSI Weak player in domestic market. Only 1 % of revenues from India – low as compared to peers Low R & D spending as compared to global IT companies – only 1.3 % of total revenues Rising wage bill – 42.9 % to 44.8 % of revenues Low expertise in high end services like Consultancy and KPO. OPPORTUNITIES : OPPORTUNITIES Domestic market set to grow by 20%. Expanding into new geographies – Europe, Middle East, etc Infosys is cash rich (Around US $ 1 Billion) - Acquiring companies to increase expertise in Consultancy, KPO and package implementation capabilities Opening offices and development centres in cost advantage countries such as those in Latin America and Eastern Europe. THREATS : THREATS The economic environment, pricing pressure and rising wages in India and overseas Intense competition in the market for technology services could affect cost advantages. High dependency on a small number of clients, and the loss of any one of the major clients could significantly impact business. Failure to complete fixed-price, fixed-time frame contracts within budget and on time Currency fluctuations Termination of Client contracts can typically be terminated without cause and with little or no notice or penalty. SWOT MATRIX : SWOT MATRIX Business Model : Business Model 1981 1996 2001 2009 Slide 61: INFOSYS BCG MATRIX Slide 62: USA INDIA : INDIA ANALYSIS OF STRATEGIES OF INFOSYS : ANALYSIS OF STRATEGIES OF INFOSYS Corporate level strategies: Core Strategies: Actions Taken: : Actions Taken: To maintain low-cost advantage they have opened offices in Czech Republic, Mauritius, Poland, Philippines, Thailand and Mexico. Invested in developing training centres Improved quality capabilities – CMM level 5i company. Infosys Consultancy established to provide high end services in value chain. Has hedged currency for more predictability of revenues (risk management). GENERIC STRATEGIES: : GENERIC STRATEGIES: Little differentiation in low-end services of value chain; high differentiation in high end services of value chain like software products and package solutions. Focus on quality, customer relationship management, timely-delivery. Ansoff‟s Matrix: : Ansoff‟s Matrix: MARKET PENETRATION STRATEGY: : MARKET PENETRATION STRATEGY: Current Markets: USA and Europe Current Products: ADM, BPO, KPO, consultancy services (in BFSI, manufacturing and retail) and software products (financial products). Recommendation: As most large clients in US and Europe are cutting costs, Infosys needs to be more aggressive on cost and quality front. Result of strategy: Unlikely to yield good results MARKET DEVELOPMENT STRATEGY: : MARKET DEVELOPMENT STRATEGY: New Market: India, Middle-east and Australia Current Product: ADM, BPO, KPO, consultancy services (in BFSI, manufacturing and retail) and software products (financial products). Recommendation: Since these are fast developing IT market, Infosys needs a paradigm shift in focus from US and EU markets to these markets. Result of strategy: Likely to yield good result. PRODUCT DEVELOPMENT STRATEGY: : PRODUCT DEVELOPMENT STRATEGY: Current Market: USA and Europe New Product: Consultancy and package implementation services in relatively growing sectors esp. healthcare, life sciences and aviation sector, and KPO services. Recommendation: Concentrate on building expertise in these domains by strategic acquisitions. Result of Strategy: Likely to have good result. (better the company acquired, the better the result). DIVERSIFICATION: : DIVERSIFICATION: New Market: India, Middle-east and Australia New product: Consultancy and package implementation services in relatively growing sectors esp. healthcare, life sciences and aviation sector, and KPO services. Recommendation: Changing Brand image from low value service provider to high value service provider. Result of Strategy: Difficult to achieve overnight (possible in long term) OTHER STRATEGIES: : OTHER STRATEGIES: CONCENTRATION: 90% of Infosys revenues from American and European nations. VERTICAL INTEGRATION: Infosys recently made a bid to acquire a European major – Axon consultancy to improve its business in European markets, but finally called off the deal due to high valuation. Otherwise, Infosys has always believed in organic growth. INNOVATION: The Software Engineering and Technology Labs (SET Labs) at Infosys is the centre for applied technology research in software engineering and enterprise technology. SET Labs conducted 24 Innovation Workshops with customers from the US and Australia, to identify research collaboration possibilities. Infosys promotes a favourable work environment that encourages innovation and meritocracy. STRATEGY SUCCESSFUL OR NOT…?? : STRATEGY SUCCESSFUL OR NOT…?? Thank You… : Thank You… You do not have the permission to view this presentation. In order to view it, please contact the author of the presentation.