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Case Summary:

Infosys technology is a billion dollar company with over 58000 employees all around the world. Infosys operates in a number of business ventures that range from banking to retail and services provided by the company mainly focuses on end to end IT solutions. The company in 2004, established a strong brand equity and began to look for ways to combine its excellent reputations with service by launching a consulting unit. The company did not believe in acquiring existing companies as they thought it was not a viable option and solely focused on creating its own brand that was Infosys Consulting (ICI). This consulting unit was a wholly owned U.S based subsidiary. By the year 2006, this subsidiary employed over 200 employees. Through their model of low risk global delivery they accelerated their client schedules and at the same time reduced the companys operating cost. ICI focuses on providing consulting and IT services to the client globally and is driven mainly to compete with consulting firms such as IBM and Accenture. Indian companies like Infosys technology began to expand primarily because the US firms had gained confidence in working with them as they offered high quality services at low price points. In order to expand the company decided to carry out repeat business with the client base and also offer clients new opportunity to work with the company. Company employed a Global Delivery Model, this approach was called one-one-three model. The value proposition of the one-onethree model was to offer business consulting resources on site at the market rate for premium business consulting services, an on site IT implementation resource at the rate that was lower than the average on site developer, and three developers off shore at lower than the market rate. Although the model was not difficult to learn but there was a structural challenge involved in replicating it. Hence, the competitors would take sometime in replicating the model.This gave the client on one ICI resource on site, one Infosys technology resource on site, and three Infosys technology resources off shore (in countries like India, China, Australia, Mauritius and Czech Republic) By shortening the life cycle of solution designed, the subsidiary unit ICIs approach entailed in looking at the process requirements rather than the functional requirements. The subsidiary ICI in order to build a unique culture decided to differentiate from the other businessconsulting firms while maintaining the attributes required for successful consultancies and adopting the essential values of the parent company Infosys. ICI also focused on hiring the right kind of people who they felt was convincing enough to get the job done. They also tried

to hire more women. The goal of the company was also to hire more and more representatives from the local communities, as currently most of the employees in the company were Indian. Hence, to really emerge as a global company they needed more local representation. ICI also decided to build an organization structure based on meritocracy and transparency. The firm also purchased an auctioning module for its staffing system so that employees could bid on projects in a reverse auction. ICI generally compensated employees at the higher end of market rates. They came up with an internal program called One Infi for improving internal collaborative mechanisms. Both the parent company and ICI worked together to create a methodology known as the fork in the road where the pursuit of client relationship would be allocated to the area of the company that best served the clients situation.

Questions and Answers:


1. In2006, how well is Infosys Technologies doing? What is the companys strategic position in the IT industry and what are its distinctive competencies? Where does it fit in the industry value chain? How would you describe its culture? Ans1. In 2006 first quarter Infosys technology revenue by 30.3% to $ 593 million and net income increased by 19.6% percent to $152 million from the previous year. The profit margins for the company fell by the end of the quarter in March to 26.3% from 29.4% in the previous quarter. The company also faced stronger rupee, higher depreciation on buildings and equipments and accelerated hiring for the fall off and there was a 15% wage in the spring. Infosys technology was expecting a profit margin of 28% to 30 % for the fiscal year 2007. The companys strategic position When comparing the Infosys technology with other It industries: Higher buyer power

Commoditized technology Many providers Dependency on large firms

Low supplier power

Many resources available at low cost High competitive rivalry Fragmented market Many players Not much differentiation Moderate switching cost Low threat of substitutes Moderate threat of new entrants

Difficult to copy brand value Distinctive competencies of Infosys Technology are: Global Delivery model: In which the projects are broken down into logical components which are then distributed to onside and off shore locations where they can be delivered at maximum value. This results lower cost, faster implementation lower risk and measurable value. Through this they are innovating to meet the new customer needs. Culture of the company: Delivering high quality work Measuring every aspect of performance Maintaining a sense of humility Open and transparency in doing work

2. Why did Infosys Technologies decide to move into the IT consulting market segment? How big is this market segment and what is its structure? Why did they form a wholly owned subsidiary to enter this market segment?

Ans2. Infosys Technologies by the year 2004 was billion dollar company with an employee base of 25000 and had strong brand equity in the market hence it decided to enter the consulting market segment. They believed that the IT service space was undergoing a disruptive change there was new way of delivering by applying the global delivery model

into this space. The company had a vision to create next generation IT services company by combining the reputation for business execution with consulting services. The market for the IT services was large and growing according to study done by IDC, it was anticipated that the overall spending on the world wide IT services would at 7% annually and would $803.9 billion. The projected growth rate for the IT consulting is 5% in which the market largely fragmented with 2 key segments on- shore consulting and off-

shore IT service players. The majority of the market share is held by Accenture and IBM. IT consulting is considered as a subset of the overall it services market. The company believed that if they subcontracted the consulting to some other company then the Infosys brand would get diluted. The objective of the company was to have control of the client account so a partnership wouldnt be the best interest of the company. They also believed that joint ventures had limited validity as there would be a conflict in objectives which would result in the overlap of the businesses as the partners often competes with each other. 3. In Raj Joshis words, one of the goals of the leadership team of Infosys Consulting was to change the rules of the game What are the rules of the game currently, and how is Infosys Consulting trying to change them? What do they mean by Global Delivery Model? Ans3. By applying the Infosys technologies approach to global delivery, the leadership team at ICI believe that the firm had created a unique model in business and information technology consulting that shorten the life cycle from business consulting to technology consultation, reduce the cost of the typical client engagement and delivered measurable benefits to clients. They had a different approach to implement the technology which enabled operational improvements. Earlier if a client wanted to implement SAP to improve its operation then the company would analyze the forms process and then redesign them. So the traditional approach included the design phase which was different from development phase. The specifications would be written following the process requirements and then it would be grouped by vertical functions such as Sales, marketing etc. SAP would then be implemented to deliver the implementations and client employees would be trained to use the technology. The company started expanding by adding service lines to its portfolio.

Global Delivery Model (GDM) GDM refers to the delivery of IT implementation projects using globally distributed teams. In this the projects are broken down into logical components and distributed along three different locations mainly, onsite, offshore and near shore where they then be delivered at maximum value in the most cost efficient manner. It has the following advantages: Reduced cost of offsite resources in India Increased delivery time through 24 hrs operations Measurable benefits of deliverables

4. How important are client relationships and institutional knowledge in the consulting industry? How would you assess Infosys Consulting competencies in these two areas? Does Infosys Consulting have a sustainable competitive advantage? If so, what is it? Ans4.The client relationships are of extreme importance in the consulting industry as it helps in repeat business with would increase the revenue. A better client relationship helps to identify the problem and to propose and implement the solution. This results in client satisfaction and retention of the clients. The institutional knowledge of great importance for the consulting industry since it helps in understanding the issue at hand and how the best possible solutions could be prepared and provided. The following competencies are prevalent in Infosys consulting regarding client relationships: Offer opportunity for the clients to work with the company Expanded services to include package implementation, R&D, infrastructure management, system integration and BPO Working on both the client organization as well as IT side The competency of Infosys consulting with respect to the Institutional knowledge is the GDM. The sustainable competitive advantages that Infosys possess are:

strong operational skill

large supply of low cost IT/process resources

sustainable Competitive Advantage

easy to integrate onshore with off shore

unique model i.e. 11-3

access to ITL's clients

5. How are IBM and Accenture likely to view what Infosys Consulting is trying to do? How can they respond? Ans5. IBM and Accenture are going view ICI as small player in consulting which would take a long time to establish itself in the market segment further IBM and Accenture have a bigger market share when compared to ICI and also have their own integrated services hence there is no need for them to feel threatened by ICI in the short term. The competitors can respond in the following ways: Increase their value proposition Decreasing buyer power and increasing competition Integrate management and IT consulting further Remove complexities in integration Need not try to replicate 1-1-3 model everywhere Use GDM for complex processes

6. What interface challenges exist between Infosys Technologies and Infosys Consulting? To what extent do the parent company and subsidiary go to market together?

Ans6. The interface challenges that exist between Infosys Technology and Infosys consulting are: by

7. What are the challenges associated with managing growth for Infosys Consulting and for Infosys Technologies? Ans7. The challenges associated with managing growth for Infosys consulting are as follows: Low brand equity Challenge in attracting top consulting talent Inexperience with consulting relationships Easy replication of the GDM Cultural clash Increased competition The challenges associated with managing growth for Infosys technologies are as follows: Over reliance on U.S economy Limited position in the value chain Wage inflation due to competition on talents (15%) Threat from business models of the competitors

8. One of the challenges Steve Pratt faces is How can Infosys Consulting stay ahead of the game? Please prepare an action plan for Infosys Consulting and assess the companies strengths and weaknesses to stay ahead of the game in terms of its strategic position, distinctive competencies and culture.

Ans8. The company can stay ahead of the game by leveraging with Infosys Technologies thereby it can strengthen its position in the current market and prepare for further industry transformation.