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Executive summary:
This memorandum presents the teams analysis of Infosys
Consulting in 2006: Leading the next generation of Business
and Information Technology Consulting (case: SM-151 by
Stanford School of Business published on 05/16/06). Infosys
Technologies (ITL) decided to move up the value chain and
offer premium consulting services in both Business & IT
consulting domains. They chose to venture on their own and
build a company ground-up by setting up a wholly owned
subsidiary in the United States of America. Infosys
Consulting (ICI) had a distinctive Global Delivery Model
(GDM) which allowed them to deliver engagements at a
blended rate of approximately $100 while market prices
were in the range of $175-$225. By using a follow-the-sun
model through (GDM), ICI shortened the lifecycle of solution
design to implementation and brought down costs.
Leveraging ITLs core philosophy around delivering
measurable benefits to clients, ICI differentiated themselves
by providing more visibility to the clients about value-adds
resulting from the consulting engagements with ICI. ICI
invested significantly in hiring the right people, building a
unique culture for the organization and creating employee
reward structures that linked employee bonuses to the value
delivered to clients. ICI leveraged the parent companys
existing relationships to create new business opportunities.
ICI customized deal by linking their consulting fees to client
value additions and project outcomes. By creating such
value based deals that showed their willingness to put their
fees at risk, ICI won over clients confidence. ICI sought
client feedback after each engagement in which most clients
rated them as having exceeded expectations. ICI and ITL
faced several interfacing challenges amongst them. Senior
management oversight and decisions on which one of the
two entities will take up assignments that involved
overlapping client requirements posed confusions within the
organization that had to be addressed on a case-by-case
basis. ICI created disruptive changes in the consulting
industry that competitors had to respond to. It is to be
evaluated as to what ICI can do to stay ahead of the game.

Problem Statements: Following questions need to be

asked to evaluate the drivers for moving up the value chain;
the distinctive advantages that ICI had; the business model
that ICI followed; the relationship between the parent
company and the subsidiary as well as the challenges that
were faced; and finally its future strategy:
1. What was Infosys Technologies position in the IT
industry and what were its competitive advantages.
What is its position in the value Chain?
2. Why did Infosys Technologies decide to venture into the
IT Consulting segment? Why did they choose to form a
wholly owned subsidiary offshore instead of forming an
alliance with Deloitte Consulting?
3. How did Infosys Consulting create disruptive changes in
the consulting industry?
4. How important are client relationships and domain
knowledge in the consulting industry? How did Infosys
fare in these two categories?
5. How did Infosys competitors view what Infosys
Consulting was trying to do? What was the competition
doing to respond?
6. What are the challenges in interfacing between Infosys
Consulting and Infosys Technologies? How did the two
entities approach clients?
7. What are the challenges related to managing growth for
Infosys Consulting and for Infosys Technologies?
8. What should Infosys do to stay ahead of its competitors
in terms of its strategic position, unique competencies
and its culture?

Analysis and Recommendations:

Infosys Technologies by the year 2004 was a billion dollar
company with an employee base of 25000 and had strong
brand equity in the IT industry. The company provided endto-end business solutions which leveraged technology for its
clients. ITL marketed in North America, Europe and the
Asia-Pacific region and served clients in financial services,
manufacturing, telecommunications, retail, utilities, logistics
and other industries.
Moving up the Value Chain:

ITL saw the opportunity to enter a client relation earlier

in the lifecycle to define problems, identify solution and then
implement the solutions in a progressive manner. They
believed that the IT service space was undergoing a
disruptive change and there was a need for 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 a study by IDC, it was anticipated
that the overall spending on the worldwide IT services
would grow at 7% annually and would reach $803.9 billion
by 2009. The projected growth rate for the IT consulting is
5% in which the market was largely fragmented into two key
segments, namely, on- shore consulting and off-shore IT
service players. The majority of the global market share was
held by Accenture and IBM. IT consulting is considered as a
subset of the overall IT services market. There was an
option to form a strategic alliance with Deloitte Consulting
but chose against it due to the fear of dilution of the Infosys
brand as well as doubts around longevity of the relationship.
ICI was incorporated in the USA as a wholly owned
subsidiary. It was started with a target of hiring 500
consultants in the span of 3 years. Infosys had invested $20
million in to the consulting subsidiary.
Disruptive Changes in the Consulting Industry lead by
ICI:
ICI created disruptive changes in the industry through
innovation and differentiation. ICI had several competitive
advantages that can be described under the following
parameters:
Strong operational skills
Seamless integration between onshore and offshore
services
Access to ITLs clients
Unique business model [1-1-3]
Large supply of low cost IT/process resources
GLOBAL DELIVERY MODEL (GDM): ITL developed an
exceptional appraoch to global delivery almost more than 20
years ago and was considered to be a leader in the delivery

of IT implementation projects through globally distributed

teams. The whole idea was to break down projects into
logical componenets and distribute it to different locations
where they could be delivered at maximum value in the
most cost-effective manner. Infosys claimed that this GDM
cut the project costs almost by 30 percent and it also
reduced the time to market. This was possible because the
work was distributed around the world where the combined
work of teams made the 24 hour project workday a reality.
This model was applied by ICI to integrate the business
consulting and technology implementation cycle. It was
called the 1-1-3 model because it gave the client one ICI
resource onsite, one Infosys technology resource onsite and
the three Infosys Technologies resources offshore. The
training and knowledge of global delivery of Infosys
Technologies onsite resources was the differentiating factor
from the competitors approaches to global delivery. The
major benefits of the deployment of GDM were as follows:
Shortening the lifecycle of solution design to
implementation: The goal was to implement technology
in order to enable operational efficiencies and
improvements. The approach by ICI entailed looking at
process
requirements
instead
of
functional
requirements. They believed that inefficiencies could be
identified better if the horizontal processes (like product
development processes) were considered rather than
vertical functional silos (like sales and marketing). ICI
deployed a team onsite to work with a client and look at
how the company was organized by process. The onsite
team worked with the team during the day to capture
the design of process object. At night, the offshore team
converted
the
design
templates
into
software
configuration. The next day, the onsite team would test
the configuration and run through the second iteration of
the design. The end result was intended to be exactly
what the client wanted as each iteration could be tested
for user acceptance. This greatly reduced the time to
market by leveraging the global teams.
Cost Reduction: The value proposition of the 1-1-3 model
was to provide business consulting resources onsite at
the market rate for premium business consulting
services, an onsite IT implementation resource at a rate

that was lower than the onsite developer and three

developers offshore at lower than market rates. Through
this model ICI could perform major engagements for a
blended rate of approximately $100 an hour. It was killer
business model as it gave lower cost to clients and
sustained margins for the company through repeat
businesses.
Delivering Measurable Benefits: ICIs focus was to assist
their clients in dealing with business and technology
related challenges in the broad field of operations. They
determined that the one clear way to deliver value was
to achieve measurable improvement in business process
metrics within the clients business operations as a
result of its consulting engagements. For this, ICI would
first analyse the current operations of the client to
establish a baseline of business process performance.
The next step would be to assess process metrics that
reflected process metrics that reflected the efficiency
and effectiveness of each key business processes and
then designs the changes in the process structure and
enable technology to deliver defined improvement in
process metrics.

F IGURE 1: ICI S C OMPETITIVE A DVANTAGES

Leveraging Client
Knowledge:

Relationships

and

Institutional

Client relationships played a key role in the consulting

business. Lasting relationships can create repeat revenue
opportunities for the firm and this approach was an integral
value for the parent company. Tenured client relationships
make it easier for a consulting firm to discover the issues as
the consultants tend to have a greater understanding of the
processes. In addition, it also helps suggest and execute the
solution in an effective manner. This in turn increases
retention rates of clients. ICI utilized ITLs existing client
relationships to identify opportunities for engaging and
offering consulting services. The two entities performed
joint account management. Decisions on which entity would
take up a given assignment that had overlapping
requirements were made on a case-by-case basis by judging
which entity was better suited to service the needs better.

Since consultancy is an advisory service, it is extremely

important for consulting firms to have well qualified and
experienced professionals with deep industry knowledge.

ITLs domain wise split was replicated in ICI to maximize

the industry knowledge that consultants had to bring to
the table.
Focus on providing additional services to the client by
showcasing their expansive portfolio of services such as
R&D,
infrastructure
management,
BPO,
System
Integration, Package Implementation etc.
Localizing ICI by hiring local talent in the regions to
understand their requirement better and create better
connect with the clients.

Competitors Response: companies like IBM and Accenture

held major market share of the consulting industry which
ICI wanted to break into. IBM and Accenture offered
personal integrated services and had created brand value
for themselves in high-end consulting. Their costing was
premium as well. With the entry of ICI, pricing at premium
levels was no longer possible.
Even though ICI was a new entrant, the disruptive changes
that they brought in the industry through GDM & low cost
pricing meant that consulting firms like IBM and Accenture
had quickly catch-up and replicate the models wherever
applicable. Some of the steps which competitors like IBM
and Accenture can take are mentioned below:
Increase their Value Proposition: This can be done by
staying clear of the pricing war and focusing on
delivering maximum value to its clients. Identifying
niche areas that have high entry barriers and where
there is significant dearth of expertise could be areas
that they could identify and focus on. It will make it
difficult for new entrants like ICI as it is still an
extremely new firm in this sector of business where as
IBM and Accenture are big players in the market that
can create niche sectors that they are experts in.
Integrate management and IT consulting further: This
can be done by eliminating all sorts of complex
integration and make the process flow as simple as
possible, which client can understand easily and will be

easily executable. Creating transparency in processes

and knowledge sharing with the clients can create
goodwill and deliver additional value over and above the
project outcomes.
Innovate & Differentiate: Competitors should refrain
from replicating models like [1-1-3] model from ICI.
Infosys can be able to do it because there have
experienced in using it. Alternatively, IBM and Accenture
can use Global Development Model for complex
processes but look at how they can leverage their talent
pools to identify innovations that can disrupt the market
itself. Survival in a competitive industry like Consulting
meant that the firms had to invest in their own R&D and
identify frameworks, solutions, products etc that would
differentiate them in the market.

Interfacing Challenges: Infosys recognized that all pieces

of the company needed to work together in a manner that
optimized performance. A challenge facing Infosys
Technologies was to ensure that ICI received enough airtime
from the parent company given its relatively small size (ICI
had 200 employees versus Infosys 50,000 employees).
Senior management realized that active intervention was
required in order to ensure that the subsidiary received the
attention it needed to be successful. Infosys Technologies
set up a board led by Kris Gopalakrishnan to review the
subsidiarys performance. Quarterly meetings were held
where ICI s performance was monitored and issues were
discussed.
Infosys Technologies also
viewed their
relationship with ICI as an opportunity to transform the
companys culture and build the brand into a global
transformation enabler. Senior management viewed the
quarterly meetings as an opportunity to learn about a new
space and evolve the company. The leadership of both
Infosys Technologies and ICI agreed that interacting with
each other regularly provided a constant education for
everyone. Paul Cole described the attention to detail given
by the leadership of Infosys Technologies to the operations
of ICI, citing that the chairperson, Narayana Murthy,
regularly reviewed weekly status reports from the
subsidiary. Steve Pratt described ICIs approach to
interfacing with the parent company as: They are guests
here and we have to be respectful of that. They are here to
learn and listen more than we speak. They want to

demonstrate over time, which they have already, that they

are a good thing for the clients of Infosys. In order to be
viewed as a global company, Infosys Technologies
recognized that it needed to incorporate different global
perspectives by bringing in managers from the United
States and Europe. The leadership of Infosys Technologies
hoped to see migration of management from ICI to the
parent company over time.
Challenges of Managing Growth: The five managing
partners saw several challenges ahead for ICI. Driven by
Infosys Technologies COO Kris Gopalakrishnans edict to
compete with the best, the team aspired to be ranked
alongside IBM and Accenture, leaders in the business and
information technology consulting industry. They also faced
internal challenges of leveraging Infosys technologies,
interfacing productively with the parent company and
managing growth as they built the organization.
Challenges and timeframe involved in replicating the cost
structure of ICIs -1-1-3 model: Realistically, testing the
replicability of their model will play out over the next three
to five years, because its at least that big of a problem for
the legacy consulting firms such as IBM and Accenture to
get to their model. The problem is not about scaling up
offshore, but de-scaling here. If your core financial model is
built on engaging their onshore employees and if the rates
start collapsing, their cost structure is not sustainable. The
model is not difficult to learn, but theres a structural
challenge involved in replicating it. Another complicating
factor for their U.S. competitors is that once they get
sufficient scale, they will tip the market and collapse the
price point in the consulting industry. This will hurt them in
the capital markets because their margins will be squeezed.
Then their utilization of people has to go up, and their ability
to invest will go down.
The firm recognized that by leveraging the GDM, they
had created a 24-hour work cycle, given the time differential
of the various teams that were deployed on a specific
engagement. Although this seemed to be the next wave of
productivity in a global work environment, in order to
prevent employees from burning out through overextending
their hours (as there was the potential to work during every
hour of the day), they asked employees to block out certain

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times in their calendars when they would not be available to

work. Mark Holmstrom, a practice leader who was the
seventh employee to join ICI, described the challenge of
working in a global delivery environment:
One of the challenges for this global delivery model is that
it requires a different way of thinking about work thats not
the traditional eight to five, eight to six models. A lot of what
they do becomes much more asynchronous. Mark
Holmstrom means that its much more e-mail based. There
are traditional times when meetings take place that are
during the week. He actually blocks his calendar at certain
times that most people wouldnt think of in a traditional
company. One of the things he really enjoy doing is putting
his little daughters to bed. So he block out time to say, "he
is not going to work during these hours." Everyone has got
to figure out their own rhythm, their own pace and figure
out what success looks like within the global delivery
model. This goes on to show the level of focus on its
employees and preventing burnouts in a competitive
environment.
Action Plan for ICI: ICI will need to focus on below areas
to sustain their growth and to stay ahead of the game.

Build brand value: ICI still is miles behind its

competitors in terms of the value of its brand in the
consulting domain. It needs to continue to create and
build a separate identity for itself.
Integration with ITL: ICI still has considerable work in
terms of integration with ITL. There differentiation
between the two entities is still blur and this could
cascade into how the clients view them as well.
Innovation: The firm needs to continue inventing new
models for its business and up the ante on an on-going
basis. Its exponential growth cannot be sustained
without path-breaking ideas. It needs to find ways to
keep its competitors in the game of playing catch-up.
Pricing: The firm cannot rely on low pricing to continue
building market share. At some point, the entire market
will be able to replicate business models and offer
competitive pricing. The firm should focus on premium
service that command premium prices and this can only

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be done by building expertise and domain knowledge to

deliver quality services even in niche sectors.
Investing in Resources: Consultants that work for ICI are
its biggest assets. It needs to focus on retaining the
talent and invest in training them to build domain
expertise.

Conclusion:
ICI has gotten off to a great start and has brought about
disruptive changes in the consulting space through 1-1-3
models, GDM, lowering costs, delivering metrics for
performance & value and structuring end-to-end deals.
Although these models are not very difficult to be replicated,
there is a considerable amount of time that goes in favor of
ICI before which competitors can scale up to provide these
services. A lot of what the competition does to respond to
this will also rely on how much they are willing to modify
their own core values. ICIs growth story is an incredible
success story of persistence of core values and culture to
build businesses. Their methods of replicating their success
mantras as well innovating and leading the pack at a global
scale in an industry that they have barely broken into shows
their deep-rooted application of long-term strategy that is
grounded in their culture.

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