SWOT analysis Of Infosys

Submitted By: Neeraj Chadawar FMG19A 191035

Infosys is one of the largest businesses in India with a turnover in excess of $4 billion in 2008. The company specializes in Information Technology (IT) and consulting. N.R. Narayana Murthy and six others started the company in 1981, and it is now the largest IT Company in India with its headquarters in Bangalore (although it was started in Pune). It employs more than 90,000 IT professionals and was famously rated 'Best Employer in India. It operates in a number of business sectors from banking to retail, and its services tend to encompass end-to-end IT solutions which includes a whole bundle of added-value solutions from infrastructure to software engineering. Infosys pioneered the Global Delivery Model (GDM), which emerged as a disruptive force in the industry leading to the rise of offshore outsourcing. The GDM is based on the principle of taking work to the location where the best talent is available, where it makes the best economic sense, with the least amount of acceptable risk.

PEST Analysis Infosys

1. Political stability: Indian political structure is Positive 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 Deep Negative

companies that outsource IT work to other locations Political other than U.S. will not get tax benefit. 3. Government owned companies and PSUs have Positive decided to give more IT projects to Indian IT companies. 4. Terrorist attack or war. 1. Global IT spending (demand) Negative Negative

2. Domestic IT Spending (Demand): Domestic Positive market to grow by 20% and reach approx USD 20

billion in 2008-09 -NASSCOM 3. Currency Fluctuation Economic Negative

4. Real Estate Prices: Decline in real estate prices Mildly Positive has resulted reducing the rental expenditures. 5. Attrition: Due to recession, the layoffs and job- Mildly positive cuts have resulted in low attrition rate. 6. ECOMONIC ATTRACTIVENESS due to cost Positive advantage and other factors. 1. Language spoken: English is widely spoken Highly Positive language in India, English medium being the most accepted medium of education. Thus, India boasts

Social

of large English speaking population. 2. Education: A number of technical institutes and Highly Positive universities over the country offer IT education. 3. Working age population 1. Telephony: a. India has the worlds lowest call rates (1-2 US cents). b. Expected to have total subscriber base of about 500 million by 2010. c. ARPU for GSM is USD 6.6 per month. d. India has the second largest telephone network Positive Highly Positive

Technological after china. e. Teledensity 19.86 % f. Enterprise telephone services, 3G, Wi-max and VPN are poised to grow. 2. Internet Backbone: Due to IT revolution of 90s Positive Indian cities and India is well connected with undersea optical cables. 3. New IT technologies: Technologies like SOA, Positive 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.

Porters 5 Force Modal Infosys Entry to New Player  Low capital requirements.  Large value chain, space for small enterprises.  MNCs are ramping up capacity and employee strength. Bargaining Power of Customer  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.  However, for the existing products and services, the clients continue the old companies.

Bargaining Power of Supplier  Due to slowdown, the job-cuts, the layoffs and bleak IT outlook.  Demand and supply of IT professionals is no longer that favorable to employees.  Availability of vast talent pool freshers and experienced. Threat of Substitutes:  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. Competitors  Commoditized offerings  'low-cost, little differentiation' positioning.  high industry growth  Strong competitors few numbers of large companies.

SWOT Analysis Infosys Strengths

 Since the company is based in India its competitive advantage is enhanced. The Indian

economy, despite weak economic indicators such as relatively high rates of inflation, has low labor costs. The workforce has relatively high skills levels in Information Technology. Couple these two elements together and you have an operational basis that offers low-cost based, highly skilled competitive advantage. Trained Indian personnel often speak very good English and are sensitive to Western culture, underpinned by India's colonial past.
 Infosys is in a strong financial position. The business turned over more than $4 billion in

2008. This means that it has the capital to expand, and also the basis to leverage potential investors.
 The company has bases in 44 global development centres, most of which are located in

India, although the company has offices in many developed and developing nations. This means not only that Infosys is becoming a global brand but also that it has the capability to support the global operations of multinational clients.

Weaknesses
 Infosys on occasion struggles in the US markets, and has particular problems in securing

United States Federal Government contracts in North America. Since these contracts are

highly profitable and tend to run for long periods of time, Infosys is missing out on lucrative business. Added to this is the fact that its competitors do well in terms of securing the same Federal business (and one should also take into account that many of its competitors are domiciled in the US and there could be political pressure on the US Government to award contracts to domestic organizations).
 Despite being a huge IT company in relation to its Indian competitors, Infosys is much

smaller than its global competitors. As discussed above, Infosys generated $4 billion in 2008, which is relatively low in comparison with large global competitors such as Hewlett-Packard ($91 billion), IBM ($91 billion), EDS ($21 billion) and Accenture ($18 billion).
 It is sometimes argued that Infosys is weaker when it comes to high-end management

consultancy, since it tends to work at the level of operational value creation. Competitors such as IBM and Accenture tend to dominate this space.

Opportunities
 At a time of recession in the global economy, it may appear that some companies will

reduce take up of services that Infosys offers. However, in tough times clients tend to focus upon cost reduction and outsourcing - with are strategies that Infosys offers. So hard times could be profitable for Infosys.
 There is a new and emerging market in China as the country undergoes a huge industrial

revolution.
 The strategic alliance between Infosys and Schlumberger gives the IT company access to

lucrative business in the gas and oil industries.

 There has been a trend over recent years for European and North American companies to

base some or all of their operation in India. This is called an offshore service. Essentially there is a seamless link between domestic operations and services hosted in India. Examples include telecommunications companies such as British Telecom and banks such as HSBC that have customer service and support centres based in India. Think about

the times that you have made calls to a support line to find that the adviser is in Mumbai or Bangalore and not in your home market. Threats
 India is not the only country that is undergoing rapid industrial expansion. Competitors

may come from countries such as China or Korea where there are large pools of low-cost labor, and developing educational infrastructures such as universities and technology colleges.
 Customers may switch to other offshore service companies in other countries such as

China or Korea.
 Other global players have realised that India has the benefit of low-cost, highly-skilled

labor that often speaks English and is culturally sensitive to Western practices. As with all global IT players, Infosys has to compete for skilled labor and this may have the effect of driving up wage levels, and making it more difficult to recruit and retain staff.