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© Infosys Technologies Limited 2004-2005
Building a Disruptive Business Model in the Market
Building a Disruptive Business Model in the Market
Basab PradhanSenior Vice President & Head – Worldwide Sales
Basab PradhanSenior Vice President & Head – Worldwide Sales
© Infosys Technologies Limited 2004-2005 Analyst Meet 2004 | New Game. New Rules.
Safe HarborSafe Harbor
Certain statements made in this Analyst Meet concerning our future growth prospects are forward-looking statements, which involve a number of risks and uncertainties that could cause actual results to differ materially from those in such forward-looking statements. The risks and uncertainties relating to these statements include, but are not limited to, risks and uncertainties regarding fluctuations in earnings, our ability to manage growth, intense competition in IT services including those factors which may affect our cost advantage, wage increases in India, our ability to attract and retain highly skilled professionals, time and cost overruns on fixed-price, fixed-time frame contracts, client concentration, restrictions on immigration, industry segment concentration, our ability to manage our international operations, reduced demand for technology in our key focus areas, disruptions in telecommunication networks or system failures, our ability to successfully complete and integrate potential acquisitions, liability for damages on our service contracts, the success of the companies in which Infosys has made strategic investments, withdrawal of governmental fiscal incentives, political instability and regional conflicts, legal restrictions on raising capital or acquiring companies outside India, and unauthorized use of our intellectual property and general economic conditions affecting our industry. Additional risks that could affect our future operating results are more fully described in our United States Securities and Exchange Commission filings including our Annual Report on Form 20-F for the fiscal year ended March 31, 2004 and quarterly report on Form 6-K for the quarter ended June 30, 2004. These filings are available at www.sec.gov. Infosys may, from time to time, make additional written and oral forward- looking statements, including statements contained in the company's filings with the Securities and Exchange Commission and our reports to shareholders. The company does not undertake to update any forward-looking statements that may be made from time to time by or on behalf of the company.
Slide 2
© Infosys Technologies Limited 2004-2005 Analyst Meet 2004 | New Game. New Rules.
Outsourcing & Consulting – the two primary streams of our businessOutsourcing & Consulting – the two primary streams of our business
Discretionary spend
Baseline spend
Consulting & Application Integration
Application Outsourcing
Either way
Application Outsourcing – Targets the ‘Run the business’ spend with the promise of improving cost-performance parameters of the operations
Consulting led Application Integration or Application Development – Targets ‘Change the Business’ spend on major programs where business expertise is required or organizational change is high
Gray area in-between the two is the spend on small projects. These could go either under the Outsourcing arrangement or under Consulting
Most of the discussion in the presentation is around IT and therein the application layer. However, all the points in the discussion also apply to our forays into Infrastructure Mgmt as well as BPO through Progeon
Slide 3
© Infosys Technologies Limited 2004-2005 Analyst Meet 2004 | New Game. New Rules.
Structure of the outsourcing marketStructure of the outsourcing market
ApplicationOutsourcing
Market
Size of market
Siz
e of
dea
l
Managed Projects
Offshore Outsourcing
Incumbent Onsite Outsourcing
66% of the market*
4% of the market*
* Source: Gartner
Slide 4
© Infosys Technologies Limited 2004-2005 Analyst Meet 2004 | New Game. New Rules.
The structure of the market is driving onsite outsourcers to vacate the middle…The structure of the market is driving onsite outsourcers to vacate the middle…
» Onsite outsourcing has little cost leverage. The need to show cost savings drives margins down substantially
» High involvement purchase requires high sales investments. Pays off only for ‘all-at-once’ mega deals
» Sales teams are high cost, specialized and commission based – unable to focus on small deals or ‘grow-with-success’ deals
» Transition to offshore outsourcing will be hard for onsite outsourcers, both organizationally and client credibility wise
» Offshore players on the other hand have good margins. Able to make smaller deals profitable
ApplicationOutsourcing
Market
Size of market
Siz
e of
dea
lManaged Projects
Offshore Outsourcing
Incumbent Onsite Outsourcing
Slide 5
© Infosys Technologies Limited 2004-2005 Analyst Meet 2004 | New Game. New Rules.
…as the structure of the market is changing…as the structure of the market is changing
ApplicationOutsourcing
Market
Size of market
Siz
e of
dea
l
Offshore Outsourcing
Incumbent Onsite Outsourcing
» All-at-once deals are going out of favor – few success stories
» IT is better understood – need for top management to give it all away is going down
» Expectation that modularity will come into sourcing of IT similar to manufacturing
Slide 6
© Infosys Technologies Limited 2004-2005 Analyst Meet 2004 | New Game. New Rules.
Application Outsourcing
Market
…as the structure of the market is changing…as the structure of the market is changing
Size of market
Siz
e of
dea
l
Offshore Outsourcing
Incumbent Onsite Outsourcing
» All-at-once deals are going out of favor – few success stories
» IT is better understood – need for top management to give it all away is going down
» Expectation that modularity will come into sourcing of IT similar to manufacturing
Slide 6
© Infosys Technologies Limited 2004-2005 Analyst Meet 2004 | New Game. New Rules.
Infosys market strategyInfosys market strategy
» Created Unit called Strategic Global Sourcing (SGS) as an overlay to IBU sales force
» Hired large deal experience into SGS
» Created large offshore outsourcing as a distinct offering that addresses key client concern around risk
» Modular Global Sourcing – attacks the soft underbelly of the large outsourcing
Slide 7
© Infosys Technologies Limited 2004-2005 Analyst Meet 2004 | New Game. New Rules.
Structure of the market - consulting & application integrationStructure of the market - consulting & application integration
» Fat at the top – in the past driven largely by huge ERP implementations
» This is now leveling out as clients seek RoIs on smaller projects before moving onto larger ones
» However, there is still a major market at the top end
» Infosys’ penetration till recently has been largely in smaller engagements
Consulting & Application Integration
Size of market
Siz
e of
dea
l
Current Infosys
$107.9B*
*Forrester Research for 2004
Slide 8
© Infosys Technologies Limited 2004-2005 Analyst Meet 2004 | New Game. New Rules.
Onsite consultants’ high cost model makes them uncompetitiveOnsite consultants’ high cost model makes them uncompetitive
» Moving delivery offshore has organizational barriers
» Offshore is typically a different cost center, a different organizational unit
» Partners feel compelled to find billable work for their onsite teams to avoid layoffs
» Clients are offered offshore only ‘if they insist’
» Low credibility on offshore amongst most clients
» The Partner Sales model is a high cost model
» Smart Partner, Networked Partner
» Large number of highly paid Partners form a major component of costs
» High cost Delivery and Sales needs to be supported by higher rates
Slide 9
© Infosys Technologies Limited 2004-2005 Analyst Meet 2004 | New Game. New Rules.
Consulting &
Application
Integration
Infosys market strategy: Infosys Consulting, integrated 1:1:3Infosys market strategy: Infosys Consulting, integrated 1:1:3
» Use Application Outsourcing strength to attack lower end - Some part of discretionary spend is low risk for client – push to move that under sourcing arrangements
» Build World-Class Consulting - Attack the high-end of the market with Infosys Consulting combined with low cost, high predictability delivery engine. Avoid integration issues by building Infosys Consulting as an organic, opt-in Infosys Consulting
Application
Outsourcing
Slide 10
© Infosys Technologies Limited 2004-2005 Analyst Meet 2004 | New Game. New Rules.
Combining consulting with outsourcingCombining consulting with outsourcing
Process
Application
Infrastructure
OperateBuild
OperateBuild
OperateBuild
BPO
Slide 11
© Infosys Technologies Limited 2004-2005 Analyst Meet 2004 | New Game. New Rules.
Combining consulting with outsourcingCombining consulting with outsourcing
Process
Application
Infrastructure
OperateBuild
OperateBuild
OperateBuild
AO
Slide 11
© Infosys Technologies Limited 2004-2005 Analyst Meet 2004 | New Game. New Rules.
Combining consulting with outsourcingCombining consulting with outsourcing
Process
Application
Infrastructure
OperateBuild
OperateBuild
OperateBuild
Consulting and App Integration
Slide 11
© Infosys Technologies Limited 2004-2005 Analyst Meet 2004 | New Game. New Rules.
Combining consulting with outsourcingCombining consulting with outsourcing
Process
Application
Infrastructure
OperateBuild
OperateBuild
OperateBuild
Build-Operate Solutions
» New opportunities to combine ‘Build’ and ‘Operate’ – build industry leading process and outsource the process and IT for maximum leverage
» Will combine consulting strengths of Infosys Consulting along with Delivery strengths and cost leverage of Infosys and Progeon
Slide 11
© Infosys Technologies Limited 2004-2005 Analyst Meet 2004 | New Game. New Rules.
Imperatives for Infosys sales forceImperatives for Infosys sales force
» Form peering relationships with CXOs. Extend beyond IT into other functions and LoB
» Intimately understand client’s and industry’s business issues
» Change selling behavior from selling services to selling solutions
» Follow a standard organization wide process in Sales
» While not changing the essence of what makes us successful today
Slide 12
© Infosys Technologies Limited 2004-2005 Analyst Meet 2004 | New Game. New Rules.
How are we addressing these imperativesHow are we addressing these imperatives
» Reorganized mainly on industry lines
» Talent Management to build the sales organization of the future
» Role definitions – senior roles for CXO relationships
» Defined competencies for all roles
» Promotions, hiring, training, development aligned to competencies
» Strengthen Performance Management
» Unified Sales Process for the company
Slide 13
© Infosys Technologies Limited 2004-2005
Thank youThank you