SWOT ANALYSIS

INTRODUCTIONEstablishment Founded on 2 July 1981 in Pune by N. R. Narayana Murthy and six others. Has global presence with 72 offices.

Divisions :

• Infosys BPO • Infosys Consulting• Infosys Public Services • Infosys Australia • Infosys Brazil • Infosys China • Infosys Mexico • Infosys Sweden

INTRODUCTION

Initiatives :

• Infosys Foundation• Academic Entente• Infosys Labs• Infosys Prize

INTRODUCTION

INTRODUCTION

INDUSTRY PROFILE

INDUSTRY PROFILE

Globally IT industry is going to grow steadily despite a weakening global economy.

• “The Nexus of Forces — social, mobile, cloud and information — are reshaping

spending patterns across all of the IT sectors” – Gartner Research Firm.

• Consumers and enterprises will continue to purchase a mix of IT products and

services – however the mix is going to change radically in the future

E.g. transitions from PC’s to mobile or licensed software to cloud.

INDUSTRY PROFILE

TOP IT Companies in India (In Millions)

1. TCS (Revenue- 48426.14)

2. Infosys (Revenue- 36765)

3. Wipro (Revenue- 31682)

4. HCL (Revenue- 8907)

5. Mahindra Satyam (Revenue- 5964)

6. Tech Mahindra

7. Mphasis

8. Oracle Financial Services

9. Mindtree

10. Polaris Tech

INDUSTRY PROFILE

INDUSTRY PROFILEThe top five Indian providers grew 13.3% exceeding the worldwide IT services

industry growth of 2%.

• Revenue contribution from project-based deals has continued to decline for

the top five Indian-based providers, and the outsourcing service line

component has steadily increased.

• Cognizant displaced Infosys to become the second-largest Indian IT services

provider in 2012-13.

PEST ANALYSIS

POLITICAL

• Very little influence of political situation including change of government.

• No tax discrimination to US companies outsourcing IT jobs

• Diverse employment practices-qualification, abilities, gender, skill sets

• Certain levels of ambiguity surrounding taxation of IT products and services,

• IT SEZ requirement

• Continuous change of stand on applicability of labour legislations to the sector

• Strengthening of the IT Act- security of data in transmission & storage.

ECONOMICALStage of business cycle: Growth Stage

Increases contribution to GDP and employment

Exchange rate:

• Indian IT sector is dependent on foreign clients, especially US, for more than 70% of its

revenue. So, the fluctuation in the exchange rate can bring a considerable difference in

the performance of a company.

• IT sector undertakes various measures like hedging exchange risks using forward and

future contracts. This helps them in mitigating some of the loss due to exchange rate

fluctuation but none the less the impact is substantial.

“Every 1% movement in the Rupee against the US Dollar has an impact of approximately 50 basis points on operating margins” – Infosys Annual Report

ECONOMICALEconomic growth:

Due to global slowdown, exports of IT and ITeS services has slightly dimmed but

a great opportunity is waiting in India’s domestic market with increasing

technology adoption within the government sector and the small and medium

business (SMB) sector.

SOCIALThe social factors affecting IT industry ranges from employee right, language barriers

(English), race nationality of company or other issues.

Potential employment opportunity for women in this organized sector.

EDUCATION : Large number of universities and institutes.

LABOUR : Indian labour is not only cheap but is technically skilled too.

CAREER : In the year 2006-07, the industry hired approximately 3, 80,000 people. Out

of these, the ITeS sector hired 2, 00,000 people and the rest were taken by IT sector.

TECHNICAL• Government Research spending : Government IT spending in India reached $6.4

billion US Dollars (USD) in 2013, a 7 percent increase over 2012, according to Gartner, Inc

• New Inventions and Development : National optical fiber network (NOFN) National Knowledge Network

ADHAR ( Unique Identification Authority of India) eSeva Proposed global learning center of the TCS.

• (Changes in) Internet : Indian Internet Companies with Innovative business model Naukri.com

Flipkart Redbus

TECHNICAL• (Changes in ) Mobile Technology : The exploding mobile technology includes

telecommuting, working from partner or client locations, from a plane or train or

simply moving more fluidly around the company's own premise through the use

of a wireless local-area network.

PORTER’S 5 FORCE MODEL

THREAT OF MOBILITYSince in IT software and services, the players enjoy significant economies of scale and

the switching costs are also very high, therefore, the entry barriers for the IT

Software and Services are very high. Therefore, threat of new entrants is low in the

case of IT software and services.

In contrast to this, in ITeS- BPO, lower economies of scale are reached and the

switching cost is also very low. This leads to very low entry barriers. There is high

threat of new entrants in the ITeS- BPO sector .

SUPPLIER POWERKnowledge Professionals have a high bargaining power in the IT Software and

Services sectors because they demand high level of skill and expertise to render

their services. In the ITeS- BPO sector, the level of skill and expertise required is

low, therefore, they have a lower bargaining power on the industry.

For the IT industry to function properly, proper hardware infrastructure is required.

Therefore, the bargaining power of hardware manufacturer grows. This is

supported by the fact that hardware manufacturing industry is very concentrated

(HP, IBM, Dell etc.)

BUYER POWER

The switching costs in case of IT Software and Services, is very high, the Bargaining

power of the buyers becomes low.

But just opposite to this, in case of ITeS- BPO sector, the switching cost is

relatively very low, which makes the bargaining power of the buyer very high.

SUBSTITUTES

IT industry is driven by technology, which itself is ever evolving, therefore, there

is a high risk of substitutes for the industry.

RIVALRY

With the increase in rivalry, the players resort to a number of strategies being

followed by the players to acquire new customers or to retain older ones. Earlier

players used to provide customized services to attract customers, but now this

practice, also fails to attract them. Therefore, they resorted to providing end to end

solutions, niche services etc.

SWOT ANALYSIS

STRENGTH• Early positioning as a high end differentiated player.

• Diversified revenues across regions, services and verticals.

• Infosys also gets a higher share of revenues from Consulting which has

helped it maintain its margins.

• Infosys has better distribution of verticals and it has started focusing on

healthcare which is an emerging sector.

STRENGTH

STRENGTH

STRENGTH• Identification of seven game-changing trends

• 1.Digital Consumers

• 2.Emerging Economies

• 3.Healthcare Economy

• 4.New Commerce

• 5.Pervasive Computing

• 6.Smarter Organizations

• 7.Sustainable Tomorrow

• Products, platforms and solutions was set up as a dedicated organization to

focus on innovation-led business growth for our clients.

• Infosys manages the portfolio of software assets and offerings around them

STRENGTH

WEAKNESS• Large proportion of revenues from developed markets, especially the US,

that are facing economic difficulties.

• Lagging peers in making strategic, 'game-changing' acquisitions

• Consulting business has not delivered the results as expected.

• Infosys' strategy of charging a premium for its services (as compared to its

peers) is putting strain on its clients who are pressured to cut costs in the

backdrop of a slowdown. ( e.g. Infosys doesn’t favor reverse auction

processes )

• Infosys has always focused on the high margin business.

WEAKNESS

WEAKNESS

WEAKNESS

WEAKNESS

OPPORTUNITIES

• Best positioned to replicate the Accenture model from offshore

• A game-changing acquisition in a new geography could help the company

raise its profile.

• Profit Margins among the best in the industry which offers cushion for

further growth.

• Geographical expansion into relatively untapped regions.

• Potential for strong revenue growth from home market in India.

OPPORTUNITIES

THREATS• Management transition from founders to professionals will bring

uncertainty.

• Vulnerable to global economic climate, with demand from developed

market financial institutions still a key part of its revenue mix.

THREATS

THREATS

COMPETITOR ANALYSISTATA Consultancy Services

COMPETITOR ANALYSISTATA Consultancy Services

COMPETITOR ANALYSISTATA Consultancy Services

COMPETITOR ANALYSISTATA Consultancy Services

COMPETITOR ANALYSIS

TATA Consultancy Services - Strategies

• Strategy for long term growth Customer Centricity – For repeat business

• Full Service Capability – Present in all segments and geographies

• Global Network Delivery Model – Facilitate cost arbitrage across geographies

• Strategic Acquisitions – For quick growth across segments and geographies

• Non Linear Business Models – Strategies to ensure growth without increasing

the head count.

COMPETITOR ANALYSISCognizant Technology Solutions

COMPETITOR ANALYSISCognizant Technology Solutions

COMPETITOR ANALYSISCognizant Technology Solutions

COMPETITOR ANALYSISCognizant Technology Solutions

COMPETITOR ANALYSIS

• Closer to the clients – Spends heavily on sales and marketing .

• Lobbying – Spent $1.95 M for employees ( Wipro - $.29 M, Infosys < $5000 )

• Two in a box Strategy – A relationship management team and deep industry

expertise are assigned to every client.

• Consulting Practice - Helped increase its mindshare with clients, thereby driving

market share, and also win and execute large-scale transformation deals.

• Investment in SMAC (Social, mobile, analytics and cloud) - Delivering SMAC stack

related work for over 60 per cent of the top 100 customers.

Cognizant Technology Solutions

RECOMMENDATIONS• Improvement in utilization rates

• Training in diverse skills for the high performers i.e. consulting + programming

and will require higher training costs.

• Prevention of attrition among this group of high performers ( and or middle

management ) and utilizing them to maximum effect.

• Combination of fixed price contracts and time and material contracts

To grow revenues by attracting customers

• Inorganic growth through M&A

For gaining expertise and gaining entry into the European and Emerging Markets.

RECOMMENDATIONSAbility to manage the 6 key risks will be important for growth

1.Exchange Rate Risk – Using Derivatives and other hedging instruments

2.Political Risk – Increase use of lobbying as an instrument to prevent such risks

3.Geographical Risk - Pushing for growth in new geographies like Japan & Middle East

4.Competition – Acquisition of companies in competing countries like China

5.Vertical – Increase presence in verticals with expectations of high growth e.g.

healthcare

6.Service Line Risk – Have a presence in both high margin areas like consulting and

package implementation as well as low margin areas such as custom application

development