CMD: NR NARAYANA MURTHY

A stroll across the Infosys park located on the out skirts of Bangalore makes you
wonder whether you have stepped into a university campus in another country. The interiors
are clinically designed, signboards plastered functionally, rooms spacious and informal,
employees lounging in seats surrounded by bamboo groves and completing the impression are
employees from international customer organizations mingling with their local
counterparts. Yet, a closer look reveals deadly serious employees, sprawled at their
workstations, or groups in earnest conversation.

So how does this organization, with a workforce of more than 2,000,
maintain a track record of 50 percent plus cumulative growth over the last four years.
Looking at its trend-setting achievements as an Indian company, the answer strikes
you–clinical transparency across all its working systems. As a searing vision, the
company appears to have realized that the only way it can actually become a global player
is by unambiguously revealing how far or close it is to becoming one.

The organization has, over
the years, repeatedly improved its financial accounting procedures, to a level where it is
the only domestic IT company that announces its financial results every
quarter–available a week after. It is also one of the few which have been publishing
their results, according to the US GAAP standards. Now the company has increased the GAAP
list to include Australia, Canada, France, Germany, Japan, and UK. All this, with the
burning vision to compete in the global markets, deliver world-class services

and products, and exhibit high growth levels and financial returns
for its investors. Infosys believes the service gap between its competitors in the global
marketplace can only be narrowed by acquisitions and mergers. And that means publishing
GAAP details in markets important for the organization.

Today, with more than 80 percent of the organization’s revenue from the
US, this is the most important market for Infosys. The company is devoting considerable
attention to obtain government clearance for an ADR issue of $ 75 million. While this will
fund further expansion, the most important purpose is a planned acquisition of a suitable
US company, within the next two years. Infosys’ exceptional transparency in functioning
extends to unconventional areas including assessment of intangible assets, brand, and
human resource valuation.

In 1997-98, the sales revenue for Infosys was Rs 260.4 crore, up from Rs
143.8 crore in 1996-97, thereby exhibiting a growth of 81 percent. In the previous year,
the growth was 54 percent. So what does Infosys do best? The core competency of the
organization can be described as customized software development and software maintenance,
while its vision is to become a globally respected organization, delivering best-of-breed
solutions, with best-in-class professionals. Infosys currently focuses on its global
markets through eight business units. These include manufacturing and distribution;
banking, finance, and insurance; banking business; retail and telecom; engineering
services; Internet and intranet consulting; technology advancement; and Nortel-Infosys
development units. In order to address the global markets, Infosys operates through 12
international sales offices

The business units deliver services limited to off-shore turnkey
projects, off-shore software maintenance, off-shore development centers, and on-site
consultancy. While the forte of Infosys has been customized software development projects,
the company plans to strategically increase focus on implementation of branded services.
This is prompted by the need to move up the value chain of software services, competing
more on quality and customer satisfaction and less on price. The confidence to move up the
value chain stems from considerable domain knowledge the company has built in warehousing
and transportation, banking, Y2K, and web applications. This has resulted in development
of products and their associated implementation services, including WMSYantra and
WebYantra, Bancs 2000 and Bank Away, In2000, and WebSetu.

Infosys expects future
growth in revenue to take place in engineering, ERP, and Euro currency services. Amongst
its major projects in 1997-98 were implementation of mission-critical product data
management system for Groupe Salomon, France; merchandising system for Nordstrom, USA;
wireless network solution for Nortel; and Internet banking solution for ICICI Bank.A
significant strategic outlook adopted by Infosys limits the extent of contribution in the
revenue by any product, market segment, or customer segment. By doing so, Infosys is
controlling risks associated with volatile global markets of today. With the Y2K
opportunity now a closed window, Infosys has decided to limit the contribution to its
revenue at 25 percent. Another example is the US market, which currently contributes 82
percent of the company’s revenue. The attempt is to reduce this share to 60 percent in the
next few years, with an increase from the other regions, mostly Japan. The company has
been able to reduce the risk associated with its top five customers, by reducing their
contribution from 43 percent in 1996-97 to 35 percent in 1997-98.

Looking into the future, the company appears ready to jump to a higher
arena of global competition and deliverables. If the ADR issue materializes and Infosys
acquires a US company, it may find itself in a completely new situation with little prior
experience to fall back on. While failures could be punishing, the rewards would be
breathtaking. If all goes well, Infosys could well be on its dream run: think
India—think Infosys.