Rank3: INFOSYS GORUP - Not there Yet

Technically speaking Infosys is not a group. The idea behind including the
company in the group category was to see--as it diversified to newer business
and newer geographies, taking inorganic route sometimes--how would it be able to
integrate them into itself. It has surely diversified into pure consulting (with
not so much success) and BPO (with fair degree of success). But very few
inorganic growth has happened that requires a real integration. For example,
this analaysis would have looked etirely different, and we guess far more
interesting, had one of the large acquisitions it was eyeing--that of European
SAP firm Axon--happened.

So, the only way one could analyze it is by comparing it with others in the
list. The three that trailed Infosys in FY 09 still functioned better as
groups. In fact, HP and HCL, the two under-performers, strictly fit the group
billingtheir troubles had more to do with a heterogenous portfolio that was
bound to pull them down in a tough year like this. But the very fact that these
two managed to still have all operational and functional matrices in place and
run these diversified constituents proved their mettle as groups. The results
might not have been great this year, but end of the day one should not look at
group results as a zero sum game.

Infosys group performed well because it was the most homogenous of the
lotbeyond IT services and BPO, and that too primarily exports, it had hardly
dabbled in any other domain. True, Tatas are also into IT services, but the
companies are into disparate areas with deep enough focus on both exports and
domestic markets. Wipro too, with its hardware business as well as concerted
focus on domestic markets functioned more as a group. Despite the much touted
One Infy offering started a couple of years back, Infosys has yet to make its
mark as a group, notwithstanding the numbers.

Even the relatively positive numbers did not hide a growing realization that
going forward the group cannot put all its eggs in one basket. Whether it was
the over dependence on US and Europe, the worst victims of the slowdown (90% of
revenues); on manufacturing, retail and BFSI, again badly affected (72% of
revenues); the league of large clients (unwise exposure) and despite hyperbole,
the still negligible domestic presencethere was always a feeling that
notwithstanding positive guidelines, things were always close to a precipice. If
not in the short term, but at least in the long run, functioning more as a group
with a really heterogeneous and diversified area of operations, would help
offset some of these impacts.

RANK 3 - infosys group
(Revenue in Rs crore) CyberMedia Research                                                                                             DQ Estimates
	With not much diversification taking place, its anybodys guess whether the group will be able to maintain the same growth rate next year. Amongst the subsidiaries, though Infosys BPO is gaining critical mass, Infosys needs to start more units, like Infosys Mexico soon and ramp them up in quick time. The need of the hour is, however-to maintain a sustainable domestic business; it has the most lopsided export to domestic ratio amongst all the five groups (domestic virtually non-existent)
S Gopalakrishan, CEO

The One Infy experience was launched in November 2007 when Infosys
reorganized its business unitsthe restructuring was ostensibly aimed to broaden
its customer base and strengthen its current portfolio through scale benefits,
but more importantly, the idea was to have more diversified portfolio that would
have allowed it to function better as a group. A balanced non-linear growth has
definitely been the ultimate aim, though looking beyond numbers, it seems that
Infosys has not attained much success on this front in FY 09.

Under the new structure, Infosys formed six vertical industry business units
and five horizontal business units that cut across all the vertical units. The
European business was divided into industry verticals, which was integrated
within the proposed IBUs. Infosys also established new growth engines unit to
expand business in Australia, China, Japan, Middle East, Canada, South America
and Latin America. For the first time, there was a separate business unit to
focus on India to tap the domestic market.

Increasing its focus on delivery excellence, Infosys has broadened the role
of the existing business heads. Srinath Batni, member of the board, was
identified to lead the global delivery. Infosys senior management team was
expanded, wherein an executive council (EC), chaired by the CEO, has been
constituted. The executive council consists of the CEO, COO, CFO, executive
board members and select unit heads. The company is also looking at increased
participation of younger leaders in charting company strategy. Budding leaders
below thirty will form part of the management council of the business units.

Infosys consulting, the existing domain competency group and various
solutions groups within units will become part of consulting solutions to
create, deliver and coordinate global best practices for enhanced solutions to
all customers. To synergize its focus on sales and marketing, Infosys will
consolidate the sales effectiveness, marketing, alliances and Strategic Global
Sourcing functions under corporate sales and marketing. Infosys will also
increase its focus on R&D and commercialization of IP.

To reduce North American dependence, earlier the focus was on increasing
presence in Europe. However, the dreaded Sword of FY 09 meant that Europe too
was deep into recession; there was no other option than to look at other
geographies, mainly emerging economies. The domestic focus was top on the
agenda, though there was the obvious business imperative to explore the
potential of Central Europe, Central America and South America. Under One Infy,
a new growth engine unit was formed to expand business in markets like
Australia, China, Japan and the Middle East. Not much has happened on this front
in FY 09, but with a new development center in Mexico and large government
deals in India (I-T department), things might start looking up now.

Another focus at Infosys group, the motivation behind One Infy, was
non-linear growth. This included developing more intellectual property and
increasing its content in the various solutions, and also introducing new
pricing models. At present the engagement with clients is more effort based but
the attempt is to move to value based pricing, and the aim is to see more and
more different ways of delivering that value. For instance, Infosys is now
creating offerings on a software-as-a-service model. It has also recently
introduced a platform based BPO solution for procure-to-pay services. New
pricing models have also recently been introduced for applications maintenance
and infrastructure management. Infosys has not set any hard targets regarding
the percentage of its business that will come through new business models. It
wants to offer different choices to clients and then let them decide how these
will grow and pick up.

In the ultimate analysis, whatever numbers might say, the success of Infosys
as a group can only be measured in the proper light once the One Infy strategy
starts paying off. Without that happening, Infosys might face tougher times, in
case it faces another tough year like FY 09. Without really assimilating any of
the group attributes, Infosys managed to stem the crisis in FY 09 mainly owing
to its great set of leaders and management. Now with Nandan Nilekani too
exiting, it would be tempting the fate too much in case Infosys thinks it can
have another lucky escape.

Rajneesh De

rajneeshd@cybermedia.co.in