Transcript Analyst Meet 2004

Building a Disruptive Business Model
in the Market
Basab Pradhan
Senior Vice President & Head – Worldwide Sales
© Infosys Technologies Limited 2004-2005
Safe Harbor
Certain statements made in this Analyst Meet concerning our future growth prospects are forwardlooking 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 forwardlooking 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.
© Infosys Technologies Limited 2004-2005
Analyst Meet 2004 | New Game. New Rules.
Slide 2
Outsourcing & Consulting – the two
primary streams of our business
Consulting &
Application
Integration
Application
Outsourcing
Discretionary spend
Either way
Baseline spend
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
© Infosys Technologies Limited 2004-2005
Analyst Meet 2004 | New Game. New Rules.
Slide 3
Structure of the outsourcing market
Size of market
Incumbent Onsite
Outsourcing
Size of deal
66% of the market*
Application
Outsourcing
Market
Offshore
Outsourcing
4% of the market*
Managed Projects
* Source: Gartner
© Infosys Technologies Limited 2004-2005
Analyst Meet 2004 | New Game. New Rules.
Slide 4
The structure of the market is driving
onsite outsourcers to vacate the middle…
© Infosys Technologies Limited 2004-2005
Size of market
Incumbent Onsite
Outsourcing
Size of deal
» 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
Application
Outsourcing
Market
Offshore
Outsourcing
Managed Projects
Analyst Meet 2004 | New Game. New Rules.
Slide 5
…as the structure of the market is
changing
Size of market
» All-at-once deals are
going out of favor –
few success stories
» Expectation that
modularity will come
into sourcing of IT
similar to
manufacturing
© Infosys Technologies Limited 2004-2005
Incumbent Onsite
Outsourcing
Size of deal
» IT is better
understood – need
for top management
to give it all away is
going down
Application
Outsourcing
Market
Offshore
Outsourcing
Analyst Meet 2004 | New Game. New Rules.
Slide 6
…as the structure of the market is
changing
Size of market
» All-at-once deals are
going out of favor –
few success stories
» Expectation that
modularity will come
into sourcing of IT
similar to
manufacturing
© Infosys Technologies Limited 2004-2005
Incumbent Onsite
Outsourcing
Size of deal
» IT is better
understood – need
for top management
to give it all away is
going down
Application
Outsourcing
Market
Offshore
Outsourcing
Analyst Meet 2004 | New Game. New Rules.
Slide 6
Infosys 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
© Infosys Technologies Limited 2004-2005
Analyst Meet 2004 | New Game. New Rules.
Slide 7
Structure of the market - consulting &
application integration
» Fat at the top – in the past driven
largely by huge ERP
implementations
Size of market
» However, there is still a major
market at the top end
» Infosys’ penetration till recently
has been largely in smaller
engagements
Size of deal
» This is now leveling out as clients
seek RoIs on smaller projects
before moving onto larger ones
Consulting &
Application
Integration
$107.9B*
Current Infosys
*Forrester Research for 2004
© Infosys Technologies Limited 2004-2005
Analyst Meet 2004 | New Game. New Rules.
Slide 8
Onsite 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
© Infosys Technologies Limited 2004-2005
Analyst Meet 2004 | New Game. New Rules.
Slide 9
Infosys 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
© Infosys Technologies Limited 2004-2005
Analyst Meet 2004 | New Game. New Rules.
Slide 10
Combining consulting with outsourcing
Process
Build
Operate
Application
Build
Operate
Infrastructure
Build
Operate
© Infosys Technologies Limited 2004-2005
BPO
Analyst Meet 2004 | New Game. New Rules.
Slide 11
Combining consulting with outsourcing
Process
Build
Operate
Application
Build
Operate
Infrastructure
Build
Operate
© Infosys Technologies Limited 2004-2005
AO
Analyst Meet 2004 | New Game. New Rules.
Slide 11
Combining consulting with outsourcing
Consulting and
App Integration
Process
Build
Operate
Application
Build
Operate
Infrastructure
Build
Operate
© Infosys Technologies Limited 2004-2005
Analyst Meet 2004 | New Game. New Rules.
Slide 11
Combining consulting with outsourcing
Build-Operate Solutions
Process
Build
Operate
Application
Build
Operate
Infrastructure
Build
Operate
» 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
© Infosys Technologies Limited 2004-2005
Analyst Meet 2004 | New Game. New Rules.
Slide 11
Imperatives 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
© Infosys Technologies Limited 2004-2005
Analyst Meet 2004 | New Game. New Rules.
Slide 12
How 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
© Infosys Technologies Limited 2004-2005
Analyst Meet 2004 | New Game. New Rules.
Slide 13
Thank you
© Infosys Technologies Limited 2004-2005