Transcript New Games… New Rules

Asian markets
V. Sriram
Vice President and Head – APAC region
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
World markets and Asia Pacific markets
IT Services Market
Size in $ bn
400
350
300
250
200
150
100
50
0
2002
2003
2004
2005
2006
2007
2008
North America
255
258
269
282
299
317
337
Western Europe
160
179
193
199
208
217
227
Central/Latin America
19
19
20
22
24
26
29
Middle East/Africa
7
8
8
9
10
11
12
Eastern Europe
4
4
5
5
6
6
7
Asia Pacific
25
28
31
34
37
40
44
Japan
65
73
82
88
94
101
107
Source:
North America
Western Europe
Central/Latin America
Eastern Europe
Asia Pacific
Japan
Middle East/Africa
Gartner July 2004
© Infosys Technologies Limited 2004-2005
Analyst Meet 2004 | New Game. New Rules.
Slide 3
Overall approach to Asia Pacific
» A $ 100 bn + market size growing at a CAGR 8%
» Recognize the need for variations of strategy
» Recognize the need for market (read cultural) diversity
» Market positioning in line with solution offerings
» Invest appropriately to reap long term benefits
© Infosys Technologies Limited 2004-2005
Analyst Meet 2004 | New Game. New Rules.
Slide 4
Next generation business model
Hong Kong
Taiwan
ASEAN
Australia
Client
Japan
© Infosys Technologies Limited 2004-2005
China
Analyst Meet 2004 | New Game. New Rules.
Slide 5
Infosys APAC has grown rapidly in the past few
years through new account acquisition…..
120
101
100
78
80
60
37
40
28
21
20
0
1
FY 98
4
8
FY 99
FY 00
FY 01
FY 02
FY 03
FY 04
LTM
Jun 04
APAC revenue in USD millions
© Infosys Technologies Limited 2004-2005
Analyst Meet 2004 | New Game. New Rules.
Slide 6
Infosys in Asia Pacific Today - Snapshot
» Total Revenues / Head Count / Offices
» 10 % of company revenues
» 6 offices in Tokyo, Hong Kong, Shanghai, Beijing, Melbourne,
Sydney (excluding offices in India)
» Approximately 2,100 employees in overall practice
» Coverage
» From Japan - Japan and Korea
» From Hong Kong / Shanghai, Beijing - Hong Kong, Taiwan and China
» From Australia - Australia and New Zealand
» Year of start for offices
»
»
»
»
Japan 1997
Australia 1999
Hong Kong 1999
China 2004
© Infosys Technologies Limited 2004-2005
Analyst Meet 2004 | New Game. New Rules.
Slide 7
Infosys APAC Revenue Split for Q1 05
($ m)
0.7
2.7
20.9
10.7
Japan
© Infosys Technologies Limited 2004-2005
Australia
Greater China
Others
Analyst Meet 2004 | New Game. New Rules.
Slide 8
Individual market – salient points
» Key markets are
» Japan
» Australia
» Greater China
Gartner says: In 2006 China will be the largest market after Australia
in Asia Pacific excluding Japan. Japan will continue to be the largest
in the region and the second largest in the world.
© Infosys Technologies Limited 2004-2005
Analyst Meet 2004 | New Game. New Rules.
Slide 9
Japan – Salient Features
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2003
2004
2005
2006
2007
2008
Process segm ent
IT m anagem ent and service
Application developm ent and integration
Consulting service
Softw are m aintenance and support
Hardw are m aintenance and support
© Infosys Technologies Limited 2004-2005
Analyst Meet 2004 | New Game. New Rules.
Slide 10
Infosys in Japan
» Market
» World’s Second largest economy, Japan accounted for 14% of the worldwide IT
services market in 2004. CAGR will be 8% through 2008
» Japanese IT services market was forecast at $ 82 bn in 2004, growing to $107 bn
in 2005 (Gartner Dataquest July 2004)
» 84 Companies in Fortune 500 (July 2004)
» Interest in offshore very high, China strategy will also help
» Key Initiatives / Achievement
»
»
»
»
»
Marketing Office setup in 1997
30 % of APAC revenue from Japan (Q1 FY 05)
Strong relationships with 15 large Japanese multinationals
Positioned as a leader in providing seamless GDM based value
Unique branding event called Infosys Leadership Forum for CXOs
» Challenges
»
»
»
»
»
»
Language Proficiency and Culture
Slow Decision
Highly cost and quality conscious market
Hiring of locals and other Japanese - English enabled Technicals
Short cycle projects with evolving requirements
Aggressive schedules in almost every project
© Infosys Technologies Limited 2004-2005
Analyst Meet 2004 | New Game. New Rules.
Slide 11
Japan Strategy
High
as Enterprise
EnterpriseSolutions
Solutions
Highvalue
valueofferings
offerings such
such as
Highly
ClientFacing
Facinggroup
group
Highlylocalised
localised Client
Custom
forJapan
Japan
Custom GDM
GDM process
process for
Investment
for‘2007
‘2007problem’
problem’
Investmentin
in solution
solution for
Lower
productbusiness
business
Lowerexposure
exposureto
toprice
price sensitive
sensitive product
Unique
immersionprograms
programs
Uniqueimmersion
immersion and
and reverse
reverse immersion
Sustained
Competitive advantage
Leveraging GDM
Direct
withmarquee
marquee
names
Directclient
clientrelationships
relationships with
names
Leverage
in future
future
Leverage China in
© Infosys Technologies Limited 2004-2005
Analyst Meet 2004 | New Game. New Rules.
Slide 12
Australia – Salient Features
100%
80%
60%
40%
20%
0%
2003
2004
2005
2006
2007
2008
Software Maintenance and Support
Process Management
IT Management
Development & Integration
Consulting
Software Maintenance and Support
Hardware Maintenance and Support
Source: Gartner Dataquest August 2004
© Infosys Technologies Limited 2004-2005
Analyst Meet 2004 | New Game. New Rules.
Slide 13
Infosys in Australia
» Market
» Australia will remain the largest IT Services country in Asia Pacific after
Japan, It will grow up to $ 16.7 bn by 2005 (Gartner Dataquest July 2002)
» Australia accounted for 11.8% of the Asia Pacific IT services market in 2001
» 6 Companies in Fortune 500 (July 2002)
» Unique opportunity to position Infosys as a credible alternative to the Big 4.
No local player has the scale and reputation.
» Key Initiatives / Achievement
» Marketing Office setup in 1999
» Have about 30 clients including those acquired through Expert System Pty.
Ltd.
» Acquisition of Expert Systems Pty. Ltd. a cornerstone of the strategy
» Infosys is a “Thought Leader” in Australia
» Telstra relationship will be the beach head
» Use of next generation GDM model
» Challenges
» Cultural integration with local employees to work in a seamless way
» Building the next set of large, deep relationships
© Infosys Technologies Limited 2004-2005
Analyst Meet 2004 | New Game. New Rules.
Slide 14
Next generation business model
Client
© Infosys Technologies Limited 2004-2005
Analyst Meet 2004 | New Game. New Rules.
Slide 15
Next generation business model
Emphasis on “Local ”, “Predictable” and
vast “on-demand” global capability
© Infosys Technologies Limited 2004-2005
Analyst Meet 2004 | New Game. New Rules.
Slide 16
Greater China
» Turning the World Upside Down
If you think China's athletes have been brilliant in Athens, wait until
Beijing 2008
HANNAH BEECH (Time magazine)
© Infosys Technologies Limited 2004-2005
Analyst Meet 2004 | New Game. New Rules.
Slide 17
Why China ?
» China is an attractive, growing market
» Global Clients are investing in China
» As a global company, we have to build our business
» Offers attractive talent pool as well
© Infosys Technologies Limited 2004-2005
Analyst Meet 2004 | New Game. New Rules.
Slide 18
China is the engine of global economic growth….
- 400 of Fortune 500 companies are already present in China
» China is the fastest growing economy in the world and set to become the
world’s 3rd largest by 2010 and expected to overtake Japan by 2015 ( source
Goldman Sachs)
» Cumulative FDI in China has crossed $ 500 bn so far.
» 400 of Fortune 500 companies are outsourcing from China and view China as a
strategic market. Making investments in China (Source: UNCTAD). - China is
global Manufacturing Outsourcing Hub.
» 2008 Olympics hosted by China – $ 40 bn Direct Spend and local spin off
© Infosys Technologies Limited 2004-2005
Analyst Meet 2004 | New Game. New Rules.
Slide 19
China for IT services – Market, Large
supply base & infrastructure
30%
CAGR 02-07
25%
20%
World Class IT infrastructure
PRC
ROAP
» Major cities like Shanghai have “last
mile fiber” – 9.2 GBPS Bandwidth .
» Shanghai alone has 6 million phones
» World’s 2nd largest PC population
» World’s 2nd largest Internet user
population.
Vietnam
Malaysia
15%
Korea
Thailand
India
Indonesia
10% Philippines
New Zealand
Australia
Taiwan
5%
Singapore
Hong Kong
0%
0%
5%
10%
15%
20%
25%
30%
35%
Proportion of 2002 Total APEJ IT Services
Large talent pool
»
»
400,000 software engineers in 6,000 local
companies, 50,000 being added per year
This pool of 50,000 could increase to
additional 200,000 per year
China is the only country other
than India that can have a base of
equal IT talent - in terms of cost,
quality and scale
Thriving Local Industry
»
»
»
6,000 local IT Companies in China
China's share of the total IT Services
market to significantly increase over the
next few years
China IT services industry to overtake
Japan by 2012 (source Gartner)
© Infosys Technologies Limited 2004-2005
Analyst Meet 2004 | New Game. New Rules.
Slide 20
Chinese IT services and Indian IT services …
Indian Services Cos.
Project
Management
Skills
Organizatio
n skills
Chinese services cos.
Niche
domain/tech.
Hi-Tech Mfg,
Linux
Language
capability
© Infosys Technologies Limited 2004-2005
Quality and
Process
Maturity
Domain
Skills &
Industry Best
Practices
Strong
education
system
Pool of
technical
resources
Analyst Meet 2004 | New Game. New Rules.
Unique
opportunity for
Infosys
Slide 21
Value expectation from our Global Clients
» Ability to service their China business
» Ability to service their North Asia (including Japan) business
» Want same service levels as India – Includes Quality, Process
Maturity, IP Protection and Cycle time
» Meet commitments to Chinese Government
» Single CFG window to deal with
© Infosys Technologies Limited 2004-2005
Analyst Meet 2004 | New Game. New Rules.
Slide 22
What do we want to do in China?
» Tap the Chinese market – Position as a premium end-to-end
service provider
» Build the Chinese supply pool
Dream Big, start small, scale rapidly
© Infosys Technologies Limited 2004-2005
Analyst Meet 2004 | New Game. New Rules.
Slide 23
Segments/ value / source of value
Segment 1
Segment
Segment 2
Segment 3
Segment 4
MNCs
MNC in
China
Japanese
Customers
Chinese
Customers
Solution
3
1
3
1
Derisk
1
4
4
5
Cost
2
2
1
2
Ramp up
4
5
5
4
Language
5
2
2
2
Language
E
E/C
J/C
C
Value
Based on Infosys Execution competence / project management
Value by virtue of presence in china
© Infosys Technologies Limited 2004-2005
Infosys value transplant/import/leverage
Analyst Meet 2004 | New Game. New Rules.
Slide 24
Summary
» Infosys is defining the game by extending the GDM model
beyond its traditional definition
» Subsidiaries in Australia and China
» Seamless Global Delivery with emphasis on local domain, culture
and relationships
» Market specific opportunities for growth identified
» Unique leadership position as a end to end service provider
leveraging GDM
As the Center of Gravity shifts more and more towards Asia,
Infosys is well placed to take advantage of the shift
© Infosys Technologies Limited 2004-2005
Analyst Meet 2004 | New Game. New Rules.
Slide 25
Thank You
© Infosys Technologies Limited 2004-2005
Analyst Meet 2004 | New Game. New Rules.