2010

Infosys

International
Academy
of
Shoubhik Sen
Management
PGPM/0911/018
& 2009-2011
Entrepreneurship
Introduction
IT services brands in Europe. As we expand our
operations in the UK and Europe, our presence in
London is critical to our success as it allows us both
to leverage the global talent pool, and to utilise the
excellent physical and communications infrastructure
required to rapidly scale up our operations.”

- B G Lahiri, Head EMEA

History
Infosys was founded on July 2, 1981 by N. R. Narayana Murthy with
six others Nandan Nilekani, N. S. Raghavan, Kris Gopalakrishnan, S. D.
Shibulal, K. Dinesh and Ashok Arora.
N. S. Raghavan officially being the first employee of the company.
Murthy started the company by borrowing Rs 10,000/-.
The company was Incorporated as "Infosys Consultants Pvt Ltd.“

Company Background
Infosys Technologies Limited, incorporated in the year 1981 provides
consulting and IT services. Infosys has been a pioneer in offering
innovative solutions to its clients. The company offers a wide range of
software services, namely application development and maintenance,
corporate performance management, independent validation services,
infrastructure services, packaged application services and product
engineering and systems integration.

Achievements
1. Infosys was the first Indian company to be listed on the NASDAQ
Stock Exchange. The company reported a consolidated net profit of
US$ 152.1 million for the quarter ending March, 2006.

2. It has five subsidiaries globally – Progeon Limited, Infosys

Technology (Australia) Pty. Ltd., Infosys Technology (Shanghai) Co.
Ltd., Progeon S.R.O. (Czech Republic) and Infosys Consulting Inc. It
has presence across the globe with 30 offices spread over USA,

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 Europe, Australia and Asia. It currently employs people from 53
different nations.

3. Infosys has a growth rate of over 50% and more than half a billion
dollars in revenues in EMEA (Europe, Middle East and Africa) region,
Infosysis one of the fastest growing Consulting and IT Services
organisations in EMEA region

Factors for Success

Delivering locally relevant business value

Infosys has been able to customise its services and solutions to the
requirement of its clients. Infosys has delivered enhanced customer
value to its UK clients- evidenced by the 90 per cent plus repeat business
that the company generates. Understanding client-specific needs and the
value proposition has been key to this. An example is the creation of
specific services around regulatory compliance that are region specific.

Growth Strategy of Infosys

Infosys Technologies (Infosys), one of the fastest growing companies in
India is growing at an annual rate of over 40%. Infosys believes it has a
strong and resilient business model, which has been successfully adapted
to the changing market requirements over the years. Infosys has added
services like independent software testing and enterprise applications to
its offerings. It has also re-organised itself along verticals or industries
compared to the geography-specific orientation it had conformed to
earlier.

To maintain its scorching pace of growth Infosys has devised a new

business model. It intends to build a super-efficient platform that could
offer the entire range of software services, from consulting to business
process outsourcing, and layer it over with new initiatives, such as the
emphasis on business solutions, to ensure that the company does not fall
into a commodity trap. "Scalability is the name of the game," points out
N.R. Narayana Murthy, chairman and chief mentor.

Pedagogical Objectives:

 The case discusses Infosys’ earlier business model – the global

delivery model, its growth strategy and its efforts to become a globally
competitive company
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 It discusses the growth of offshore software development, the
challenges faced by such developers and their future
 The case also discusses Infosys’ ‘scalability model’.

The project Management in Infosys

Infosys Technologies Ltd. (NASDAQ: INFY) was started in 1981 by seven
people with US$ 250. Today, they are a global leader in the "next
generation" of IT and consulting with revenues of over US$ 3 billion.
Infosys defines, designs and delivers technology-enabled business
solutions that help Global 2000 companies win in a Flat World. Infosys
also provides a complete range of services by leveraging our domain and
business expertise and strategic alliances with leading technology
providers.

Infosys pioneered the Global Delivery Model (GDM), which emerged as a

disruptive force in the industry leading to the rise of offshore
outsourcing, to ensure the distribution of application and business
process lifecycle activities and resources, while ensuring their
integration.
The GDM is based on the principle of taking work to the location where
the best talent is available, where it makes the best economic sense, with
the least amount of acceptable risk. It has several Key Drivers, which are
Process, Quality, Tools, Knowledge Management, Program Management,
and Risk Mitigation. In this way, the project management in Infosys is a
key part of GDM, and to support the whole business of Infosys.

The project Management in Infosys will be fully introduced in this page.

Because of the success of Infosys in business, its project management
becomes a successful case of project management of Software
Outsourcing.

Infosys Project Process will be explained from three parts, the structure
of Infosys Processes, Key Elements of Infosys Project Processes, and
Process Infrastructure.

The structure of Infosys Processes

The structure Infosys Processes is a pyramidal structure of 4 stages. Each

stage presents a level of Infosys Processes. The higher the level, the more
rigorous the process is.

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In Stage 4 which is the lowest level at the bottom, only records are
needed in the process. In Stage 3, which is a level higher than Stage 4,
reference document are built as process product basing on records in the
process. In Stage 2, which is higher than stage 3, Department and
Process Manuals are needed. At last, in Stage 1, the top level, all
documents and records in the process should be organized as Quality
Manual and Organizational Manual, which is a full dimensional guide in
process of the whole organization.

Besides, Process Frameworks in PRIDE System are provided to support

management. Project Management, Support Processes, Engineering
Processes and Process Management are 4 parts of Process Frameworks.
When being used in a certain project, a project Process will be checked
out from the Process Frameworks and will be tailored into a list of
activities according to customer needs/requirements and project
objectives.
A typical project life cycle in Infosys contains Development Process and
Project Management Process. Development process uses V model and
Waterfall model. The process begins from the Requirement and ends at
User Acceptance Test. Requirement Phase is corresponding to System
Test. Design phase is corresponding to Integration Test. Implementation
Phase is corresponding to Unit Test. Project Management Process is
started parallel with Development Process, which includes Risk
Management, Change Management, Communication/Status Reporting,
and Tracking.

HRA in Infosys
Infosys used the Lev and Schwartz method to value Human
Resource
According to this model the present value of future earning capacity of
an employee, from the time of joining the organization till retirement
was estimated. Infosys used this model based on the following
assumption
An employee’s salary package included all benefits, whether direct or
otherwise, earned both in India and in a foreign Nation.
The additional earnings on the basis of age group were also taken into
account.
The method is as follows.
All the employees of Infosys were divided into five groups, based on
their average age .Each group’s average compensation was calculated.
Infosys also calculated the compensation of each employee at
retirement by using an average rate of increment.

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 The increments were based on industry standards, and the employee’s
performance and productivity.
Finally the total compensation of each group was calculated. This
value was discounted at the rate percent per annum which was the cost
of capital at Infosys to arrive at the total human resources of Infosys.

Ratio’s of Infosys Technology ltd

Ratios (in crores)

Mar '09 Mar '08 Mar '07 Mar '06 Mar '05
Per share ratios
Adjusted EPS (Rs) 108.08 78.06 65.42 90.65 68.38
Adjusted cash EPS (Rs) 120.19 87.61 73.63 105.50 78.30
Reported EPS (Rs) 101.58 78.15 66.23 87.86 70.38
Reported cash EPS (Rs) 113.70 87.69 74.44 102.70 80.30
Dividend per share 23.50 33.25 11.50 45.00 11.50
Operating profit per share 120.59 86.78 73.98 108.51 85.97
(Rs)
Book value (excl rev res) 27.51 25.96 29.13 26.56 28.91
per share (Rs)
Book value (incl rev res) 27.51 25.96 29.13 26.56 28.91
per share (Rs.)
Net operating income per 353.75 273.57 230.20 327.63 253.53
share (Rs)
Free reserves per share 305.80 230.74 190.30 245.07 188.51
(Rs)
Profitability ratios
Operating margin (%) 34.09 31.72 32.13 33.11 33.91
Gross profit margin (%) 30.66 28.23 28.57 28.58 30.00
Net profit margin (%) 27.52 27.37 28.05 26.17 27.28
Adjusted cash margin (%) 32.57 30.69 31.19 31.43 30.35
Adjusted return on net 34.76 33.09 33.47 36.21 35.29
worth (%)
Reported return on net 32.67 33.13 33.89 35.10 36.33
worth (%)
Return on long term funds 39.80 37.77 36.64 40.62 41.52
(%)
Leverage ratios

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Long term debt / Equity - - - - -
Total debt/equity - - - - -
Owners fund as % of total 100.00 100.00 100.00 100.00 100.00
source
Fixed assets turnover ratio 3.39 3.47 3.38 3.18 3.20
Liquidity ratios
Current ratio 4.71 3.30 4.96 2.75 2.80
Current ratio (inc. st loans) 4.71 3.30 4.96 2.75 2.80
Quick ratio 4.67 3.28 4.91 2.73 2.77
Inventory turnover ratio - - - - -
Payout ratios
Dividend payout ratio (net 27.03 49.77 19.85 58.32 18.48
profit)
Dividend payout ratio 24.15 44.35 17.66 49.89 16.20
(cash profit)
Earning retention ratio 74.60 50.17 79.91 43.48 80.98
Cash earnings retention 77.16 55.60 82.15 51.43 83.39
ratio
Coverage ratios
Adjusted cash flow time - - - - -
total debt
Financial charges 3,891.00 5,642.00 4,559.00 3,211.00 2,243.01
coverage ratio
Fin. charges cov.ratio 3,257.50 5,017.00 4,253.00 2,831.00 1,994.21
(post tax)
Component ratios
Material cost component 0.09 0.11 0.16 0.17 0.19
(% earnings)
Selling cost Component 0.40 0.56 0.47 0.60 1.20
Exports as percent of total 97.88 92.59 92.44 95.86 88.99
sales
Import comp. in raw mat. - - - - -
consumed
Long term assets / total 0.25 0.28 0.30 0.33 0.42
Assets
Bonus component in 93.58 93.58 93.58 93.65 95.53
equity capital (%)

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CONSOLIDATED FINANCIAL STATEMENTS

in Rs. crore
Consolidated Balance Sheet Schedule December 31, 2009 March 31, 2009
SOURCES OF FUNDS
SHAREHOLDERS' FUNDS
Share capital 1 286 286
Reserves and surplus 2 22,122 17,968
22,408 18,254
MINORITY INTEREST - -
22,408 18,254
APPLICATION OF FUNDS
FIXED ASSETS 3
Original cost 8,035 7,093
Less: Accumulated depreciation and 3,072 2,416
amortization
Net book value 4,963 4,677
Add: Capital work-in-progress 424 677
5,387 5,354
INVESTMENTS 4 5,273 -
DEFERRED TAX ASSETS, 5 286 126
NET
CURRENT ASSETS, LOANS AND ADVANCES
Sundry debtors 6 3,369 3,672
Cash and bank balances 7 7,625 9,695
Loans and advances 8 4,000 3,279
14,994 16,646
LESS: CURRENT LIABILITIES AND PROVISIONS
Current liabilities 9 2,431 2,004
Provisions 10 1,101 1,868
NET CURRENT ASSETS 11,462 12,774
22,408 18,254

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Consolidated Profit and Loss
2009 2008 2009 2008

Income from software services, 5,741 5,786 16,798 16,058

products and business process
management
Software development and 3,009 3,075 8,887 8,720
business process management
expenses
GROSS PROFIT 2,732 2,711 7,911 7,338
Selling and marketing expenses 314 274 851 834
380 406 1,221 1,200
694 680 2,072 2,034
2,038 2,031 5,839 5,304
Depreciation 231 187 685 533
1,807 1,844 5,154 4,771
Other income, net 231 40 736 223
Provision for investments 1 2 1 2
Net profit before tax and 2,037 1,882 5,889 4,992
minority interest
15 455 241 1,240 617
Net profit after tax and 1,582 1,641 4,649 4,375
before minority interest
Minority interest - - - -
Net profit after tax and 1,582 1,641 4,649 4,375
minority interest
Balance Brought Forward 12,957 8,892 10,560 6,828
- - - 1
- - - -
12,957 8,892 10,560 6,827
14,539 10,533 15,209 11,202
Interim dividend - - 573 572
Dividend tax - - 97 97
Amount transferred to General - - - -
Reserve
Balance in profit and loss 14,539 10,533 14,539 10,533
account
14,539 10,533 15,209 11,202
EARNINGS PER SHARE
Basic 27.75 28.66 81.53 76.44
Diluted 27.72 28.63 81.43 76.30

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Consolidated Cash Flow statement

Consolidated Cash Flow statement Schedule 9 months ended Dec 31

2009 2008
CASH FLOWS FROM OPERATING ACTIVITIES
Net profit before tax and minority interest 5,889 4,992
Adjustments to reconcile net profit before tax to cash provided by operating
activities
(Profit)/ loss on sale of fixed assets - -
Depreciation 685 533
Interest and dividend income (654) (615)
Profit on sale of Investments - -
(41) 28
65 (32)
Changes in current assets and liabilities
Sundry debtors 16 319 (213)
Loans and advances 17 (296) (498)
Current liabilities and provisions 18 286 457
6,253 4,652
Income taxes paid 19 (1,391) (557)
Net Cash Generated By Operating Activities 4,862 4,095
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of fixed assets and change 20 (489) (1,015)
in capital work-in-progress
Payment for acquisition of business, net of cash (169) (16)
acquired
Investments in/ disposal of securities 21 (5,273) (121)
Proceeds from disposal of fixed assets - -
Interest and dividend received 22 674 783
Net Cash Used In Investing Activities (5,257) (369)
CASH FLOWS FROM FINANCING ACTIVITIES
60 48
Dividends paid including residual dividend (1,345) (2,131)
Dividend tax paid (228) (362)
Net Cash Used In Financing Activities (1,513) (2,445)
Net (decrease)/ increase in cash and cash (1,867) 1,253
equivalents
Cash and cash equivalents at the beginning of the 10,993 8,235
period
Cash and cash equivalents at the 23 9,176 9,488
end of THE PERIOD

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SWOT ANALYSYS OF INFOSYS

Strengths
 Since the company is based in India its competitive advantage is
enhanced. The Indian economy, despite weak economic indicators
such as relatively high rates of inflation, has low labor costs. The
workforce has relatively high skills levels in Information Technology.
Couple these two elementstogether and you have an operational basis
that offers low-cost based, highly skilled competitive advantage.
Trained Indian personnel often speak very good English and are
sensitive to Western culture, underpinned by India's colonial past.
 Infosys is in a strong financial position. The business turned over
more than $4 billion in 2008. This means that it has the capital to
expand, and also the basis to leverage potential investors.
 The company has bases in 44 global development centres, most of
which are located in India, although the company has offices in many
developed and developing nations. This means not only that Infosys is
becoming a global brand but also that it has the capability to support
the global operations of multinational clients.

Weaknesses
 Infosys on occasion struggles in the US markets, and has particular
problems in securing United States Federal Government contracts in
North America. Since these contracts are highly profitable and tend to
run for long periods of time, Infosys is missing out on lucrative
business. Added to this is the fact that its competitors do well in terms
of securing the same Federal business (and one should also take into
account that many of its competitors are domiciled in the US and
there could be political pressure on the US Government to award
contracts to domestic organizations).
 Despite being a huge IT company in relation to its Indian competitors,
Infosys is much smaller than its global competitors. As discussed
above, Infosys generated $4 billion in 2008, which is relatively low in
comparison with large global competitors such as Hewlett-Packard
($91 billion), IBM ($91 billion), EDS ($21 billion) and Accenture ($18
billion).
 It is sometimes argued that Infosys is weaker when it comes to high-
end management consultancy, since it tends to work at the level of
operational value creation. Competitors such as IBM and Accenture
tend to dominate this space.

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Opportunities
 At a time of recession in the global economy, it may appear that some
companies will reduce take up of services that Infosys offers.
However, in tough times clients tend to focus upon cost reduction and
outsourcing - with are strategies that Infosys offers. So hard times
could be profitable for Infosys.
 There is a new and emerging market in China as the country
undergoes a huge industrial revolution.
 The strategic alliance between Infosys and Schlumberger gives the IT
company access to lucrative business in the gas and oil industries.
 There has been a trend over recent years for European and North
American companies to base some or all of their operation in India.
This is called an offshore service. Essentially there is a seamless link
between domestic operations and services hosted in India. Examples
include telecommunications companies such as British Telecom and
banks such as HSBC that have customer service and support centres
based in India. Think about the times that you have made calls to a
support line to find that the adviser is in Mumbai or Bangalore and
not in your home market.

Threats
 India is not the only country that is undergoing rapid industrial
expansion. Competitors may come from countries such as China or
Korea where there are large pools of low-cost labor, and developing
educational infrastructures such as universities and technology
colleges.
 Customers may switch to other offshore service companies in other
countries such as China or Korea.
 Other global players have realised that India has the benefit of low-
cost, highly-skilled labor that often speaks English and is culturally
sensitive to Western practices. As with all global IT players, Infosys
has to compete for skilled labor and this may have the effect of driving
up wage levels, and making it more difficult to recruit and retain staff.

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SUPPLY CHAIN OF INFOSYS

Infosys’ supply chain practice provides best of breed packages that

addresses supply chain functional areas, such as Supply Chain Planning,
Sourcing & Procurement, Supply Chain Execution, and Enterprise Asset
Management. The key solutions showcased across functional areas are
Forecast to Plan (F2P), Procure-To-Pay (P2P), and Warehouse Advanced
Visibility Enterprise Solution (WAVES). The Forecast to Plan (F2P)
solution addresses complex demand prioritization requirements. Since
the success of any supply chain planning is dependant on the plan
quality, the prioritization goes a long way in addressing it. The other
differentiator for this solution is the ease in extracting required reports
even after the plan run along with its scalability and configurability. The
P2P solution of Infosys is designed to address every step in indirect
procurement process to help companies support growing business
needs. This end-to-end indirect procurement solution managed by
Infosys is designed to deliver the required levels of performance,
availability, and business value realization quickly. This platform-based
solution can provide significant cost and operational savings. While the
P2P and F2P provide clear value in the supply chain planning and
Sourcing & Procurement space, Warehouse Advanced Visibility
Enterprise Solutions (WAVES) addresses the execution part of supply
chain. The key driver for this solution occurs from the need for
warehouses to increase visibility into their processes and to enhance
responsiveness without disrupting their operations. Some of the key
advantages of this solution include non-intrusive integration into the
existing IT infrastructure and non-disruptive global visibility across
multiple warehouses. The solution also avoids information silos and
guides the user with right information at right time.

Infosys’ strategy is to essentially leverage the company’s information

technology skills and its rich supply chain implementation experience
which would be watched with keen interest. The company’s expertise in
the supply chain domain includes providing integration services covering
process sourcing and procurement, inventory and order management,
warehousing, logistics, and distribution. Infosys has been leveraging its
partnership with product vendors, such as Maximo, Oracle, SAP,
and Sterling Commerce.

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Products designed by Infosys

Products designed by Infosys

Infosys has designed and developed products across industries. If you do

not see a product similar to what you require, contact us to discuss your
needs.

Aerospace

 Design of A380 Inboard Fixed Trailing Edge

 Design of Fuselage Frame Installations
 Design of Nose Landing Gears Doors and associated mechanism
elements
 Design of Floor panels
 Complex composite and metallic structures
 Knowledge-based engineering

Automotive

 Seating system design

 Door and Pillar trims
 Instrument floor consoles
 Overhead systems
 Model for Combustion Pressure inside Engine
 Test Automation for Dashboard SW
 Embedded control development of Electro Hydraulic Breaking,
Adaptive Cruise Control and Fuel Injection system
 Design and development of software in Antilock Breaking Systems
 Body control module Platform Porting and Optimization

Business Software & Enterprise Products

 Enhancement of Business Intelligence Product

 Development of Retail server product
 Development of Enterprises Integration platform components
 Design and development of Internet security product suite
 Development of leading MNP and LNP solutions

Computing Peripherals & Office Automation

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  Product development of high-speed label printer, host system
drivers and middleware components
 Design and development of device drivers, core printer controller
firmware, testing, roll-out and support at sites for pilot
installations
 Solution development for POS product vendor

Consumer Electronics, Mobile & Handheld Segment

 Design and development of an interactive TV application for a

European cable service provider
 Development of an embedded multimedia framework and
audio/video components for various platforms and operating
systems
 Development of next generation handheld scanners that integrate
with web applications in near real-time for a US package delivery
giant.

Digital Media Technologies

 Digital media products in broadcasting, distribution and play out

 Set-top box development and integrated DTV solutions
 Network and Element Management solutions for telecom and data
communication products
 Product services in 2G, 2.5G and 3G services
 IPTV Solutions including solutions with Microsoft's IPTV Platform

Discrete manufacturing

 Electric Injection Molding machines

 Re-engineering for improved efficiency of Air conditioning
compressor
 KBE for Optimization and Automation of Design of Oil Well
Screens
 Hydraulic systems for Industrial machinery
 Mechanism Synthesis, Analysis & Optimization
 CFD analysis for Gas turbines
 Sizing and Selection Machine Elements
 Next generation HMI for power plant SCADA

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Energy & Utilities

 Equipment sizing and selection

 Effluent treatment system layout
 Piping analysis and drawings
 Oil Well Monitoring system
 Implementation of advanced process control in crude line refinery

Hardware

 Professional Video Deck for real-time video and audio editing

 Reference Platform for High End Cell phone
 Processor Board redesign for RoHS compatibility keeping the old
form factor, and minimizing software impact
 Optical Channel Monitor using DSP for control of tunable optical
filter, piezo-electric sensors and signal processing
 Oil Well Monitoring system to compute oil flow rates, bulk
velocity, and measurement of pressure and temperature; based on
industrial PC running Windows NT

Medical Devices

 New software products in the Patient Tracking and Health

Information Management areas
 Web-enablement of payor product suite including sustenance and
maintenance
 End-to-end product development for respiratory devices
 End-to-end development of comprehensive healthcare monitoring
applications
 Innovation in all aspects of medical image-analysis platform and
biochemical- markers in drug development for a CRO
 New product development, regulatory testing and support of
several medical devices

Networking & Communications

 Development of a WLAN switch for a leading networking company

 Development of VOIP calls manager, Media gateway and
Softswitch
 Complete product ownership of a leading enterprise L2-L7 switch

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  Development of a leading DSLAM switch
 Development of EMS & NMS systems for wireless and optical
networks

Product Development (Hardware & Software)

 Product development of digital video processing card

 Development of key mobile phone components including MMI
modules, entertainment modules, Codecs, etc.

Semiconductors, Scientific & Industrial Equipment

 Design of reservoir monitoring system

 Development of silicon wafer inspection solution
 Development of monitoring solutions for chemical processing
industry
 Development and sustenance of defect tracking and diagnostic
systems for railway tracks

Storage & Services Segment Solutions

 Development of ISCSI host and target modules & SCSI drivers

 Development of performance tools for disk mirroring
 Development of a NMS configurator for FC-SAN switch
 Development of Recovery & Storage manager
 Re-engineering of multi platform space manager

QUALITY CONTROL AT INFOSYS

We strictly follow quality control norms and deliver software solutions

that surpass your expectations. Our team provides you top quality
services with reliability and security that will have various steps like
business integration, process improvement, performance testing,
software publication, training, environment management.

Systems Development & Integration

We are complying global standards, use key resources and tools to cater
to your systems development and integration needs enabling you meet
long term business objectives. A thorough study on your businesses
focusing on tools, equipment, technologies, manpower, policy,
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implementation of projects and investments, environment etc., will help
our team to suggest you needed solutions to sustain in the business.

We provide Services in:

 Systems Conversion
 Project Management
 ERP Solutions
 Content Management
 Concept, New Requirements
 e-Business

CONCLUSION

With the outsourcing story expected to gain momentum, and with the
company’s focus on improving its business mix through moving up the
value chain, and also diversifying into new markets to de-risk its
business model and grow revenues, the outlook for the next few years
seems bright. Given its scalable business model and globally recognized
execution and delivery capabilities, we believe that Infosys will be at the
forefront of the Indian offshoring story in the future. Investors may stay
invested at current levels.

Since near-term valuations are at the higher end of the spectrum (31
times expected FY05 earnings), potential investors need to exercise
caution at current levels, as the risk-reward balance is skewed towards
risk. However, if one is to take a long-term view (3 years or more),
Infosys remains one of our top picks from the sector.

The growth achieved over the years (even in times of turbulence) clearly
shows that the company’s management is highly competent, visionary,
can anticipate future trends, and one that can be trusted. And this is one
of the foremost factors that need to be considered before investing in a
software stock.

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