PORTER FIVE FORCE ANALYSIS INFOSYS LTD.

RIVALRY AMONG FIRMS:

The IT Industry landscape is characterised by intense completion for conventional IT

services: Application Development & Maintenance, IT Infrastructure Management Services,
Network Management Services, Data-center Services etc. leading therefore
to commoditization. There are several firms in the market offering similar services and it
is difficult to differentiate based on these service offerings. The existing competition
comes from both domestic players and international ones.

Infosys experience intense competition in traditional services and see a rapidly-changing

marketplace with new competitors arising in new technologies who are focused on agility,
flexibility and innovation.

In future, Infosys expect intensified competition. They expect increased competition from
firms that strengthen their offshore presence in India or other low-cost locations and firms
that offer technology-based solutions to business problems and from firms incumbent in
market segments that they have recently entered.

BARGAINING POWER OF CUSTOMERS:

For conventional IT services, bargaining power of the buyer is large and the possibility of
pressure on rates exists. The buyer, having worked with both with international IT providers
as well as Indian ones is largely the price setter and has negated (to a large extent) the
offshore advantages through mature procurement and global delivery. The international IT
firms too have negated the advantage enjoyed by Indian IT companies through captive
centres in India and globally. In this industry, in case of conventional IT services, the buyer is
king!

In case of non-conventional services, i.e. those that cater to emergent technologies and
technology trends (in Data Analytics or Enterprise Mobility for instance) there is potential for
differentiation and higher margins. Also, this is the case for non-conventional, partnershipstyle engagements where both risk and rewards are higher.

Mohamed Rizwan 2015JULB02020 (PGDM Batch 2015 2017)

PORTER FIVE FORCE ANALYSIS INFOSYS LTD.

BARGAINING POWER OF SUPPLIERS:

The bargaining power for suppliers is very low and since high-standardization exists, there is
little scope of suppliers having any clout.

Software and computing technology are transforming business in every industry around the
world in a very profound and fundamental way. The continuous reduction in the unit cost of
hardware, the explosion of network bandwidth, advance software technologies and
technology-enabled services are fuelling the rapid digitization of business process and
information. Traditional business models are being disrupted in every industry with digital
and software-based business models.

The suppliers consist of IT Infrastructure providers (Servers, computers etc.), Recruitment

firms, Office Space Suppliers etc.

THREAT OF NEW ENTRANTS:

In context of the highly commoditized IT services, there is little threat of new entrants. That
said, the Industry is also characterised by high people dependence and therefore can see
veterans detach from existing companies to invest in new ventures.

The newer technologies allow the possibility of new niche players that are not dependant on
size or experience constraints.

MNCs are ramping up capacity and employee strength.

AVAILABILITY OF SUBSTITUTES:

Mohamed Rizwan 2015JULB02020 (PGDM Batch 2015 2017)

PORTER FIVE FORCE ANALYSIS INFOSYS LTD.

There are no substantial substitutes to IT services apart from Internal IT departments, which
have lost clout over the years and are ever thinner in numbers and significance. One argument
for internal IT is retaining control over pertinent aspects of business but the argument against
would be since the main business of the company is not IT services, it should outsource as
much as possible and focus on future growth in core areas. Over time there has been a steady
decrease in in-house IT development and maintenance with more and more being outsourced
and the internal IT staff has settled into a supervisory (program management) role.

This has been a mixed bag for newer services as well since internal specialization is very low,
most of the work is outsourced. For critical areas, governance has been retained in-house and
this trend seems to have found favour with most large enterprises worldwide.

Broadly speaking the market for conventional services is highly commoditised with potential
for differentiation concentrated around niche expertise in new technologies and trends
(SMAC + Internet of Things) and around non-conventional engagements (revenue/profit
share, risk-reward models). It is unlikely that the market for conventional services will vanish
overnight but the future promises to hold a highly modified view. Application development is
fast morphing into app-development and a large part of revenues continue to be drawn from
conventional services as the need to adapt and incorporate new technologies and engagement
models looms over an IT industry that needs to reform and re-invent itself rapidly.

Mohamed Rizwan 2015JULB02020 (PGDM Batch 2015 2017)