Abstract

The case discusses the challenges faced by Bangalore-based information technology and consulting company, Infosys. The company had announced disappointing results for the fourth quarter (Q4) of 2012 on several performance parameters – reduction in volumes, weaker employee utilization, weaker pricing, and lower revenues from its key US market as well as the Banking and Financial Services (BFSI) vertical. Moreover, the company, known as the sector bellwether for providing quarter guidance which it usually exceeded, not only failed to meet its guidance for the Q4 of 2012 but also gave a lower revenue guidance of 5 percent growth for the FY 2013. The company’s internal restructuring, done with the aim of transforming it into a consulting major focusing on high value businesses rather than catering to cost-reduction projects, also backfired as the global companies were keen to make investments in projects that could help them cut costs. Industry observers pointed out that the global clientele preferred working with IT companies with lower margins in view of the weak global economic environment. Analysts opined that Infosys’s premium pricing strategy and risk-averse culture had only added to its troubles. The company was also criticized for its failure to motivate its employees. Delayed and small pay rises were pinpointed as the cause for the increasing rate of attrition at the company. To add to the woes of the company, which was already grappling with several issues, players such as Cognizant Technology Solutions (CTS) and Accenture plc. (Accenture) were increasing their presence in the Indian IT market, making it even more difficult for Infosys to survive in the intensely competitive market. US President Barack Obama’s (Obama) anti-outsourcing campaign to save jobs in the US came as another major blow to Infosys and other Indian IT companies.

Learning Objectives

The case is structured to achieve the following Learning Objectives:

• Understand the challenges faced by Infosys in maintaining its leadership position in the IT industry in India.
• Understand the company’s premium pricing strategy and its implications for its future growth.
• Understand the structural changes in the IT industry in India and the quest of Indian IT players to move up the value chain.
• Understand the challenges faced by Infosys in maintaining its leadership position in the IT industry in India.
• Understand the company’s premium pricing strategy and its implications for its future growth.

Keywords

Infosys, Information technology, Consulting, Sector bellwether, Internal restructuring, Premium pricing strategy, Risk-averse culture, Attrition, Macro environment, Predicatability, Sustainability, Profitable and De-risking (PSPD) model, Global economic slowdown, Value chain, Acquisition, Infosys 3.0 strategy, NASSCOM, Tata Consultancy Services, Cognizant Technology Solutions, Accenture plc.