Infosys at Crossroads
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Case Code: BSTR430 Case Length: 22 Pages Period: 2009-2013 Pub Date: 2013 Teaching Note: Not Available |
Price: Rs.500 Organization: Infosys Ltd. Industry: Information Technology and Consulting Countries: India Themes: Managing internal and external challenges |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
Infosys- No Longer the Sector Bellwether?
The first signs that there was trouble brewing in the company surfaced when Infosys reported a seven percent drop in net profit for the April to June quarter of fiscal 2010-2011. Analysts opined that the drop was due to currency fluctuations and a weak economic environment in the US and European region. It was reported that most of the IT companies had shifted their focus to Europe after the economic slowdown in the US since 2009. The company's dismal performance continued when it reported its fourth quarter results in April 2012. For the Q4 ended March 31, 2012, Infosys announced a 2.3 percent drop in profit to US$ 430 million...
Other Problems
Some experts opined that Infosys' woes were also attributable to its premium pricing strategy and its risk-averse culture wherein the company preferred to grow organically in contrast to its competitors who also took the inorganic route to growth. To add to its troubles, several players who had started off late in the Indian IT market were ahead of Infosys....
Coping with the Changing Dynamics in the IT Industry
Some analysts felt that Infosys, once a leader in the BFSI vertical, was losing its edge in the business. It was reported that TCS and CTS had aggressively grown their market share in this vital segment. They pointed out that Infosys was still focusing on the ADM model which had become outdated. Also, with the advent of several players in the industry, this model had become commoditized. Commenting on Infosys' focus on the ADM business model, HCL CEO Nayar, said, "This is a battle of business models, not of individual companies. We are the No. 1 player in three of the four markets we are in and application development is a must to undertake total IT deals"....
Corrective Action
As the first step in its corrective action strategy, Infosys acquired Zurich-based Lodestone Holding AG (Lodestone) for US$ 345 million in September 2012. The acquisition was expected to give Infosys a significant presence in the European market, which it had lacked earlier. According to Shibulal, the Lodestone acquisition was the company's first step toward implementing its Infosys 3.0 strategy announced in 2011 that aimed to make the company “more relevant” to clients and drive superior future growth (Refer to Exhibit V for a note on Infosys 3.0 strategy). The company reported that the Lodestone acquisition was one of the first steps taken by Infosys toward strengthening the company's consulting and systems integration capabilities. After the completion of the acquisition of Lodestone, Infosys increased its revenue guidance for the FY 2013 to US$ 7.45 billion from US$ 7.34 billion. The company said that the additional revenue from Lodestone enabled it to give higher growth guidance...
Exhibits
Exhibit I: Infosys – Milestones
Exhibit II: CEOs of Infosys at Different Points of Time
Exhibit III: Infosys Financials
Exhibit IV: Five Year Revenues of TCS, CTS, and Wipro
Exhibit V: Infosys 3.0 Strategy
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