By: Georges Haour
As we look for models of corporate success, the European and North American management establishments need to become much less ethnocentric and more curious about Asia’s ascending actors. This article takes a closer look at the success of a Bangalore-based firm in global outsourced IT services. Infosys is a striking example of successful, rapid, profitable growth.
Infosys was founded in 1981 by seven computer engineers. Their vision for the company had nothing to do with revenues and profits. They wanted to create the “most respected company in India”. For its customers, this company would deliver on promises and meet expectations. For its employees, it would create an open fair meritocracy. For investors, it would provide consistent financial performance.
Early days of Infosys
Infosys got its first real break from the German technology company Bosch. The firm moved from Mumbai to Bangalore, in order to be close to this customer’s data center. It subsequently carried out application maintenance and software development for General Electric, Schlumberger, Siemens, Airbus and Crédit Suisse, delivering these services out of its offices in India.
The 1991 liberalization of the Indian economy, India’s plentiful and lower cost, skilled labor, and a time difference enabling round-the-clock operations for US/European companies, all this had fuelled the growth of Infosys and India’s emerging software industry. In 1993, Infosys went public on the Indian stock exchange and focused on selected markets. Today, close to 30%of its business world wide is with financial services.
Mid-2009, Infosys counted close to 110 000 staff. Its sales are $ 3,8 billion per annum, a long way since its founding…By and large, Infosys’ profitability is better than the average in this industry, which includes Wipro and Tat services.
Ingredients of Infosys’ success
One key to Infosys’ success is the operational excellence of its Global Delivery Model, based on doing work where it adds most value. In this way, the firm makes use of the best global resources with the lowest associated cost and of the highest possible quality. Reliable telecom infrastructure and India’s low-cost skilled manpower allowed most of the work to be conducted offshore. Onsite aspects of the project are limited to those demanding market proximity and customer interaction.
The resulting ratio of 30 to 70 onshore/offshore provides a strong customer focus, as well as significantly reduced delivery costs. Thus, close to 50 000 Infosys employees are based in India.
High customer satisfaction
Customer satisfaction is another key to Infosys’ breakneck rate of profitable growth. Over a 30 year period, the company has successfully completed more than 20,000 projects with a rate of 99.998% error-free. Over 93% of these projects were delivered on time and on budget, far above the industry average of 30%. Such high customer satisfaction rate leads to over 95% of clients coming back to Infosys for further projects.
Relying on such customer satisfaction, Infosys proactively seeks to expand the scope of the work it does with existing clients, further fueling the revenues’ growth. Infosys fully understands that in the business of outsourced services, lower cost alone is not sufficient. Quality, reliability, speed and customer orientation are fully part of the equation.
Infosys is customer-centric, creating in 2001, of the Corporate R&D unit SETLabs (Software Engineering and Technology Laboratories) totally dedicated to innovate, in order to enhance the services rendered to clients. This unit develops methodologies, frameworks and tools to drive efficiency in project execution and delivery. SETLabs help clients with development projects addressing specific technology or business problems, while also looking into radical innovations and long-term strategic issues supporting business process innovation for the customers.
By mid 2007, SET Labs had grown to 500 staff, mostly software engineers, filing numerous patent applications each year. One new line of services is in high performance tests of the security of the customers IT networks.
Focusing on staff training
Another significant feature is the importance of staff training, Infosys massively invests in technical and management education. Young staff joining the firm typically follow a four month course. These courses are carried out in Infosys’ training center, in Mysore, West of Bangalore, a sprawling campus, where 6 000 employees can follow training at the same time. This contributes to Infosys having a staff turn over much lower than that of the industry.
Today, Infosys’ market capitalization is $30 billions. Revenues have consistently grown at over 50% annually through the past decade. As a result, it had taken 23 years for Infosys to reach $1 billion in revenues, but only 23 months to reach the $2 billions mark….
By Georges Haour
About the author
Dr. Georges Haour is Professor of Technology & Innovation Management, at IMD, Lausanne, Switzerland. He also acts as an adviser to firms and organizations in his area of value-creation through effective management of the innovation process, as well as commercialization of technology. His latest books are Resolving the Innovation Paradox –Enhancing growth in technology companies and From Science to Business-How firms create value by partnering with universities (www.sciencetobusiness.ch).