Infosys' Nilekani: The success of Infosys' global delivery model rests on the assured shoulders of its employees, whose soft skills set the company apart from rivals

Guests at a wedding held in Bangalore late last year were pleasantly surprised to find a rather high-profile guest in attendance. N.R. Narayana Murthy, Infosys Technologies' Chairman and Chief Mentor, walked in unannounced, all because the 20-something Infoscion who was getting married had left an invitation with his secretary, purely as a matter of form.

People management is an area where Infosys excels. While its employee strength may have ballooned to over 35,000 from around 5,000 at the turn of the century, the intense focus on people and their skills has only increased over the years. Earlier this year, the company launched its training and leadership centre in Mysore amidst much fanfare (it has been operational since 2000 but the latest phase, which makes it possible to accommodate 4,500 people on campus for residential training sessions, was recently completed).

Infosys' intense focus on people is a natural corollary of its booming business, with customers identifying this as a quality that often separates it from other competitors in the IT services space. "Customers identify the soft skills of Infosys as a key differentiator when they work with the company," says Avinash Vasishtha, Managing Director of neoIT, an offshore advisory. "These skills can be seen in the way employees interact with management and perhaps more importantly, the way its customer-facing personnel conduct business."

For Infosys, managing employees is not a challenge that's restricted to India alone; it applies to Canada, the Czech Republic, and China, three of the nine locations where it has development centres. While size may offer it some comfort at home, overseas, it plays in the same field as the 500-pound-gorillas of this space, IBM, EDs and Accenture. And as Infosys seeks to transform itself into a global entity, it has learnt that its employees have to be the best, not just in India, but in the globe. While its selection is already stringent (in 2003-04, it picked 10,000 people from over a million applicants), training will help keep its nose ahead of the increasing competition.

Team Infosys: (Left to right) COO Kris Gopalakrishnan, Chairman and Chief Mentor N.R. Narayana Murthy, CEO, President & MD Nandan Nilekani, and CFO T.V. Mohandas Pai

Building a $1-billion (Rs 4,400-crore) company (actually, Infosys' guidance shows that it will be a Rs 7,098-Rs 7,107 crore company by March 31, and it should touch the $2-billion, Rs 8,800-crore, mark by 2006) isn't however achieved by just being good to your employees. While it was initially just a plain vanilla IT services company, Infosys has stepped up its offerings over the past few years at both ends of the spectrum (high-end and low, to use popular parlance) and is increasingly managing to string its various pieces together. Thus, Infosys Consulting, which the company kicked off in April last year with a $20-million (Rs 88-crore) investment, will become a 500-employee unit in the next couple of years, and Progeon, its business process management subsidiary, already boasts over 3,400 agents.

Critics of the end-to-end model may argue that BPO and IT services contracts are handed out by different people, but both are now core business problems and there are at least a few customers that want companies such as Infosys to solve the problem in its entirety, not in pieces. Thus, while in some cases Infosys Consulting may have won the initial contract, the company is now doing much more for the client, IT services, even BPO. "As Infosys grows, deals are becoming more complex... we are getting earlier into the lifecycle of the project and we are building relationships with the business side with the CEO, the CXO," Kris Gopalakrishnan, Infosys' Chief Operating Officer told analysts while announcing the company's results for the three months ended December 31 (Infosys declined to speak to Business Today because it is in its quiet period in the run up to an ads offering). "Our focus on creating synergies through Infosys Consulting and Progeon at either end of the services chain has enhanced our competitiveness." That view is echoed by Basab Pradhan, the firm's head of worldwide sales, who told the media on the same occasion that: "...clients have responded favourably to the combination of our consulting services and offshore delivery."

The company's extended capabilities are reflected in growing engagements with customers across industries. In the case of Hannaford Brothers, a European retailer, Infosys began with conventional IT maintenance work in 2000 but rapidly stepped up its partnership to encompass many other areas such as business process consulting, software process consulting, application development and support, enterprise architecture services, and technical training. "Infosys stepped in as a partner in our efforts to extend Hannaford's supply chain solutions to an additional 1,350 stores," says Bill Homa, CIO of Hannaford Brothers. "It doubled our development capacity in very short order leading to a flawless implementation."

The creation of a us-based consulting company is a major step forward in Infosys' long-term strategy of presenting itself as a global service provider. Infosys' $20-million investment in this subsidiary is designed to send a clear signal to the marketplace that it is differentiating itself from its Indian competitors, and intends to compete for business consulting services with the traditional consultancies, says a report from Gartner, a technology research and consulting firm.

Companies like Infosys have leaned heavily on the cost and quality advantage offered by being based in India; today, many multinational competitors are learning fast. IBM, for instance, has over 6,000 engineers in India and EDs, another rival, has announced plans to shut 20-plus call centres in the us and move work here. IBM has even bought out Daksh, a large third-party BPO operator, to step up its India presence. And several other large us corporations have succumbed to the business imperatives of moving work offshore and are setting up sizeable software centres in India.

BEST PRACTICE

Infy@Bangalore: It's all planned A company that has not missed an earnings target in the past 48 quarters should be doing something right in terms of planning. So, it shouldn't come as a surprise to anyone that Infosys' planning process spans four levels along one axis (board, unit heads, sales and delivery heads, and key accounts), and three time horizons along the other, one year (further disaggregated into every quarter), three years, and five to eight years. If that isn't complex enough, the matrix, for that is what it is, also accommodates another dimension, a strategic account management process that seeks to determine where relationships with key customers are headed, critical for a company that derives 95 per cent of its revenues from repeat business. In the short term, annual plans are broken into quarterly targets and the company focusses on 22 risk parameters. Infosys' corporate planning department reviews these plans every three months. The yearly plan budgets for short-term requirements in terms of manpower, infrastructure and immediate business environment. For instance, it could forecast increased activity in the financial services segment, which means the company will have to train more employees in this vertical than, say, retail or manufacturing. The 12-month planning cycle also takes into consideration factors such as political climate and the current business environment. Infosys also drafts three-year plans, drafted after the heads of individual business units meet and discuss where each is headed in terms of revenues, profits, new solutions to be developed and the like. Finally, the company also builds a five-eight year business plan. This is not merely restricted to numbers, but seeks to create a holistic view, incorporating metrics like revenue mix, average age of employees, even broad trends in technology.

Infosys relies on its much-touted global delivery model (GDM), which it insists is based on much more than cheap manpower, to push its case as a preferred vendor. Yet, it is apparent that the competition, especially companies like IBM, having recently discovered GDM are pushing ahead with their newfound wisdom. The key to GDM is the focus on getting the best talent, wherever it is located and using that to address the customer's needs. Infosys can obtain skilled labour at better rates than its customers can in their own region and the focus of the GDM is maximising skill while minimising cost, a note from ZapThink, an Waltham, Massachusetts-based IT market intelligence firm states. Some critics deride Indian vendors' obsession with near perfect processes; Infosys itself doesn't see this as the be-all-and-end-all of its strategy, but as a business enabler that allows it to quickly deploy efficient and cost-effective processes to any client irrespective of location or industry.

One of Infosys' key strengths has been its ability to add new business offerings and mould itself to suit changing market requirements. It has added services like independent software testing and enterprise applications to its offerings. It has also reorganised itself along verticals or industries compared to the geography-specific orientation it conformed to earlier. And most of the company's growth has been organic, barring the odd buy like its acquisition of Expert Information Systems, which it morphed into Infosys Australia. Arch rival Wipro may seek to build a "string of pearls" inorganically, but Infosys clearly prefers to build competencies in-house, even in the fast-growing BPO market, where it built Progeon from the ground-up. The immediate benefit is that it avoids a lot of the pains of integrating a new business with existing operations.

Infosys is also looking to diversify its risk and explore emerging markets for its range of services. The American market may offer the largest and deepest IT market to companies; yet, the potential in other geographies can't be ignored. The contribution from the us has in fact dipped to just over 65 per cent for the third quarter ended December 31, 2004 compared to over 73 per cent in the corresponding period in the previous fiscal.

Admiration for Infosys both from within and outside the business community also comes from its strong focus on corporate social responsibility and corporate governance. The company created a whistle-blowing policy after being rocked by accusations of sexual harassment against its former head of sales Phaneesh Murthy, and it has also been rated highly in several corporate governance reports, including one by rating agency CLSA, which has given it a high cg Star grade. Infoscions are also expected to be closely involved in the society they live in and the Infosys Foundation engages in socially relevant charitable activities such as social rehabilitation and rural upliftment.

However, as Infosys scorches its way ahead with near 50 per cent growth rates, there are a handful of hurdles it will have to clear to stay on course. The most obvious one is the strong appreciation of the rupee, but there are other, far more significant challenges, such as the shrinking pool of skilled manpower and the creation of a complete solutions provider with global reach and scale.