Just ask Nilekani: There's actually plenty in a name, especially if it's Infosys

No company has captured public imagination and come to represent an entire sector in India's post liberalisation era as Infosys has. Yes, there are larger companies (think Reliance, even TCS in its own sector), those with a better pedigree (think companies from venerable business houses such as the Birlas, Godrej, Bajaj), but none has managed to get the kind of cachet and adulation Infosys has.

Part of the reason why Infosys has been able to do this is the much-chronicled working-class-to-riches stories of its founders. The power of brand Infosys has to do with the DNA of the company and its founders-this is a company that was built from scratch by middle class Indian entrepreneurs who borrowed money and pawned jewellery. It fired the imagination of an entire generation; here was a bunch of ordinary middle class people who, through sheer intelligence, hard work and ethics succeeded on a global scale. Brand Infosys, however, is not just a success story of a bunch of guys next door propelling themselves to riches, albeit carrying a few thousand people along.

The success of brand Infosys has been based on both emotional and, more importantly, financial reasons. Infosys has long outgrown its roots and become a $2-billion (Rs 9,000-crore) it services giant and its branding initiatives try to reflect this mix of old school values with a focus on the cutting edge technology market, an attitude that is reflected in its calling card, "powered by intellect, driven by values". However, it's not just sentiment that is pushing Infosys' brand building initiatives, with cold business logic having its own role to play. The company has carefully nurtured the image and made investments on an ongoing basis to burnish the brand.

When Infosys joined the billion-dollar revenue club two years ago, the company kicked off a riotous celebration at not just its 80-acre headquarters at Bangalore's Electronics City, but across its campuses and representative offices globally. Yellow invitation cards were sent to thousands of invitees, including the company's first customer, Donn Lilles of Data Basics Corporation, its first chairman G.K. Jayram, and a raft of other clients, analysts, families of its employees and business partners. Ace designer Michael Foley was commissioned to design a watch commemorating the event and a special deep blue T-shirt was also unveiled as part of these celebrations. The event was highlighted across India and rest of the globe. What was not commonly known was that TCS had passed the same mark a good six months earlier, but had failed to leverage the occasion citing its then privately-held status. This is a clear example of how Infosys is able to use every opportunity to build 'Brand Infosys'. Even in technology offerings where all its Indian peers have similar offerings, it is able to present a 'differentiated' look to customers. Little wonder then, 90 per cent of Infosys' business is repeat business from its existing base of 460 customers.

TOP AND BOTTOM Infosys has a presence in consulting and BPO; the performance, though, is a mixed bag.

Infosys Consulting's Pratt: Will he be able to make rain? After failing with a separate unit called Infosys business Consulting Services, Infosys, in 2004, founded a subsidiary, Infosys Consulting Inc. And it followed this up by hiring several rainmakers from leading consulting firms, including CEO Stephen Pratt from Deloitte Consulting. While the jury is still out on whether this model (the one perfected by consulting-firm-turned-IT-powerhouse Accenture) works, some analysts (AMR's Dana Stiffler among them) believe that companies expanding into higher-value services will grow faster than the rest (in 2005-06, 3.5 per cent of Infosys' revenues came from consulting; Wipro and TCS claim consulting revenues are embedded in their service line). Others (Gartner's Partha Iyengar and TPI's Sid Pai) believe that Indian firms would do well to stick to the knitting, in this case, technology. Infosys' Nilekani is confident that the company will hit the sweet spot of the market by offering a combination of business process management and IT consulting that will feed into core applications and managed services. The company's foray into business process outsourcing is another story. Progeon (as the subsidiary is named) hasn't really grown. Today, while BPO accounts for 8.5 per cent of Wipro's revenues, it accounts for a mere 4 per cent of Infosys'. With Infosys buying out Citigroup's 23 per cent stake in Progeon last month (the company is now a 100 per cent subsidiary), everyone must be hoping for a faster growth trajectory.

Generally, the tech industry is seen to be tight-fisted (where companies typically spend a miserly 1-2 per cent of turnover on marketing and branding). Infosys has always done otherwise. In 2005-06, it spent around 5 per cent of its revenues or Rs 500 crore on sales and marketing (on a standalone basis) and saw its brand value pegged at Rs 13,950 crore (or $3.1 billion) for 2004-05, a massive jump from the Rs 8,185 crore a year earlier.

One way a company can claim it has a brand rather than a commodity play is from the premium it commands, in turn reflected in its net profit margins. Infosys' net margins, at 26 per cent, dwarf that of rivals like Wipro (19 per cent) and TCS (23 per cent). This is not to suggest that Infosys' margins come from perceived attributes like brand alone. Its strengths in the BFSI (banking, financial services and insurance), manufacturing, retail and telecom verticals are real. The robustness of its systems and processes is well known.

"We are the nextGen company," says Nandan Nilekani, President, CEO and Managing Director. "Our leadership comes from the fact that tomorrow's ideas are being shaped by us today." "We are an aspirational brand as indicated by the 1.3 million applications we received to hire a mere 16,000," he adds.

The ability to attract and retain talent will be a key factor as companies seek to scale up their operations significantly. This year Infosys plans to hire 25,000 people; TCS and Wipro will do likewise; and this hiring will happen across the world bringing with it the challenge of managing a multi-cultural workforce. Dana Stiffler of AMR Research believes that Infosys is best equipped to manage cross culturally because of its 'NewCo' roots. TCS and Wipro are venerable old-line companies, she adds. That's a sentiment with which Gartner's Partha Iyengar agrees. "Infosys is best placed to manage a cross cultural workforce while TCS will find it the most difficult, with Wipro in the middle."

Branding will also be key to Infosys' transformation from a back-office code shop into a highly visible technology and consulting powerhouse (see The Race To $10 Billion). With the market growing at 30 per cent year-on-year and Infosys' largest global competitors making a beeline for India, the company may have to lean on every ounce of marketing muscle to keep ahead of the competition.

Also, the company has little presence in key verticals like government, life sciences, auto and aerospace, nor a footprint in a growing market like Latin America. The unstated fear is that Infosys might crimp its growth to protect margins. Sanjay Purohit, Head (Corporate Planning), dismisses this and says, "We have shown in the past that we can grow at, or above industry growth rates and still protect our margins. We will enter vertical or geographies based on a game plan. We do not enter or exit markets easily." Another flaw in the Infosys story is that it derives just 1.7 per cent of its revenues from the domestic Indian market compared to 21 per cent for Wipro and 12.5 per cent for TCS.

Whether it is becoming the first Indian tech company to be listed on nasdaq or receiving a higher credit rating than the country, Infosys, claims Nilekani, has always strived to set benchmarks. And in keeping with its Chief Mentor and Chairman N.R. Narayana Murthy's mantra of "when in doubt, disclose", Infosys' corporate governance and financial disclosure norms have set industry standards. Little wonder that the investor community has an ongoing love affair with the stock. This has ensured that its market capitalisation is 10.21 times revenues, significantly higher than TCS' 7.22 or Wipro's 8.49.

In their after-results (2005-06) report, Merrill Lynch analysts Mitali Ghosh, Ajay Mathrani and Prasad Deshmukh reiterate that Infosys is their top pick in the sector. "Infy will be a key beneficiary given its strong brand and ability to mine clients based on expanded services and client management skills. This is reflected in its track record of superior growth and margins." This is echoed by brokerage Motilal Oswal in its post-result analysis. In the race to the $10 billion (Rs 45,000 crore), surely, all this must count for something.