[solved]-Link Average Annual Cost 130 000 Sation Three Parts Financial Emotional Compared 9 000 Dom Q39699328
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We were unable to transcribe this imagelink has an average annual cost of about $130,000, sation that has three parts-financial, emotional, compared to only $9,000 for domestic leased lines and learning. The financial component-salary, But U.S. companies still find it less expensive to loans and stock options-grows and erodes with outsource to overseas firms. In early 1996, Infosys the industry. The emotional part comes from being reported that the company provides a cost advan- part of the Infosys team. And the learning opportu- tage to their American clients of anywhere from 40 nities reward individuals who want to grow in their percent to 50 percent. jobs. Other facilities include a health center and a One of the keys to Infosys’s success in soft- state-of-the-art gym, a sauna, basketball and vol- ware development is its blend of whip cracking ef- leyball courts, and an excellent child care center ficiency and fanatie attention to detail. The Infosys was also among the first few Indian com- Carnegie Mellon Software Engineering Institute in panies to start an employee stock option plan. Not Pittsburgh has a rating system for developers that surprisingly, its employee attrition rate of about 10 takes into account the ability to produce quality percent is about half the industry average. Also, In- software on time and on budget, called the Capa- fosys has been voted the best employer by Hewitt bility Maturity Model (CMM). Infosys boasts of Associates in India. having attained the highest grade, CMM Level 5, By the year 2000, Infosys had become a market which means they deliver more than 90 percent of, leader in providing customized software solutions projects on time, compared with the U.S. average to the world’s top companies. It now employed of 60 percent to 65 percent. 9,000 people in 30 offices worldwide. Infosys had Infosys had a very interesting account manage big plans to maintain high growth. The company ment policy. In 1989 General Electric (GE) became wanted to transform itself from a provider of low- a major customer and, within three years of busi cost software fixes for such things as the millen- ness, contributed to approximately 40 percent of num bug to an InfoTech consulting powerhouse, Infosys’s total sales. Attempting to take advantage which would be staffed by programmers and exec- of its bargaining power as Infosys’s largest client, utives to carry projects from design to implemen GE began exerting intense pressure on Infosys to tation. It had some success moving up the value reduce its rates, Infosys responded by terminating chain. Offering cheap solutions to the millennium its relationship with GE. After a one-year transition bug it bullt strong client base that include top U.S. period, during which all Infosys work at GE was companies. It then used those relationships to win handed over to other companies and in-house IT contracts for more complex and profitable work personnel, Infosys exited the relationship. Appar such as maintaining and reengineering existing ently Infosys does not want to be dependent on one software. The company began making a shift customer for more than 10 percent of its business. from labor intensive coding to the development of Thus, in financial year 2000, its largest customer e-commerce software consulting services. Of accounted for 10 percent, and the five largest cus- course, this required closer contact with customers tomers for 33 percent of its total sales. and a stronger physical presence in markets. Infosys realizes that its key resource is its em- Since March 1999, when Infosys made its de ployees, and it has created a nurturing environ- but on the NASDAQ stock exchange, the com- ment for them. The company has a strong belief pany’s stock prices in the United States have risen that, in a knowledge industry like software, wealth more than fivefold. The firm has been consistently creation is done by people, and hence they too rated as India’s most admired corporation by the should be the beneficiaries of that wealth creation. leading financial newspaper for the years 1999 to This translates into a generous compensation 2001. This has helped to build the Infosys brand package, attractive stock options, and a campus name in the United States and attract talented like atmosphere with little hierarchy and flexible American executives to work closely with the hours. The company believes in holistic compen clients. The listing also helps the company attract global talent by offering dollar denominated stock 200k Out, Here Comes India Computer , Poby 24, 1995 options. Infosys is one of the biggest magnets in the talent pool and one of the earliest to move into more sophisticated software work. The company services hundreds of global firms, including Gold- man Sachs, Visa, and DHL It has developed switching software for Cisco, a factory manage- ment system for Nestlé, and an inventory tracking application for Nordstrom.” Until 1999 Infosys was organized around nine strategic business units (SBUS). Each SBU was run as a self-contained organization, comprising func tions such as sales, marketing, and delivery ser- vices. In addition to allowing each area to focus deeply on developing domain expertise, this struc ture helped the firm develop the next generation of Infosys leaders by giving SBU managers a free hand in leading their SBUS. To take advantage of potential economies of scale across the different business units, in October 1999 the firm was re- organized into practice units (PUS) organized by geography, with dedicated sales and software de livery organizations, although each PU has coor- dinators for support functions, human resources, finance, and so on. U.S. $255 million, an increase of 27 percent. The re- lonal sales composition during the year is United States 71 percent, Europe 20 percent, India 2 per cent, and 7 percent from the rest of the world. Con- tribution from offshore business is 51 percent, while the onsite component is 49 percent. The new-cus- tomer total for the year was 116, and the company currently has a total of 283 active accounts. Infosys had lost some big-ticket projects to competitors, an alysts say. Although it signed up 33 new customers during the last quarter, customers are not expanding initial projects into new work for Infosys. Multina- tional corporations are not making fast decisions to subcontract or outsource big or new projects, as they decide on a quarter-to-quarter basis. According to one estimate, there should be a strategy to convert the US, slowdown into an op- portunity. Last year, 185 of the Fortune 500 compa- nies were outsourcing from India, leaving 315 to do potential business. Infosys believes that even if overall spending by companies goes down, it will continue to garner a greater share of the world- wide IT pie. Since Infosys gets about 70 percent of its revenue from the United States, it is seeking to expand in Europe, Japan, and Asia. A strategy In- fosys has is to acquire companies that bring com- plementary values and new customers. The think- ing is that if a company with complementary skills is bought, then it is easier to become a concept-to- execution company. Business analysts expect that in the looming slowdown, large companies with an established client base, good professional manage- ment, and deep pockets will survive. Down a road outside this Indian city jammed with cars, buses, and scooters, inside the industrial park wet now with one of the Bangalore’s tropical showers, Mr. Murthy sits down to lunch, as he has probably done a thousand times before. But this time it’s not growth miracles the legendary leader of India’s bellwether technology company is preparing to discuss. The one-two punch of the U.S. recession and the September 11, 2001, terrorist at Future Outlook Most analysts agree that for Infosys to further suc- ceed in business, it has to transform from its old model to a new model. The old model: (a) write code to spec for big clients, (6) maintain software for long-distance clients, (c) do small portions of large solutions, and (d) compete on price. The new model: (a) offer software solutions for key cus- tomer systems, () outsource simple code work to cheaper countries, @) create and market software for Western countries, and (d) compete on quality. In the fiscal year ending March 31, 2001, Infosys Increased sales by 115 percent and gross profit by 114 percent.” But sales growth rates reduced sharply during the fiscal year ending March 2002; the sales total was U.S. $545 million, showing an in crease of only 32 percent, and the gross profit was APPENDIX A Integrative Cases 521 tacks have smacked India’s software industry. The strategy Murthy outlines is part vision, part dirty ne- cessity: cut billing rates for volume, lessen depend- ency on the U.S. market, which buys 60 percent of the company’s exports; sell to Old Economy types such as health care companies and government agencies; and expand to offer a range of technology services. Also, the vision is to be a truly global company, we should raise capital where it is the cheapest, produce software where it is the most cost effective, and sell our services where it is more profitable. As software sales stall, Infosys is struggling to transform itself from a great code- writer to a one-stop technology services provider. questions: 3. How can Infosys increase sales growth in view of the constraints in the U.S. market? 2. In a declining software industry, what recom- mendations would you provide to Infosys in strategic sales management? 3. Do you think that Infosys’s holistic compen- sation system-financial, emotional, and learning is an effective way to motivate salespeople? 4. What are the merits and demerits of product based sales organization versus geography- based organization in context of Infosys? Please refer to SBUs and PUs as described in ! the case. India’s Software Guru, Aslan Buss, Jamky 2002 Show transcribed image text
link has an average annual cost of about $130,000, sation that has three parts-financial, emotional, compared to only $9,000 for domestic leased lines and learning. The financial component-salary, But U.S. companies still find it less expensive to loans and stock options-grows and erodes with outsource to overseas firms. In early 1996, Infosys the industry. The emotional part comes from being reported that the company provides a cost advan- part of the Infosys team. And the learning opportu- tage to their American clients of anywhere from 40 nities reward individuals who want to grow in their percent to 50 percent. jobs. Other facilities include a health center and a One of the keys to Infosys’s success in soft- state-of-the-art gym, a sauna, basketball and vol- ware development is its blend of whip cracking ef- leyball courts, and an excellent child care center ficiency and fanatie attention to detail. The Infosys was also among the first few Indian com- Carnegie Mellon Software Engineering Institute in panies to start an employee stock option plan. Not Pittsburgh has a rating system for developers that surprisingly, its employee attrition rate of about 10 takes into account the ability to produce quality percent is about half the industry average. Also, In- software on time and on budget, called the Capa- fosys has been voted the best employer by Hewitt bility Maturity Model (CMM). Infosys boasts of Associates in India. having attained the highest grade, CMM Level 5, By the year 2000, Infosys had become a market which means they deliver more than 90 percent of, leader in providing customized software solutions projects on time, compared with the U.S. average to the world’s top companies. It now employed of 60 percent to 65 percent. 9,000 people in 30 offices worldwide. Infosys had Infosys had a very interesting account manage big plans to maintain high growth. The company ment policy. In 1989 General Electric (GE) became wanted to transform itself from a provider of low- a major customer and, within three years of busi cost software fixes for such things as the millen- ness, contributed to approximately 40 percent of num bug to an InfoTech consulting powerhouse, Infosys’s total sales. Attempting to take advantage which would be staffed by programmers and exec- of its bargaining power as Infosys’s largest client, utives to carry projects from design to implemen GE began exerting intense pressure on Infosys to tation. It had some success moving up the value reduce its rates, Infosys responded by terminating chain. Offering cheap solutions to the millennium its relationship with GE. After a one-year transition bug it bullt strong client base that include top U.S. period, during which all Infosys work at GE was companies. It then used those relationships to win handed over to other companies and in-house IT contracts for more complex and profitable work personnel, Infosys exited the relationship. Appar such as maintaining and reengineering existing ently Infosys does not want to be dependent on one software. The company began making a shift customer for more than 10 percent of its business. from labor intensive coding to the development of Thus, in financial year 2000, its largest customer e-commerce software consulting services. Of accounted for 10 percent, and the five largest cus- course, this required closer contact with customers tomers for 33 percent of its total sales. and a stronger physical presence in markets. Infosys realizes that its key resource is its em- Since March 1999, when Infosys made its de ployees, and it has created a nurturing environ- but on the NASDAQ stock exchange, the com- ment for them. The company has a strong belief pany’s stock prices in the United States have risen that, in a knowledge industry like software, wealth more than fivefold. The firm has been consistently creation is done by people, and hence they too rated as India’s most admired corporation by the should be the beneficiaries of that wealth creation. leading financial newspaper for the years 1999 to This translates into a generous compensation 2001. This has helped to build the Infosys brand package, attractive stock options, and a campus name in the United States and attract talented like atmosphere with little hierarchy and flexible American executives to work closely with the hours. The company believes in holistic compen clients. The listing also helps the company attract global talent by offering dollar denominated stock 200k Out, Here Comes India Computer , Poby 24, 1995 options. Infosys is one of the biggest magnets in the
talent pool and one of the earliest to move into more sophisticated software work. The company services hundreds of global firms, including Gold- man Sachs, Visa, and DHL It has developed switching software for Cisco, a factory manage- ment system for Nestlé, and an inventory tracking application for Nordstrom.” Until 1999 Infosys was organized around nine strategic business units (SBUS). Each SBU was run as a self-contained organization, comprising func tions such as sales, marketing, and delivery ser- vices. In addition to allowing each area to focus deeply on developing domain expertise, this struc ture helped the firm develop the next generation of Infosys leaders by giving SBU managers a free hand in leading their SBUS. To take advantage of potential economies of scale across the different business units, in October 1999 the firm was re- organized into practice units (PUS) organized by geography, with dedicated sales and software de livery organizations, although each PU has coor- dinators for support functions, human resources, finance, and so on. U.S. $255 million, an increase of 27 percent. The re- lonal sales composition during the year is United States 71 percent, Europe 20 percent, India 2 per cent, and 7 percent from the rest of the world. Con- tribution from offshore business is 51 percent, while the onsite component is 49 percent. The new-cus- tomer total for the year was 116, and the company currently has a total of 283 active accounts. Infosys had lost some big-ticket projects to competitors, an alysts say. Although it signed up 33 new customers during the last quarter, customers are not expanding initial projects into new work for Infosys. Multina- tional corporations are not making fast decisions to subcontract or outsource big or new projects, as they decide on a quarter-to-quarter basis. According to one estimate, there should be a strategy to convert the US, slowdown into an op- portunity. Last year, 185 of the Fortune 500 compa- nies were outsourcing from India, leaving 315 to do potential business. Infosys believes that even if overall spending by companies goes down, it will continue to garner a greater share of the world- wide IT pie. Since Infosys gets about 70 percent of its revenue from the United States, it is seeking to expand in Europe, Japan, and Asia. A strategy In- fosys has is to acquire companies that bring com- plementary values and new customers. The think- ing is that if a company with complementary skills is bought, then it is easier to become a concept-to- execution company. Business analysts expect that in the looming slowdown, large companies with an established client base, good professional manage- ment, and deep pockets will survive. Down a road outside this Indian city jammed with cars, buses, and scooters, inside the industrial park wet now with one of the Bangalore’s tropical showers, Mr. Murthy sits down to lunch, as he has probably done a thousand times before. But this time it’s not growth miracles the legendary leader of India’s bellwether technology company is preparing to discuss. The one-two punch of the U.S. recession and the September 11, 2001, terrorist at Future Outlook Most analysts agree that for Infosys to further suc- ceed in business, it has to transform from its old model to a new model. The old model: (a) write code to spec for big clients, (6) maintain software for long-distance clients, (c) do small portions of large solutions, and (d) compete on price. The new model: (a) offer software solutions for key cus- tomer systems, () outsource simple code work to cheaper countries, @) create and market software for Western countries, and (d) compete on quality. In the fiscal year ending March 31, 2001, Infosys Increased sales by 115 percent and gross profit by 114 percent.” But sales growth rates reduced sharply during the fiscal year ending March 2002; the sales total was U.S. $545 million, showing an in crease of only 32 percent, and the gross profit was
APPENDIX A Integrative Cases 521 tacks have smacked India’s software industry. The strategy Murthy outlines is part vision, part dirty ne- cessity: cut billing rates for volume, lessen depend- ency on the U.S. market, which buys 60 percent of the company’s exports; sell to Old Economy types such as health care companies and government agencies; and expand to offer a range of technology services. Also, the vision is to be a truly global company, we should raise capital where it is the cheapest, produce software where it is the most cost effective, and sell our services where it is more profitable. As software sales stall, Infosys is struggling to transform itself from a great code- writer to a one-stop technology services provider. questions: 3. How can Infosys increase sales growth in view of the constraints in the U.S. market? 2. In a declining software industry, what recom- mendations would you provide to Infosys in strategic sales management? 3. Do you think that Infosys’s holistic compen- sation system-financial, emotional, and learning is an effective way to motivate salespeople? 4. What are the merits and demerits of product based sales organization versus geography- based organization in context of Infosys? Please refer to SBUs and PUs as described in ! the case. India’s Software Guru, Aslan Buss, Jamky 2002
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Answer to link has an average annual cost of about $130,000, sation that has three parts-financial, emotional, compared to only $9… . . .
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