Investing in India? Get Equitymaster Research  
Does Infosys need introspection! 
(Mon, 16 Apr Pre-Open) 
Charles Darwin once said that it's not the strongest, who survive, nor the most intelligent, but the ones most adaptable to change. And this is true not just for the species on our planet but also for organizations around the world. Take the example of the Information Technology (IT) major Infosys. It is practically a household name in India. Sometime back it was the undisputed leader of the IT Industry. On the back of a great leadership, the company had created a very strong foothold in the software outsourcing business. However, in the recent time the company seems to be struggling in growing its business.

Why so? Perhaps the management of the company is too reluctant to let go of its old business strategies. In the past, they have chased high margin businesses. And this was certainly a great strategy. It worked very well for the company which was the industry stalwart when it came to margins. But things were different at that time. Many of the IT services such as application development and maintenance (ADM) were not commoditized. The sector was in a high growth mode. However, nothing remains forever. The business environment changed a lot in the software sector. However, Infosys continued its focus on high margin businesses only. This meant their focus remained on the developed economies such as the US and the Europe. In the process, the company did not invest much in the growth opportunities arising from the other part of the world including India.

And all this seems to be hurting the growth momentum of the company now. So much so that leave alone the status of the bellwether, its 2nd position in packing order of the Indian IT industry is now in danger. Cognizant is fast snapping at the heels of Infosys. Going down in the packing order would definitely hurt the company more in the future.

True, there is nothing wrong in chasing high quality and high margin business. However, it is equally important to fine tune the business strategy when times are changing. It is high time for the management of the company to relook its business strategy in the light of changing business environment. They need a lot of introspection as to why they are lagging their peers such as Tata Consultancy Services (TCS), Cognizant in terms of growth, despite being a strong brand name in the global IT outsourcing business.

Will Infosys get back on the growth track? Definitely they will. But when? It would be too early to comment on.
View all commentaries | Archives  RSS
Read the latest Market Commentary
 
BSE-30
 

 
Go
 
 
 
Equitymaster requests your view! Post a comment on "Does Infosys need introspection!". Click here!
  
 
 

S&P BSE SENSEX
26,057.50 (-0.82%)
Jul 25, 2014 02:31 PM
View Detailed Quote

OTHER USEFUL LINKS

MARKET STATS
 
BSE-30
 

 
   Go