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"Our focus on speed and excellence in execution is a sustainable competitive advantage." - Views on News from Equitymaster
 
 
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  • Jan 24, 2004

    "Our focus on speed and excellence in execution is a sustainable competitive advantage."

    Mr. Nandan M. Nilekani received a B.Tech. in electrical engineering from the Indian Institute of Technology (IIT), Bombay in 1978. And in 1981, along with a group of first generation entrepreneurs founded Infosys. Since then he has served as a Director in the organisation. Over the years he has played a seminal role in the transition of Infosys from a fledgling software company to a multimillion-dollar global corporation. Presently, he is the Chief Executive Officer, President and Managing Director of the company.

    In an interview with Equitymaster, Mr. Nilekani shared his views on the global delivery model, issues pertaining to outsourcing and long-term strategy.

    EQTM: How has Infosys’ vision evolved as it grew over these years? What are the key challenges the company faces on its way to achieving its vision?

    Mr. Nilekani : Infosys vision is “To be a globally respected corporation that provides best-of-breed business solutions, leveraging technology, delivered by best-in-class people.” The key challenges that the company faces is its ability to provide the best solutions to clients and the ability to attract and retain the best talent.

    EQTM: What is Infosys doing to improve its competitive advantage – the global delivery model? The challenges in this space arise from aspects like resistance to outsourcing and Visa related issues. How do you see this model evolving?

    Mr. Nilekani : Our focus on speed, imagination and excellence in execution is a sustainable competitive advantage. So is our ability to attract, retain and train the best talent in India. We have created processes to help us seamlessly integrate the customer-side activities with those on our development side. We have effectively addressed the challenges on the global delivery of solutions. There are other challenges like the resistance to outsourcing and visa related issues. These are challenges that are macro in nature and we believe that these issues have to addressed by various agencies like governments, trade associations, etc, as it not about outsourcing, but a trade related issue.

    We believe that the global delivery model offers very distinct business value to our clients. While the business model is robust, the challenge is to increase the quantum of work done offshore.

    EQTM: Why do you think it is difficult for the global majors to replicate the Indian outsourcing model when they have been doing this since a long time in areas like call centers, auto components, textiles, footwear etc.? If the threat is true, how is the company gearing up to face competition from MNCs who are trying to replicate this model?

    Mr. Nilekani : Infosys is well positioned against the US multinational IT services companies. Their clients now have a greater awareness that Indian companies can offer very high quality application development and IT-consulting services at much lower cost. The US IT services firms are under tremendous pressure from their clients to demonstrate better value for money of that workforce.

    Offshoring is becoming mainstream and MNC vendors have to come to India to deliver value. We believe the global majors have to contend with very difficult situation because if they don’t move aggressively on providing comparable capabilities, then they will lose more and more market share to us. On the other hand, if they move aggressively into offshoring, then their balance sheet will get disrupted and that will have huge implications on their cost structures, on their SG&A expenses, on their partner compensation, and other things.

    EQTM: What are the benchmarks Infosys is setting on the human resource front when there are concerns about MNCs ‘poaching’ on key personnel of Indian software companies? What are the key challenges in bringing about a common “Infosys’ culture” when the company is increasing its manpower base at such a high speed?

    Mr. Nilekani : One of the challenges we face is to continue to retain the soul of a small organization in the body of a large organization. We now have more than 21,500 employees worldwide. We need to balance our ability to scale the organization as quickly as we have been doing while balancing the need to maintain disciplined processes as well as an integrated multicultural organization. Another challenge is to become more and more multicultural. Employees of 33 nationalities work for Infosys. We have efforts under way to integrate people across various cultures.

    EQTM: Against a generic feeling in the market that slowdown in global technology spending has affected Indian software companies, what are your views considering the fact that it is this slowdown that has, in fact, brought in the realization among global customers to outsource?

    Mr. Nilekani : The slowdown in global technology spending affected Indian software companies as much as it affected other companies, industries and countries. However, the impact on the Indian software companies was much lower as the value proposition offered was stronger. The slowdown imposed many companies to become more efficient and value conscious and this helped the case of Indian software companies.

    EQTM: The US continues to draw mixed views as far as future growth prospects are concerned. In an interview with equitymaster, Dr. Marc Faber stated that he expects the US to go back into recession as early as next year. What is your view on this? Are you geared to face the challenge of a slowing US economy?

    Mr. Nilekani : We have no views on the matter. Economists and market experts are best placed to respond.

    EQTM: In its mission of becoming an end-to-end service provide in the technology space by moving up the value chain, has there been a missing link for Infosys? If yes, how is the company planning to fill or strengthen the chain further?

    Mr. Nilekani : Infosys has been introducing service offerings in tune with the market requirements. We have also been aligning our organization structure to suit the market requirements. Recently, we expanded the number of vertical units in Infosys.

    EQTM: Is Infosys focusing on growing its product business where is faces tough competition from majors like i-flex and Temenos? Is the company planning to foray into other verticals to grow its product business?

    Mr. Nilekani : Infosys continues to focus on the Banking Business Unit. We have strengthened the product portfolio and the Banking Business Unit has been expanding geographically. At this point in time, we have no plans to develop product business in other verticals.

    EQTM: Could you share with us your vision for Progeon? What kind of a growth trajectory do you see the company taking going forward?

    Mr. Nilekani : Progeon offers business process outsourcing solutions to its global clients by leveraging process, domain and people management expertise. Progeon has built its organization around managing risk for its clients through a scalable, cost-effective and predictable delivery platform. It is too early to speak about a growth trajectory for Progeon.

    EQTM: Infosys has, for some time, been talking about breaking into markets like consultancy services dominated by the likes of IBM. How has the progress been on this front? Has there been some success in getting larger sized deals in this space?

    Mr. Nilekani : Infosys has a consultancy practice that has grown quite significantly over the years. For Infosys, Consulting practice is part of the end-to-end solution offering and was not targeted to obtain larger sized deals.

    EQTM: What are the emerging technology requirements that Infosys is likely to cater to its global clients?

    Mr. Nilekani : We are technology neutral and would cater to the technology requirements of our clients.

    EQTM: What lessons have been learnt from the difficult times in the last three years?

    Mr. Nilekani : We have learnt that improving value proposition to clients is the most important value-add.

     

     

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