X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2018 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Infosys v/s Wipro: Their business strategy - Views on News from Equitymaster
  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Infosys v/s Wipro: Their business strategy
Apr 4, 2012

While doing comparative analysis of Infosys and Wipro, in the first article of the series, we talked about the revenue distribution of the two companies. We also talked about the difference or similarities in client focus. In this article, our discussion would be focused on different business strategies adopted by the companies.

Business strategies change with time and they should. After all whole business environment keeps changing all the time. This is more evident in the field of technology. True that the Indian software companies are primarily service oriented. However, their ways of servicing the client have been changing in the past. Now this industry is witnessing the era of cloud computing and mobile computing. More clients are relying on services such as Infrastructure-as-a-Service and Software-as-a-Service (SaaS). Before going more into the current business environment and strategies, let us first peep into the history.

In the past, there was a stark difference between the growth strategies followed by these companies.

Acquisition strategy

Companies look for acquisition for various reasons like achieving greater economy of scale, increasing market share, gaining taxation advantage, creating synergies between operations of two entities or for vertical integration. Sometime it is also done for diversification or to expand the business house's footprint. However, in case of an IT company, the acquisition works a little differently. The acquiring company gets very little tangible assets in the process of acquisition. Rather it gets a foothold in the form of an expanded client base or an entry into a new geographical market. The most important asset that the company acquires is the people asset.

Till recently, IT bellwethers like Infosys and Tata Consultancy Services (TCS) mostly refrained from acquisitions. Lack of right-fit acquisition targets at attractive valuations was the rationale cited by their respective managements.

On the other hand, Wipro followed the much talked about 'string of pearls' acquisition strategy, which is a fairly aggressive acquisition strategy. This was to make acquisitions to plug gaps in its client offerings and ramp up quickly in these areas. Wipro integrated the acquisitions of small companies such as mPower, New Logic, cMango, Saraware, Enabler, Quantech and Infocrossing during 2006-2008. However, the acquisition strategy changed to 'move the meter as a whole' by the new management. Recently, Wipro has acquired the IT related Oil & Gas business of Science Applications International Corp (SAIC). This acquisition is very strategic to the company. It is expected to enhance Wipro's domain capabilities in the upstream area and make it an end-to-end service provider in the Oil & Gas space.

As far as Infosys is concerned, the company has been and is still sitting on a huge cash pile. The management has stated that it is on the lookout for proper acquisition targets. But they have not really made any big ticket acquisitions as of now. The reason - the management has set very stringent criteria. While this is good to some extent as the company has not made any wasteful or value destructive acquisitions, however, it has also lost out on some attractive opportunities which its peers have capitalized upon. Recently, Infosys has said that it is eyeing opportunities in the emerging healthcare space. But then again from a shareholders' perspective one does not know when this acquisition would happen.

Focus on India

Infosys has always focused on the high margin business. For this, it has concentrated on the business from the developed markets such as the North America and the Europe. And, it has definitely worked well for the company till now. But in the process Infosys has ended up ignoring the emerging market opportunities particularly those from India. On the other hand, Wipro has been catering to domestic market as well. And during the time of slowdown in the developed economies, this focus on India has worked in the favour of Wipro and has helped it in growing its business.

Of late, though Infosys has started focusing on Indian market. But till now its name has not really featured in the big ticket contracts awarded by the Indian government or domestic companies. Its portion of revenues from India still remains quite low.

Present Situation

In the beginning of year 2011, Wipro decided to dismantle its traditional Joint-CEO model. The management has identified four industries as the core momentum verticals. On the other hand, Infosys has completed 30 years of its journey. It is now in the third phase of its growth. The management has set out new visions for the next 30 years.

In the subsequent articles of the series, we would talk about their current business strategies in detail. In addition, we would also discuss the management quality, financial performance and valuations.

Equitymaster requests your view! Post a comment on "Infosys v/s Wipro: Their business strategy". Click here!

1 Responses to "Infosys v/s Wipro: Their business strategy"

Sindhiya

Apr 7, 2012

currently both companies are almost following the same strategy, after joint CEO model is over, wipro is going well,

Like (3)
  
Equitymaster requests your view! Post a comment on "Infosys v/s Wipro: Their business strategy". Click here!

More Views on News

Infosys: A Decent Operating Performance (Quarterly Results Update - Detailed)

Oct 24, 2017 | Updated on Oct 25, 2017

Infosys delivers on profitability in the face of slowing growth.

Infosys: A Decent Start to FY18 (Quarterly Results Update - Detailed)

Jul 14, 2017

Infosys starts FY18 on an encouraging note with a stable performance.

Infosys: A Flat End to FY17 (Quarterly Results Update - Detailed)

Apr 13, 2017

Infosys ends FY17 with a 7% QoQ fall in net profit for the March quarter.

Tech Mahindra: Rapid Recovery Underway (Quarterly Results Update - Detailed)

Nov 2, 2017

Tech Mahindra moves strongly on the recovery path.

Wipro: Along Expected Lines (Quarterly Results Update - Detailed)

Oct 24, 2017

Wipro's profitability continues to improve.

More Views on News

Most Popular

Safe Stocks

Here are some insights on why buying safe blue chip stocks is not the easiest task in investing.

Dine with Ivanka; Waltz with Salman!(The Honest Truth)

Dec 1, 2017

A Saudi template to solve Indian government's tax deficit problem.

Using Deposits to Rescue Banks is a Bad Idea; It Needs to Be Nipped in the Bud(Vivek Kaul's Diary)

Dec 11, 2017

The Financial Resolution and Deposit Insurance(FRDI) Bill proposes to do just this.

If You're Not Looking for 'Excitement' but 'Big Returns' from Stocks, This Is for You(The 5 Minute Wrapup)

Dec 7, 2017

One does not have to necessarily invest only in 'exciting' stocks to become wealthy.

Beat Fund Managers at Their Own Game with These Stocks(Smart Contrarian)

Dec 6, 2017

The road to big investment gains passes through this universe.

More

Small Investments
BIG Returns

Zero To Millions Guide 2018
Get our special report, Zero To Millions
(2018 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

INFOSYS LTD SHARE PRICE


Dec 13, 2017 (Close)

TRACK INFOSYS LTD

  • Track your investment in INFOSYS LTD with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
  • Add To MyStocks

INFOSYS LTD - CHINASOFT COMPARISON

COMPARE INFOSYS LTD WITH

MARKET STATS