Case Analysis I

Janaki Anant
Principal Solution Architect
i-flex solutions Ltd
e-mail: janaki.anant@iflexsolutions.com
T
his case has multiple dimensions of analysis to it. While there is certainly
an immediate short-term issue of winning the Ariba e-procurement project
of the existing client, Prairie Four Square (PFS), and gaining an increased
share of the customers business that the Infosys team is trying to address, there
is also an overall long-term strategic issue that needs to be addressed as well that
of the pricing mechanism based on value that needs to be deployed for long-term
sustainability and growth of the relationship. This case offers an insight into the
various dimensions of moving up the value chain and increasing the economic value
of a customer relationship, identifying the differentiation strategy, communicating
the positioning effectively, and the impact of local competition in the global scenario.
The case also effectively illustrates the general growth path followed by most Indian
software services companies, the issues they face in this progression, the changing
scenarios in the global competitive arena, and the relentless pressure to lower costs
in a diminishing labour cost arbitrage advantage scenario.
The Case Context: An Overview
Infosys Technologies Ltd. is a $2,979 million company, headquartered in Bangalore,
India, providing full range of software services to a global clientele. A highly
respected company in the Indian IT services space, Infosys employs over seventy
two thousand employees, and has been instrumental in building Brand India in
the global IT services space.
Infosys evolved from inception in 1991 to become a giant in 2007, in four clear
stages. Starting with an opportunistic mindset of leveraging global labour arbitrage,
the company progressed into providing end-to-end solutions, and further on to
Infosys Technologies Ltd.: Growing
Share of a Customers Business
James A Narus and D V R Seshadri
DI AGNOS E S
presents analyses of the
management case by
academicians and practitioners
The April-June, 32(2),
2007 issue of Vikalpa
had published a
Management Case titled
Infosys Technologies
Ltd.: Growing Share of a
Customers Business, by
James A Narus and DVR
Seshadri. This issue
features responses on the
case by Janaki Anant,
Achal Raghavan, Avinash
Mulky, Sudip Nandy,
Shlomo Maital, and
Zillur Rahman.
123
VIKALPA VOLUME 32 NO 4 OCTOBER - DECEMBER 2007 127
127
domain excellence in the chosen business verticals (Fig-
ure 1).
Infosys has been associated with PFS for over five
years. In fact, PFS is one of its key customers. Infosys
has over 65 major contracts with it for IT maintenance
services. PFS is a $27 billion company in the US, pro-
viding insurance solutions in life insurance space and
insurance products for individual and group life, in
addition to other long-term care and disability insurance
products. It makes extensive use of IT to conduct its
businesses and uses the outsourcing model for these
services. Its preferred best of breed approach awards
contracts to organizations most competent in the speci-
fied area of work.
In response to increasing market pressures to re-
duce costs, PFS has embarked upon a pilot test of sole
sourcing as opposed to its preferred approach. This was
based on the premise that total cost of ownership would
reduce due to reduction in downstream costs. The Ariba
e-procurement project is the one for which PFS is seeking
a single vendor to handle the customization, implemen-
tation, and post-implementation support and mainte-
nance.
InfosysPFS Customer Relationship Status
The following parameters of the strength of Infosys
relationship with the customer are evident from the case:
In the minds of PFS key decision-makers, (CIO,
Robert Peters, from the IT side, and Purchasing Vice
President, Kay Bryan, from the business side), In-
fosys has a very positive image.
Infosys has been acknowledged to have moved from
an unknown commodity to a trusted service pro-
vider in the IT maintenance services area.
PFS is satisfied with the quality of the deliverables
thus far, by Infosys.
On all the key measurement criteria of PFS, Infosys
has exceeded the customer expectations. (Exhibit 2
of the case)
PFS has pro-actively invited Infosys to quote for the
JAVA-based Ariba e-procurement system.
The expectations from PFS, with respect to the project
proposal presentation were also quite well-articulated.
These can be summarized as follows:
The competition is from two leading IT consulting
firms, Merrimac and Excalibur, who are also the
existing service providers, in the high-end consult-
ing space.
Although US-based, these companies are setting up
development centres in India, and are thus capable
of deriving the same cost advantages as Infosys.
There is an organization-wide drive in PFS, to reduce
costs significantly; so, price will be a crucial deci-
sion parameter.
Infosys will need to demonstrate capability to handle
end-to-end solutions.
KEY ISSUES
Infosys Perspective
While there are a host of issues that are faced by the
Infosys PFS team, the overarching question is:
How can Infosys present a compelling case to win
the deal without reducing their cost-plus targets?
The associated issues that would need to be ad-
dressed are:
No prior experience in the insurance space in the
implementation of Ariba.
Possibility of competitor pricing being similar to
that of Infosys, given that this would be a predo-
minantly on-shore engagement.
While the current need is for end-to-end solution,
IT maintenance services are what Infosys has been
offering to PFS over the past five years. What is the
best way to demonstrate their capability in the end-
to-end solution space, specifically in the high-end
area of consulting where competition has a distinct
advantage?
The unstated issues typically faced by Indian soft-
ware companies. While Indian software companies
are perceived to be good outsourcing destination for
124
Desired position
with Ariba project
Current
position at PFS
Global labor arbitrage
IT Maintenance
Contracts
End to End
Solutions
Domains of
Excellence
G
r
e
a
t
e
r
V
a
lu
e
-
a
d
d
it
io
n
Figure 1: Stages of Infosys Evolution
128 INFOSYS TECHNOLOGIES LTD.: GROWING SHARE OF A CUSTOMERS BUSINESS
128
labour arbitrage for the low-end services , there
could be potential issues arising out of outsourcing
high-end strategic services such as consulting and
software design, given the perception that these
services need a deeper understanding of the local
context, and as such are best handled by local
companies.
PFS Perspective
From a PFS perspective, the e-procurement project would
be a pilot project for testing the waters for sole sourcing
end-to-end IT projects vs. the best of breed . The future
IT outsourcing strategy of PFS would hinge upon the
success of this project. In addition to price competitive-
ness, PFS would therefore look for compelling evidence
of advantages of sole sourcing.
Value Analysis
The case clearly brings out the following four areas
where Infosys has added demonstrable and quantifiable
value through cost savings.
Re-Engineering Project Assignments
This was a major accomplishment, in which five major
maintenance projects for PFS were redesigned, and the
onsite-offshore resource mix was not only optimized,
but also the resources were rationalized to achieve
improved productivity. The total quantifiable cost sav-
ings on account of this were to the tune of $12,96,000.
This achievement clearly illustrates how Infosys has
gone beyond just offshoring to increased efficiencies and
effectiveness in addition to being able to consolidate and
have a relook at the assignments.
The graph below (Figure 2) shows the cost savings
and Table 1 shows the computational basis for the cost
savings.
Data Corruption Prevention Subroutine
This is another critical area where cost savings can be
achieved through good diagnostic skills and solution
implementationThe PFS batch system running after 5
a m and the consequent data corruption events being
eliminated by Infosys identifying the problem, writing,
and successfully implementing a system shutdown
subroutine.
The pre- and post-scenarios of writing and imple-
menting the subroutine and the associated costs are as
shown in Table 2.
Record Comparison Algorithm
Infosys team proactively wrote an algorithm that sig-
125
$24,000,000
$24,000,000 $-
$16,800,000 $7,200,000
$11,040,000 $5,760,000
$11,040,000 $-
$- $5,000,000 $10,000,000 $15,000,000 $20,000,000 $25,000,000
Year 1
Year 2
Year 3
Year 4
Year 5
Total Costs
Cost Savings over previous year
Figure 2: Reengineering Project AssignmentsCost Savings
VIKALPA VOLUME 32 NO 4 OCTOBER - DECEMBER 2007 129
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nificantly improved the record comparison efficiency by
56 per cent and also reduced the processing time. Con-
sidering that end of month is a critical time for a lot of
activities, this release of CPU time could be used for
some other jobs.
Given that a delay in regulatory reporting attracted
a heavy penalty of approximately $360,000, the increased
efficiency reduced the probability of delay to just about
1 per cent. While the available data does not lend itself
to proper quantification of the savings, one could ap-
proximate it to $3,600 per month or $43,200 per annum.
(computed as $360000*.01*12)
This clearly demonstrates the commitment of Infosys
in adding value proactively, as well as its capability to
improve and fine-tune process efficiency.
Reduction in Disability Claims Reserves
The Infosys team re-engineered and automated some
manual processes in claims submissions, and payments,
and streamlined the entire claims process. This resulted
in a reduction of the claims reserves.
While the data available is not adequate to come
up with any concrete numbers in cost savings, one could
safely estimate that given the cost of capital at 10 per
cent, the reduction of $14,00,000 in reserves could create
a saving of $1,40,000.
What Infosys team demonstrated once again is their
ability to re-engineer and streamline a business process.
Recommendations
Clearly, Infosys has delivered significant value in the
relationship, much beyond the contractual terms. The
value proposition of Infosys and the proposal presen-
tation should be predicated on bringing out the follow-
ing points in a compelling manner:
Consistently high performance
Demonstrated by not just meeting but beating
customer performance targets on the three vital
dimensions of quality, timeliness, and reliabil-
ity.
Customer commitment and delivery of value
Demonstrated by quantifiable cost savings in
excess of $13 million, over the five years of
relationship
Pursuit of increased productivity at all times through
Resource rationalization
Removal of process inefficiencies
Organizational capabilities of providing end-to-end
solutions
Experience in other accounts
Customer testimonials in the other Ariba imple-
mentations
People and process strength in JAVA
Globalization of their workforce and access to ex-
pertise.
To effectively address the concern of PFS on Infosys
ability to stretch and move up from maintenance ser-
vices to more high-end consulting and process engineer-
ing services, Infosys should illustrate effectively, how
it has, in a limited yet powerful way, brought these skills
to board in each of the key accomplishments (Table 3).
Further, Infosys could propose Pilot / Proof of
Concept approach to demonstrate the capability, to-
gether with a pricing model and payment terms that are
126
Table1: Basis for Computation
Year Onsite Offshore Onsite Offshore Total Cost Savings over
Resources Resources Costs ($) Costs ($) Costs ($) Previous Year ($)
Year 1 250 0 24,000,000 - 24,000,000
Year 2 250 0 24,000,000 - 24,000,000 -
Year 3 75 250 7,200,000 9,600,000 16,800,000 7,200,000
Year 4 75 100 7,200,000 3,840,000 11,040,000 5,760,000
Year 5 75 100 7,200,000 3,840,000 11,040,000 -
Total Cost Savings 12,960,000
FTE cost onsite FTE cost offshore
per annum ($) 96,000 per annum ($) 38,400
Table 2: New Subroutine Implementation
Before After
No. of corruption events 24 0
PFS hours idled [ 125*4*24] 12,000 0
Programmer repair hours [ 3*4*24] 288 0
Technical assistant repair hours [ 1*1*24] 24 0
CPU time in seconds [ 15*24] 360 0
Cost savings ($)
PFS staff Idle time ($) 504,000
Programmer hours ($) 12,960
Technical assistant hours ($) 960
CPU time ($) 140.40
Total cost savings 518,060
130 INFOSYS TECHNOLOGIES LTD.: GROWING SHARE OF A CUSTOMERS BUSINESS
130
predicated upon the success of the Pilot module. This
would demonstrate Infosys commitment and confidence.
Infosys should move up from transaction selling
to consultative selling and instead of reducing its
The Value Chain Imperative
In many ways, this case is representative of the strategic
crossroads at which the Indian IT industry leaders find
themselves today. They clearly realize the need to climb
the value-chain, and break free from the commoditiza-
tion that has inevitably taken place in the offshore out-
sourcing and IT maintenance markets. They have been
successful so far in leveraging the cost arbitrage that
Indian manpower provided them; but rapidly escalating
wages in India, emerging shortages in talent, and the
strengthening rupee exchange rate have all combined to
make that model incapable of providing aggressive future
business growth which is in line with past performance.
The Indian IT giants now need a strategy to repo-
sition themselves as firms which can play competently
all across the value chain from high-end consulting (of
the Excalibur and Merrimac kind), down to getting
their hands dirty with maintenance jobs. Industry
history is against them; customers like PFS have long
favoured the horses for courses approach working
on the basis that the thorough-bred (and expensive) race
horses at the high end cannot (and should not) be used
for hauling the bulk load of IT maintenance, which
is apparently best left to the mules of the industry.
127
Table 3: Key Accomplishments and Benefits
Accomplishments Benefits Skills Demonstrated
Reengineering project assignments Cost savings through increased Resource rationalization and
productivity rather than just offshoring productivity improvement
Data corruption prevention subroutine Cost savings through reduction in down time Problem diagnosis, analysis, and resolution
Reduction in disability claims reserves Reduction in cash reserves Process re-engineering
Record comparison algorithm Timely submission and release of Process improvement and fine-tuning
end-of-month CPU time
margins in order to win the deal, should show the value
in quantifiable terms and all the other long-term benefits
they bring to board and position themselves as part-
ners rather than as an outsourcing vendor.
Case Analysis II
Achal Raghavan
Vice President Business Development
Sundram Fasteners Limited
Bangalore
e-mail: achalraghavan@yahoo.co.in
T
his case deals with the challenge Infosys is facing
in terms of convincing its customerPrairie Four
Square Insurance (PFS)to entrust it with the
customization, installation, and maintenance of a Java-
based Ariba e-procurement system. This project is a
typical value-added, end-to-end solution assignment
that Infosys would love to get its hands on, involving
both consulting expertise and day-to-day operational
excellence.
Infosys has already established its credibility with
PFS as an outstanding IT maintenance service provider,
but has no track record with them as a solution pro-
vider. It is competing with Merrimac Consulting and
Excalibur Consulting both of whom are leaders in the
operations consulting domain, and are among the top
15 consulting firms worldwide. But they suffer from the
converse weakness i.e., they do not have any experi-
ence in IT maintenance, which is Infosys area of strength.
Infosys now has to figure out a strategy and a
communication plan, aimed at convincing PFS that
Infosys can be entrusted with this critical high-end e-
procurement project. Success in this project will unlock
tremendous potential for larger jobs within PFS, and also
act as a launch-pad for winning similar jobs with other
customers. It is, therefore, a bid of high strategic signifi-
cance for Infosys.
VIKALPA VOLUME 32 NO 4 OCTOBER - DECEMBER 2007 131
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The Expanding the Pond Imperative
Ram Charan and Noel Tichy, in their excellent book,
Every Business is a Growth Business
1
, have talked of
companies expanding their market (or pond) by look-
ing out constantly for the emerging new needs of their
existing, and new customers. They argue that this is the
best way for companies to ensure continuous and pro-
fitable growth. If the companies continue to play in the
familiar current customers current needs quadrant,
they will inevitably succumb to commoditization and
pricing pressures, and die.
In this particular case, PFS has found that it needs
a radical overhaul of its procurement practices and
processes, in order to reduce costs and grow its business
profitably. This is a new need felt by PFS, and Infosys,
by virtue of its excellent track record in fulfilling the
customers existing need for IT maintenance, has been
invited to bid for the e-procurement project. If it suc-
ceeds in this bid, Infosys would succeed in expanding
the pond, paving the way for future growth with PFS
and other customers.
The Challenge: Strategic Repositioning
How does Infosys go about achieving a strategic repo-
sitioning of its competencies in the eyes of Prairie Four
Square Insurance? Kay Bryan, Purchasing VP at PFS,
says Infosys is delivering outstanding maintenance
work. But she, and Robert Peters, CIO, PFS, need to
be convinced that Infosys can handle the strategic and
conceptual consulting portion of the project. In a con-
verse manner, they also wonder if Merrimac or Excalibur
can handle the maintenance portion, while they can do
justice to the consulting portion.
Clearly, the tasks ahead for Infosys are the follow-
ing:
Reinforcing the positives of the current brand equity
with PFS as a maintenance expert
Putting across a compelling case which addresses
all the anxieties of PFS with respect to Infosys
consulting capabilities.
If Infosys succeeds in doing this, other things being
equal, its familiarity with the inner workings of PFS, the
credibility built over the years as people who deliver,
and the working relationships established with various
PFS functions ought to swing the decision in its favour
assuming, of course, that the pricing is competitive.
From PFS perspective, it is clear that while pricing is
important, it is the end-to-end competencies which would
ultimately influence the choice of the vendor.
The Strategic Sales Pitch
Let us now look at the key elements of Infosys strategic
sales pitch the core communication, or mantra,
that Rahul and Jaspal need to highlight in the critical
meeting with Robert Peters and Kay Bryan just three
weeks away. What should be their overall communica-
tion strategy?
Here are the core elements of the sales pitch:
Infosys evolution: Start with a crisp summarization of
the four phases of Infosys evolution (or development)
as an organization, each representing a distinct market
offering and value proposition:
The first phase was during the 1980s when Infosys
relied on the classical offshore outsourcing model,
leveraging on the labour arbitrage available in India.
The second phase, in the early 1990s, saw Infosys
move up the value chain to maintenance contracts
for legacy systems. This included the programming
work required to take care of the much-spoken about
Y2K (Year 2000) doomsday scenario.
The third phase, in the late 1990s, was the period
when Infosys truly focused on the high-value so-
lutions end of the business offering consultative
services such as design, customization, business
process reengineering, and installation.
The fourth (and current) phase is where Infosys is
moving further up into a high level of domain knowl-
edge for specific industries where Infosys is able
to leverage on its knowledge to offer highly custom-
ized solutions. Typically, Infosys has been concen-
trating on segments like insurance, healthcare, and
retailing where IT applications are crucial to the
clients survival and growth.
The key communication objective behind this intro-
ductory pitch is to convince PFS that high-end consult-
ing solutions are nothing new to Infosys; that the com-
pany has been operating in this domain for nearly a
decade; and that the e-procurement project that PFS is
considering now is something akin to what Infosys has
been doing in the third phase of its evolution from the
late 1990s.
In short, PFS is not going to be the guinea pig for
Infosys to practise on. More importantly, PFS can take
128
1
Charan, Ram and Tichy, Noel M (1998). Every Business is a Growth Business,
New York: Three Rivers Press.
132 INFOSYS TECHNOLOGIES LTD.: GROWING SHARE OF A CUSTOMERS BUSINESS
132
comfort from the fact that Infosys has already been
focusing on Insurance as one of its growth avenues for
the past several years.
The competency pyramid: Represent (to PFS) the mix of
competencies required to do justice to the e-procurement
project as a pyramid with three layers; link each layer
powerfully with a corresponding strategic business
requirement of the customer:
The bottom layer is the ability to design and set up
a system which can maintain and process huge
volumes of data with fail-safe measures against a
breakdown or data loss. Remember that PFS, as an
insurance company, depends on its ability to pro-
cess, analyse, and act upon tremendous amounts of
diverse data on an ongoing basis.
The middle layer is the ability to re-engineer existing
methods and processes, in order to respond to the
customer faster, and at a lower cost. Remember that
PFS founder Stephen Neely and his partners built
the companys insurance business by offering fair
prices, personalized and friendly service, and prompt
and equitable resolution of all claims. In the highly
competitive insurance industry, PFS can only sur-
vive and grow through relentless introspection, and
continuous improvement in its speed of response
to customers.
The top layer is the capability to add value as a
consultant and business partner, who will help PFS
succeed in its business (insurance) through insights
on emerging customer needs, benchmarking, and
saving money for PFS through operational optimi-
zation techniques.
The stability of the pyramid: Emphasize the fact that
the stability of this pyramid primarily depends on the
robustness of the bottom layer (huge volumes of data, to
be processed through fail-safe systems). If that layer is shaky,
or if it crumbles under the weight of customer demands,
the whole business model of PFS will be in jeopardy.
An insurance company with data integrity issues is as
good as a plane flying with zero visibility, and all cockpit
instrumentation showing suspect readings. The middle
layer (reengineer for faster response, at lower cost) is the
next layer of stability, which depends on the robustness
of the data base below. The top layer (strategic consul-
tancy and partnership) depends on the stability and
strength of the two layers below for its very existence.
The top layer is clearly a vital competence but for the
long term. The idea behind this portion of the pitch is
to remind PFS that ground-level competencies are vital
to successful implementation of high-level strategies.
The real life success stories: For each layer of this pyramid,
illustrate Infosys suitability and competence with real-
life examples from its work done in the past for PFS,
or some other client. For example, Infosys has success-
fully delivered results beyond PFS expectations in five
major re-engineering projects in the past. It has gone
beyond mere offshoring and has delivered improved
employee productivity. Provide vital case data to rein-
force this achievement. Focus also on some of the other
key projects from the past the data corruption preven-
tion subroutine, the record comparison algorithm, re-
duction in disability claims reserves, etc. In each case,
show Infosys exceeded customer expectations and
added value through the creative thinking of its people.
The rolling start: Emphasize the advantage Infosys
enjoys over Merrimac and Excalibur, in terms of its deep
insiders knowledge of PFS systems and processes
from the past years of association. This familiarity trans-
lates to zero time wastage in acclimatization, and a
rolling start to the project. This means huge savings
to PFS.
The right emphasis: Avoid over-emphasizing the excel-
lent past track record in IT maintenance at PFS; this is
already a given as far as PFS evaluation of Infosys
is concerned. Dwelling excessively on that domain will
reinforce PFS concerns about Infosys ability to handle
the consulting end of the project, thereby sabotaging its
chances of winning the order.
Focus instead on the specific steps Infosys has been
taking to strengthen its in-house consulting talent pool
in this domain. In the words of Robert Peters, the CIO
at PFS, Infosys has been hiring well-seasoned people
from the top consulting firms as well as from the top
MBA programmes worldwide. Infosys has also been
bolstering their consulting resources and in-house train-
ing. Provide specific details of these steps, to give
confidence to PFS that Infosys means business, and is
constantly working on enhancing its all-round capabi-
lities. At an individual level, Rahul, the Infosys Engage-
ment Manager, has acquired a decade of work experi-
ence in Excalibur. Mention this fact at an appropriate
place.
Execution excellence: Provide in-depth detail on how
Infosys plans to organize its team both in the US and
in India to work on this e-procurement project. Focus
on the people and their track record and competencies.
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VIKALPA VOLUME 32 NO 4 OCTOBER - DECEMBER 2007 133
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IT solutions, ultimately, are people-intensive projects.
Seeing is Believing
By good coincidence, Laura Ewing, President, PFS, is
visiting Infosys at Bangalore shortly, along with a ven-
dor management team. Lalitha, the Infosys Delivery
Manager for PFS, is on the right track when she talks
about taking advantage of this visit to give PFS a com-
plete tour of Infosysits world-class training facilities,
specific examples of JAVA projects executed in the past,
and meetings with Infosys personnel with consulting
experience. Seeing, after all, is believing even in the
rarefied atmosphere of IT consulting.
Conclusion
This case brings out in good detail the nuances in-
volved in large companies in the IT field moving up
the value chain. The Infosys example can very easily
be extrapolated to other Indian IT giants who are also
jockeying for a slot in the global consulting arena. The
existing consulting firms of long standing would do
everything they can to prevent the entry and growth
of the hungry newcomers. Success would ultimately
accrue to those companies which deliver lasting value
as partners, by helping their customers succeed in their
end markets.
130
Case Analysis III
Avinash Mulky
Professor, Marketing
Indian Institute of Management, Bangalore
e-mail: avinashgm@iimb.ernet.in
T
his case describes an opportunity that Infosys
Technologies Ltd., has received, to bid for a new
project involving an end-to-end solution in the
e-procurement area with one of their major current
clientsPrairie Four Square Insurance (PFS) a large,
US-based insurance company. Five years ago, PFS had
selected Infosys as a sole supplier for outsourcing IT
maintenance and had awarded it three pilot contracts.
The contracted work involved routine tasks such as
cleansing corrupted data, correcting software flaws, and
running programme and system tests. Infosys had
performed so well in these initial projects, that over the
next five years, it had received a total of 65 contracts
from PFS which covered higher value maintenance work
like application development, business process reengi-
neering, installation of some packaged solutions, etc.
Although Infosys had an excellent reputation at PFS in
the area of maintenance projects, it had yet to make an
entry into the prestigious, high margin, end-to-end
consulting projects with this client. PFS had hitherto
favoured a best of breed approach under which it
awarded IT systems work only to those firms that it
perceived as the most competent in the concerned cat-
egories (system analysis, design, installation, and main-
tenance).
During the past few months, an internal white paper
at PFS had pointed out that the companys purchasing
systems and activities required urgent streamlining as
the costs of order processing at PFS were way above the
industry average. The white paper recommended the
reduction of the PFS supplier base from 1,200 to just 300
and the implementation of an e-procurement system
featuring Java-based Ariba software. Faced with intense
pressure from various quarters to cut costs, PFS man-
agers chose to drop the best of breed approach and
instead try out a single sourcing approach to select one
vendor for the end-to-end solution of the e-procurement
project. They short-listed Excalibur and Merrimac, two
leading consulting firms who were well known for their
expertise in applying IT to operations management. Since
both these firms were known for their preference for big
picture projects, high cost structure and a weakness in
the maintenance area, PFS managers also included Infosys
as the third vendor candidate for the e-procurement
project.
Since its founding in 1981, Infosys has sought to
consistently improve its competence and reputation in
handling the higher end of the IT business. Over the
years, it has moved upwards from global labour arbitrage
and IT maintenance contracts to end-to-end solutions
and excellence in the chosen domains. Strategic repo-
sitioning of this kind must be implemented by capturing
projects with enhanced scope from both the existing and
the new clients. In other words, Infosys must increas-
134 INFOSYS TECHNOLOGIES LTD.: GROWING SHARE OF A CUSTOMERS BUSINESS
134
and preference for partners or suppliers. When engaging
in international marketing, it is important for firms to
assess the culture in the target country and understand
the differences with respect to their own culture. This
will help them to adjust to the new culture and conduct
business smoothly. The sociological literature contains
some important ideas on how to work across cultures.
Based on a landmark, multi-nation study, Hofstede
1
reported that countries differed across five dimensions
viz. small vs large power distance, individualism vs
collectivism, masculinity vs feminity, uncertainty avoid-
ance, and long vs short-term orientation. Table 1 gives
the rankings on these dimensions for India, the US, and
some other countries in which Infosys may conduct
business activities. Compared to India, in the US, there
is less acceptance of unequal power distribution (less
power distance), higher expectation that people must
stand up for themselves (greater individuality), greater
competitiveness, assertiveness and ambition (more
masculinity), greater need to minimize uncertainty by
following rules and structure (greater uncertainty avoid-
ance), and less long-term orientation.
Infosys, which is based largely out of India, serves
an international clientele located in the US, Europe, and
other countries. Hence, training of employees in work-
ing and managing across cultures is very important for
the firm. There is considerable evidence in the case that
Infosys prepares well for cross-cultural marketing. It has
recruited US citizens for boundary spanning sales po-
sitions. For example, Rahul Dev, the Infosys Engage-
ment Manager, dealing with PFS, was a second genera-
tion American of Indian origin who dressed, spoke, and
acted like a typical Californian. Infosys also encourages
India-based employees to prepare adequately for cross-
cultural interaction. Lalitha Krishnan, the Delivery
Manager for PFS, based in Bangalore, had travelled in
Asia, Europe, and the US. Although a devout Hindu,
she consciously attempted to understand the culture of
ingly migrate up the value chain in the IT solution space.
An opportunity to do this has just arisen at PFS, where
Infosys is being bracketed along with two global con-
sulting firms in the choice set for a major project. In the
case context, Infosys must now compete with Excalibur
and Merrimac for the PFS e-procurement project. The
Infosys team must convince PFS management that the
firm is not only an excellent supplier of high value
maintenance services, but it also has the competence and
capabilities to deliver an end-to-end solution compris-
ing consulting, process reengineering, customization,
and maintenance at a competitive price. The remaining
part of this analysis provides the background and ar-
guments that the team can use to make a persuasive
presentation to PFS for obtaining the Ariba e-procure-
ment order.
Challenging Issues in Global Marketing
The marketing success of Infosys (and other leading
Indian IT firms) in attracting, satisfying, and retaining
international clients is indeed significant and must be
viewed against the backdrop of many hurdles which IT
firms from India face in the international arena. Some
general hurdles faced by firms from emerging markets
include cultural differences, threats of protectionism,
and a strong currency. A particular hurdle for the Indian
IT firms seeking value migration is competition from
global consulting majors who are currently well-en-
trenched in the IT consulting space and are moving
towards cost competitiveness by developing their off-
shore capabilities. In this section of the case analysis,
data from the case will be used to understand how
Infosys is dealing with each of these hurdles.
Cultural Differences
There are cultural differences across countries affecting
communication, general understanding, negotiation,
attitude towards time and formalization of contracts,
131
Table 1: Hofstedes Values for Selected Countries
Country Power Distance Individuality Masculinity Uncertainty Avoidance Long-Term
Index Index Orientation
China 80 20 66 40 118
Japan 54 46 95 92 80
India 77 48 56 40 61
United Kingdom 35 89 66 35 25
Unites States 40 91 62 46 29
Source: www.geert-hofstede.com/hofstede_dimensions accessed on 30th August, 2007.
1
Hofstede, Geert (2001). Cultures Consequences, Comparing Values, Behaviors, Institutions, and Organizations Across Nations. Thousand Oaks CA:Sage
Publications.
VIKALPA VOLUME 32 NO 4 OCTOBER - DECEMBER 2007 135
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Dallas, proudly displayed a poster of the Dallas cow-
boysthe American football team, and often caught up
with Dallas events on the website. To better understand
the American culture, she had taken courses at the Infosys
Learning Academy. Through a planned rotation of off-
shore and onsite assignments, Infosys ensured that a
large part of its workforce had exposure to international
culture. Sensitivity to cultural aspects of doing business
will be even more important to Infosys as it tries to
reduce its large dependence on the US by focusing on
markets in Europe and Asia.
Threat of Protectionism
When Indian IT firms initially started getting business
from clients in the US and other developed nations, their
core advantage was their ability to offer high quality
work at extremely competitive prices due to the huge
difference between the costs for local vs Indian employ-
ees. The offshore model developed by Indian IT firms
further added to their cost competitiveness since only
a small onsite team needed to be maintained and the rest
of the work could be done offshore in India and else-
where at a much lower cost. Spurred by the economic
gains from the initial contracts, over the years, more
work was outsourced from the developed countries,
particularly the US, leading to some highly publicized
job losses. This has created a backlash and at least one
state legislature in the US has passed a law preventing
state governments from outsourcing. Calls for abolition
of free trade agreements and the imposition of tariffs on
imported services have also been heard. The issue is
particularly sensitive during periods of economic stag-
nation or low growth and during election years.
Like other Indian IT firms, Infosys must address the
protectionist sentiment. While continuing to use its
offshoring strength, the firm must focus on communi-
cating its service quality, timeliness, reliability, and
savings delivered and downplay its offshore activities.
It should develop an excellent presentation and mount
a public relations campaign describing how it is helping
to improve the competitiveness of the US firms. Infosys
must also highlight its investments in the US in terms
of development centres, marketing offices, and the US
nationals employed. Finally, Infosys may team up with
other Indian IT firms under the NASSCOM banner to
lobby with the Federal government for maintaining the
status quo on free trade since many IT and consulting
firms of the US have themselves set up development
centres in India expecting to benefit from an open
economy on the Indian side.
Strong Currency
The Indian rupee has been appreciating against the US
dollar since 2003. Until 2007, the rise was gradual, but
in the recent quarter, the rupee has appreciated by more
than 7 per cent. Such a sudden rise is bound to affect
the bottom line of Indian IT firms including Infosys since
more than half of their business comes from the US. In
order to contain the impact of the rise in the rupee
against dollar, Infosys will need to increase its billing
rates for new customers and new contracts by at least
3-4 per cent. It will also need to bring down its depend-
ence on the US market to under 50 per cent while in-
creasing the customer base in Europe and other coun-
tries. Another strategy to contain the effects of a rising
rupee would be to slow down the rise in employee costs.
Press reports indicate that the annual wage hike in the
IT industry has been to the order of 13-15 per cent which
has been managed through pricing. Further sharp rises
in the rupee will put pressure on the ability to manage
wage hike impacts through pricing. Indian IT firms are
already exploring alternatives for slowing down the
increase in wage costs. Press reports indicate that some
large IT firms are recruiting non-engineering graduates
and training them to fill positions usually offered to
engineers since they believe that these graduates will be
more cost-effective.
Moving Up the Value Chain
The development of the Infosys business over the years
displays a conscious effort to move up the value chain.
As it begins to target the very top end of the IT business
which is currently the stronghold of global consulting
firms like Excalibur and Merrimac, Infosys needs to
substantially upgrade both its competencies and its
reputation for business consulting, especially for pro-
viding end-to-end solutions. It must particularly increase
its capabilities in front-end analysis and system design,
and improve its software knowledge. Infosys has al-
ready started hiring experienced consultants from com-
peting firms. In fact, Rahul Dev, who deals with PFS,
was hired from Excalibur where he had worked for over
a decade. It can continue with this strategy of hiring
experienced consultants from other leading firms after
putting in place socialization processes to orient new
hires to Infosys values and systems. Infosys may also
explore inorganic growth in business consulting by
132
136 INFOSYS TECHNOLOGIES LTD.: GROWING SHARE OF A CUSTOMERS BUSINESS
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133
acquiring a mid-sized firm which has a strong reputation
in consulting.
Cost Savings for PFS
The case provides data on four projects in which Infosys
has offered cost savings to PFS over and above the
contract terms. Let us calculate these cost savings by
examining the projects one by one (A to D).
Re-engineering Project Assignments
In the course of the teleconference between the key
members on the PFS team at Infosys, Jaspal Singh
mentioned that he was particularly proud of the way
the team had redesigned project assignments so that
fewer personnel were required over the years starting
from year 2 of the project. Table 2 provides the calcu-
lation of the savings to PFS through reengineering project
assignments which work out to a substantial sum of
$12,960,000
Data Corruption Prevention Subroutine
Infosys engineers had written a subroutine to shutdown
the PFS batch programmes at 5 a m. Earlier, PFS faced
problems whenever their batch processing continued
beyond 5 a m as this corrupted data and online shutdown
system led to idling of about 125 PFS employees for up
to four hours. Calculations regarding the benefits of the
Infosys initiative to PFS are shown in Table 3.
Record Comparison Algorithm
Infosys engineers working on the PFS projects have
written an algorithm which improved the PFS record
comparison processing efficiency by 56 per cent and
processing time by eight hours. This helps PFS in timely
submission of reports to state insurance commissions
and reduces the probability of PFS being fined for late
Table 2: Savings to PFS from Reengineering Project Assignments
Year 1 Year 2 Year 3 Year 4 Year 5
Number of US-based employees 250 250 75 0 0
Number of India-based employees 0 0 250 100 100
Annual cost of US-based employees PFS 250 x $8000 x 75 x $8000 x
12= $ 24 Mn 12 = $ 7.2 Mn
Annual cost of India-based employees 250x $3200 x 100 x $3200 x 100 x $3200 x
12 = $ 9.6 Mn(3) 12= $3.84 Mn (4) 12=$ 3.84 Mn
Total employee cost during the year $24 Mn(1) $16.8 Mn (2) $3.84 Mn $3.84 Mn
Savings for PFS from transferring (1)(2) = $ 7.2
personnel to India Mn(5)
Savings from reassigning (3)-(4) =$ 5.76
personnel in India Mn (6)
Total savings to PFS from A = (5)+ (6) =
reengineering project assignments $12.96 Mn
submissions. Table 4 shows the savings to PFS from the
record comparison algorithm
Reduction in Disability Claims Reserves
Infosys has helped PFS to reduce the cash reserves
required for paying the disability claims. This was
achieved by streamlining and reengineering the claims
submission and claims payment process. The reduction
in cash reserves was to the extent of $14 million. The
savings to PFS in this regard are shown in Table 5.
Knowledge Transfer Time Savings from Sole-sourcing
In case PFS decides to award the Ariba e-procurement
project to Infosys on a sole-sourcing basis, Infosys will
be involved with the Ariba software right from the
beginning of the project and will therefore not require
any knowledge transfer time to update their program-
mers on the technical aspects of the system as they enter
the maintenance phase. Since it roughly takes 5 pro-
grammers about 12 weeks to master an Ariba system
installed by someone else, the savings from the elimi-
nation of knowledge transfer time are expected to be 5
x (12/4 months ) x $8,000 per month which is equal to
$120,000.
Persuading PFS for Capturing IT Business
An analysis of the case data gives the impression that
although Infosys has offered great value to PFS in the
course of its current projects, its share in the PFS IT
business is quite small. A stretch goal for Infosys may
be to capture at least 50 per cent of PFS IT spend. In
order to achieve this, Infosys must be seen as a major
partner by PFS. The sales approach required for achiev-
ing a partnership relationship between a client and a
vendor has been termed as Enterprise Selling
2
. The
VIKALPA VOLUME 32 NO 4 OCTOBER - DECEMBER 2007 137
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Table 3: Savings to PFS from Data Corruption Prevention Subroutine
Category of Employees involved Programmers Technical Assistants PFS Workers
in Data Corruption
No. of employees involved 3 1 125
No. of incidents 24 24 24
Time involved per employee (hours) 4 1 4
FTE costs per hour $45 $40 $42
Savings from subroutine 3 x 24 x 4 x $45 = 1x 24 x 1 x $40 = 125 x 24 x 4 x $42=
$12,960 (1) $960 (2) $504,000 (3)
Total savings to PFS from subroutine B=(1) + (2) + (3) =
(excludes minor saving in CPU time) $ 517,920
enterprise selling approach requires immense trust
between both parties based on a clear understanding
that partnering will bring significant mutual benefits.
Enterprise partnerships are usually successful when there
is some match between the cultures of the two parties.
Such partnerships are also more successful when the top
managers of both firms are in touch and trust each other.
Based on the stretch goals Infosys has in mind for its
business from PFS, a case could be made that Infosys
must use enterprise selling techniques in getting the
Ariba e-procurement order. The top management of
Infosys has an opportunity to meet senior PFS managers
during their forthcoming visit to the Infosys campus in
Bangalore. Infosys board members must use this oppor-
tunity to forge closer links with the PFS President and
discuss the formation of a long-term partnership be-
tween the two firms. At the same time, the onsite duo
of Rahul Dev and Jaspal Singh must highlight to PFS
in Dallas that the two firms have many value-based
similarities and that the savings of nearly $15 million
for PFS over and above the contract terms are an indi-
Table 4: Savings to PFS from Record Comparison Algorithm
Monthly penalties for late submission to State Commission $360,000
Probability of late submission each month 0.01
Amount saved per month $360,000 x 0.01 = $3,600 (1)
Annual Savings from algorithm C=$3,600 x 12 = $43,200
Table 5: Savings to PFS from Reduction in Disability Claims Reserve
Reduction in cash reserves $14,000,000
Cost of capital for PFS (%) 10
Annual savings from reduction in claims reserve D= $14,000,000 x 0.1 = $1,400,000
Table 6: Total Cost Savings to PFS over and above Contract Terms
Savings from re-engineering project assignments (A) $12,960,000
Savings from subroutine to prevent data corruption (B) $517,920
Savings from record comparison algorithm $43,200
Savings from reduction in claims reserve (D) $1,400,000
Total savings to PFS A to D $14,921,120
cation of the quality of concern for its client that Infosys
brings into a relationship.
The Ariba project can also be seen as a situation
where a consultative selling approach needs to be used.
Consultative selling occurs when the salesperson brings
superior knowledge and problem solving capabilities to
the sales opportunity in order to create superior value
for the client. Superior value is created by thoroughly
understanding the clients processes, constraints, and
needs and developing appropriate solutions. Such ac-
tivities are akin to consulting and therefore this ap-
proach is called the Consultative Sales Approach. Rahul
Dev and Jaspal Singh must convince PFS that Infosys
has the required capabilities in the consulting arena to
provide an end-to-end solution using the Ariba soft-
ware. Their presentation must highlight the backgrounds
and project experience of Infosys consultants who will
be assigned to the Ariba project. They must highlight
the fact that the large number of maintenance projects
that Infosys has carried out for PFS over the past five
years have provided Infosys employees with a great deal
of knowledge about how PFS operates, knowledge that
will come in extremely handy in the consulting phase
2
Rackham, N and DeVincentis, J (1998). Rethinking the Sales Force. New
York: McGraw Hill.
138 INFOSYS TECHNOLOGIES LTD.: GROWING SHARE OF A CUSTOMERS BUSINESS
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135
of the project. Additionally, Dev and Singh must high-
light the expertise that Infosys has acquired on Ariba
software in the three ongoing projects for other clients.
Finally, Infosys must quote the right terms while
seeking an order and use transactional selling tactics.
The major items of discussion will be the terms compris-
ing price, time schedule for completion, important mile-
stones, and proposed commitment of staff both onsite
and offshore. Infosys will need to consider the rising
rupee while presenting the pricing for implementation
and maintenance. It may consider a hike in the imple-
mentation price to about $2,075,000 and the maintenance
of the end-to-end solution to around $410,000 per an-
num.
Case Analysis IV
Sudip Nandy
Chief Strategy Officer
WIPRO Ltd.
e-mail: sudip.nandy@wipro.com
I
n the management case, Infosys is facing an inter-
esting business situation. The company has been
performing exceedingly well as an offshore IT
services vendor at Prairie Four Square (PFS) Insurance
over the last five years. Based on this strong track record,
PFS is now considering Infosys as a potential partner
for an end-to-end Ariba e-Procurement System Project.
This is a chance for Infosys to establish itself as not just
an offshore partner competing on cost advantage and
quality of service delivery, but also as a thought partner
with business skills to help the PFS managers respond
to business challenges. This case analysis discusses var-
ious aspects of the way the Infosys account team can
respond to this strategic growth opportunity at PFS.
The PFS managers have two objectives while mak-
ing the choice of an IT outsourcing partner for this
project one, to ensure that the IT partner has the skills
and the capability to implement an end-to-end solution,
and two, to find the lowest cost at which this can be done.
On the ground, Infosys already has a strong position
to convince PFS of its low cost and high service quality
proposition. However, the other two IT consulting com-
panies are stronger in terms of showcasing a consulting
capability for end-to-end solution development.
To win this business opportunity, Infosys needs to
do away with the tendency of its managers to package
and present its excellent performance on ongoing PFS
projects the performance metrics and case histories of
cost savings that Infosys teams have consistently brought
to PFS. To get to a winning position, the Infosys proposal
needs to pitch that it has developed consulting led end-
to-end capability required to deliver on this project.
In this context, the following need to be the key
elements of the Infosys proposal:
Discuss the evolution of the Infosys business model moving
from labour cost arbitrage to focus on specific market
opportunities, to more complex business capability, and
most recently to specific industry ability/domain excel-
lence. The PFS managers view Infosys as an outstanding
vendor for offshore outsourcing of IT maintenance
projects. It is necessary to position Infosys as bringing
specific domain and consulting-led capability to deliver
IT services. Infosys PFS account team needs to reach out
internally to collect relevant facts on consulting capa-
bility at Infosys. The proposal should seek to first es-
tablish this high level view in the minds of PFS man-
agers.
Discuss Infosys specific capability and experience at man-
aging end-to-end e-procurement system projects over the last
one year. Discuss specific challenges faced in customi-
zation, installation, and maintenance of the project and
how Infosys teams have responded to these challenges.
Infosys PFS account team needs to collect relevant facts
and prepare at least one case study from these ongoing
projects. The proposal needs to highlight the cross-in-
dustry capability required to work on an e-procurement
system project. This will help Infosys drive the point that
even though it may not have past experience of such a
project for an Insurance client, it has the expertise to
deliver on other industry clients. It will be ideal if Infosys
could arrange a reference-check call with one of its clients
on such a project.
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Discuss the operational cost savings possible for PFS in detail.
The operational cost of the current PFS procurement
systems is $ 78 per order processed, much higher than
the industry average of $ 45 per order processed. The
proposal needs to highlight the significant opportunities
to cut operational costs for PFS. Infosys can bring in the
perspective on how it has managed to bring cost savings
to PFS well in excess of their expectations. Specific
numbers will help:
500 technical people are working at Infosys on the
PFS account, at $ 4,800 per month differential costs
per FTE between the US and India, and this saves
PFS about $ 25-28 million a year. It is possible that
the PFS IT budget will be at a 4-5 per cent of the
turnover, which comes to well over $ 1 billion a year.
Thus, Infosys has already brought a 2-3 per cent
reduction in the PFS IT budget through a successful
working offshoring model. It is a saving not easy
to match for the US-focused players like Excalibur
and Merrimac Consulting, which are not experi-
enced at working with the offshore model. Howev-
er, this is a saving PFS would have expected from
Infosys. It is probably important to put a perspec-
tive on how much has Infosys achieved in terms of
cost savings over and above this amount.
Using the data in Exhibit 2 would help. In addition,
substantial cost savings from 150 Infoscions freed
up through productivity gains brought by the
Infosys delivery team. This means savings of about
$ 6 million a year.
Another key initiative that Infosys has carried out
at PFS is the reduction in average number of cor-
ruption incidences from 24 to 0. From the data
available, this has meant savings of about $ 0.5
million in terms of idle time of PFS employees due
to these incidents.
In addition, there is the saving by ensuring that the
state commissions do not penalize PFS for delay in
delivering compliance analyses each month. The
savings are not substantial from a number point of
view, but enable PFS to complete 1,800 jobs on the
last night of each month.
Taken in perspective, for every $ 25 million savings
PFS expects from handing work over to Infosys, it
has got an additional quantifiable saving of $ 6-7
million, which is a substantial additional 25 per cent
over time!
The company should not try to undercut on price
to win this project. There are two key reasons for saying
this one, the key challenge for Infosys to win this
project is to manage the end-to-end customization and
implementation challenge, and not the cost challenge;
and two, with its excellent track record at PFS, it does
not need to give any strategic price discount to improve
its chance of winning this project.
It is likely, however, that in the first year, Infosys
price quote for this project will be close to the bids likely
to come in from Excalibur and Merrimac Consulting.
This would be the case since a substantial part of the
implementation phase of the project would be done
onsite where the cost differential between the two firms
may be small. However, Infosys can beat the price quoted
by the competitors for maintenance of the project, and
also justifiably claim that PFS will get additional cost
savings every year.
The one key point to highlight will be the business
gain for PFS from Infosys ability to cut down the knowl-
edge transfer time of the project. The gain for PFS will
be more from a faster deployment of the e-procurement
system, and for PFS business managers, this will be
substantial. The point will clearly be in Infosys favour
even if the scientific estimation of business gain may not
be possible as part of this proposal.
The Infosys team can do some thinking on the
proposed team structure for this project. Infosys should
include higher billing rate resource(s) from the consult-
ing team of Infosys, and bill such resource(s) at higher
consulting charge-out rates.The proposal should men-
tion the technical expertise of the Infosys team but not
oversell that as PFS managers are already aware of it.
The presentation strategy for Infosys should be to
bring a senior Infosys consulting team member to join
the account management team for this presentation. It
should emphasize its philosophy of valuing long-term
relationships with customers and employees over the
short-term profits.
With the above as the key tenets of its proposal,
Infosys should keep the discussion focused, cut out the
parts that the PFS managers already know, not over-
emphasize the cost-saving aspect of working with Infosys
as much as the part on the capability of Infosys for
bringing the right skills to deliver on this project. Infosys
is hosting a team from PFS on its campus in Bangalore
before the presentation on this proposal to the CIO and
Purchase Managers of PFS. It is important to resist the
temptation of taking the visiting PFS team through the
140 INFOSYS TECHNOLOGIES LTD.: GROWING SHARE OF A CUSTOMERS BUSINESS
140
specifics of Infosys approach to this project. The PFS
CIO and Purchase Managers should be the first ones to
know the Infosys proposal on this opportunity in detail.
The Infosys team in Bangalore, however, can use this
visit to make the point on consulting focus, training
ability, and new hires from consulting backgrounds at
Infosys. It is all right as long as that pitch is generic,
but Infosys should not talk of specifics during this visit.
Looking beyond this project, the Infosys senior
management needs to think through the challenge of
moving up the value chain at their established customer
accounts. Long-term customers like PFS have come to
recognize Infosys and other top India-based outsourcing
providers such as Wipro and TCS, for their cost advan-
tage, high quality of service delivery, and business models
focused on building long-term customer relationships.
These companies have worked hard to establish that
position with their long-term customers. These compa-
nies are facing the marketing challenge of convincing
their long-term customers of their consulting ability and
industry-focused domain strength. It is an interesting
challenge to bring together the low cost, IT service
delivery model perfected by these companies, and the
high-end consulting-led business model that focuses on
business value for the customer with cost being less
important. These companies are working hard at getting
this transition right, and hope that they will eventually
get there.
Case Analysis V
Shlomo Maital
Academic Director
TIM-Tel Aviv, Israel
e-mail: smaital@mit.edu
T
he Infosys Case enables focused action-learning
discussion of the theory and practice of three
related topics: (a) implementing strategic change
that is both top-down and bottom-up; (b) defining
customer value propositions to find powerful reso-
nance; and (c) migrating the companys strategy, com-
petencies, and business model upward, away from the
area of commodities and into the area of high-margin
services. These topics, I believe, lie at the core of the
management dilemmas that many global companies face.
Let us begin with the issue of migrating up the value
chain.
Simplify, Einstein admonished.
To simplify: There are only two basic growth strat-
egies.
Same to more: Sell the same product or service to
more people. This is what most organizations call
as a growth strategy. It seeks to boost the share of
the market.
More to same: Sell higher-value higher-margin
products and services to the same clientele, to escape
commoditization. This is what Infosys seeks to do
and this is what their bid for the PFS contract in-
volves. The case embodies nearly all the key issues
involved in a more to same or share of wallet
strategy.
This is a difficult strategy to implement. It involves
radical change within the organization, to align capa-
bilities with a new value proposition. And from my
experience, the hardest part is not gaining new higher-
margin business from the existing clients, but getting
used to turning down business from new clients. Infosys
has to learn to do this regularly if it is to successfully
execute this more to same strategy. I believe, the com-
pany is already doing this. I was told by a senior Infosys
executive that Infosys has 400 clients and that it is rather
unusual for it to accept the new ones; the case must be
exceedingly powerful for it to do so. This is more to
same in its highest form.
Peter Drucker once said, business strategy is not
what the organization does, but what it chooses not to
do. By the same token, businesses are best judged not
by their clientele, but by the customers they decline. The
key benefit of more to same is that it builds client
loyalty. It is known to be an order of magnitude more
expensive to gain a new customer than to keep an old
one, in general. This is an important rationale for more
to same.
Infosys has not only deliberately kept its focus
primarily on the existing customers, but has also single-
mindedly focused on the key industries: banking, finan-
cial services, insurance, healthcare, retailing. Inevitably,
VIKALPA VOLUME 32 NO 4 OCTOBER - DECEMBER 2007 141
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a more-to-same share-of-wallet strategy must do this.
Infosys customer value proposition is summarized
by Narus and Seshadri in three words: Business domain
excellence We understand your business, as well as
or better than you, and we can prove it by helping you
make your business more smooth, efficient, and pro-
fitable. This excellence cannot be achieved everywhere,
in all industries. It must be focused, and hard choices
must be made. Infosys has made them. Many companies
do not. And it must above all be proven in the field.
The challenge for Infosys in winning the Ariba
contract is to convince its PFS client that, once a body
shop operation for PFS, Infosys is indeed able to move
upward into stratospheric regions dominated by heavy-
weights like EDS, IBM, and Accenture. IBM once built
its advertising campaign around the slogan You never
go wrong with IBM. PFS executives would incur sub-
stantial risk by going with Infosys. The customer value
proposition has to be so powerful, so compelling, that
it would overcome this obstacle. In Robert Peters, PFS
CIO, Infosys has an ally who likes their past work. But
competition is stiff. And a classic dilemma arises:
Whether to compete head-to-head with competitors who
may price their bid on cost? The answer is: No. Compete
on value, not on cost. Create added value and charge
for it. Infosys has to find a way to communicate the
value created by it in the past, well beyond its contrac-
tual obligations and establish that all this was possible
due to its superior domain competencies.
What constitutes a compelling, winning value propo-
sition? Anderson, Narus and Rossum (2006)*
*
distin-
guish between three types of value propositions (see
Table 1): (a) one that dumps all benefits on the table,
like a smorgasbord buffet (an approach used by many
companies); (b) favourable points of difference, an ap-
proach that stresses key differentiators, running the risk
that the differentiator the client seeks is not precisely
the one being promoted by the selling organization; and
(c) resonating focus one or two key points of difference,
that answer the question, What is most worthwhile for
our firm to keep in mind about your offering? What
really matters to you? At times, clients cannot answer
that question. It takes a very good listener and observer
to find out.
This (Ariba project) is as much a consulting project
as an IT project, Purchasing VP, Kay Bryan, said. Infosys,
led by Rahul and Jaspal, built the case for sole-sourcing.
They understand the more-to-same share-of-wallet strat-
egy and see veins of gold at PFS, in future contracts for
ERP, CRM, and financial systems. It is crucial that the
operations managers, not only senior management, at
PFS, understand the strategy clearly. It is they, in the
end, who will determine its success or failure.
This case illustrates two issues that I believe are
often underplayed.
One is the hidden value of the more-to-same strat-
egy it tremendously energizes the people in the sup-
plier firm, by giving them major challenges and expect-
ing them to rise to them. One sees it here in this case.
Managers often oscillate between the two poles: the high
stress of tackling jobs for which they may be under-
qualified, and the boredom of tackling jobs they have
done repeatedly in the past. Faced with a choice, or-
ganizations should pick the former. This case shows,
in part, why.
Two, it is the crucial point that by sharpening and
honing a resonant customer value proposition, not only
is the organization more likely to win the bid, but it is
far more likely to succeed once it wins it, in supplying
what customers want and need and in ensuring that
everyone in the supplying organization knows what is
needed.
While working with a global high-tech organiza-
tion, let us call it XYZ Ltd., I recently had some of their
development managers do the following exercise:
Please stand. Take the role of a major customer.
Say who you are (name any suitable manager of the
major customer). Now, state, in just a few words, why
you buy the product of XYZ. What is the resonant
focus?
My managers had great difficulty. We then had a
long discussion about what data they lacked and needed,
and how they could acquire it.
It is clearly understood that selling a resonant
customer value proposition is only the first step. The
next crucial step is to deliver what that proposition
promises. Infosys has a remarkable Global Delivery
Model. In service businesses, only if operations excel-
lence is aligned with value propositions will the more-
to-same strategy truly work. This case is an indication
that Infosys indeed can deliver what it promises PFS.
The final key point made by Anderson, Narus, and
von Rossum (2006), is this: Defining customer value
* Anderson, James C; Narus, James A and Rossum, Wouter van (2006).
Customer Value Propositions in Business Markets, Harvard Business Review,
March, 84(3), 1990-99.
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Table 1: Types of Value Proposition Towards Resonating Focus
Value Proposition All Benefits Favourable Points of View Resonating Focus
Consists of: All benefits customers receive All favourable points of difference The one or two points of difference
from a market offering a market offering has relative to (and perhaps, a point of parity)
the next best alternative whose improvement will deliver the
greatest value to the customer for
the foreseeable future
Answers the customers Why should our firm purchase Why should our firm purchase your What is most worthwhile for our
questions: your offering? offering instead of your competitors? firm to keep in mind about your
offering?
Requires: Knowledge of own market Knowledge of own market offering Knowledge of how own market
offering and the next best alternative offering delivers superior value to
customers, compared with the next
best alternative
Has the potential pitfall: Benefit assertion Value presumption Requires customer value research
Source: Anderson, Narus and van Rossum (2006).
138
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propositions is the job not solely of marketing manage-
ment, but in fact, is the responsibility of senior manage-
ment. Lurking in the background of this case, or perhaps
even in the foreground, is the fine hand of the Infosys
founder and Chairman, Narayana Murthy. The combi-
nation of top-down and bottom-up or middle-up busi-
ness strategy is a winning one.
T
he case covers the basic challenges and issues in
front of Infosys Technologies Ltd. to compete for
customization, installation, and maintenance of
a JAVA-based Ariba e-procurement system at Prairie
Four Square (PFS) Insurance. PFS Insurance is one of the
leading providers of individual life, group life, medical
and dental, and long-term care and disability insurance
in the US. The PFS sales exceed $27 billion and it serves
50 million individual, institutional, and corporate cus-
tomers in the US. The problem started when there was
relentless pressure from the Wall Street to cut costs
dramatically; this led to the outsourcing of the offshore
part of its IT maintenance activities. Infosys was con-
sidered for the project. The difficulties of the company
to prove its credibility is highlighted in the case.
Challenging Issues in Global Marketing
CrossCultural Differences
Infosys has to implement and maintain the project in the
US. The working culture of the US and India is different
and so, it may be difficult for the employees to gel with
the PFS employees. Similarly, if, the project was in Japan,
understanding the requirement of the client would have
been difficult for the Infosys employees because of the
language problem. They would have had to learn Jap-
anese.
Maintenance at Vendors Site
In case the maintenance work has to be carried out
entirely at the vendors end, it would be very expensive
for both the parties. It would incur more cost for PFS
as it has to pay $8,000 in the US against $3,200 in India
resulting in a net increase of $4,800 per person per
month.
Acknowledgement. I am thankful to all students of marketing in MBA batch
of 2008 for extensively discussing the issues involved. My special thanks to
Mr. Apoorv Bhatt of the same batch for helping me prepare this solution.
Case Analysis VI
Zillur Rahman
Assistant Professor
Department of Management Studies
IIT Roorkee
e-mail: yusuffdm@iitr.ernet.in
VIKALPA VOLUME 32 NO 4 OCTOBER - DECEMBER 2007 143
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Marketing at Vendors Site
Marketing at vendors site is not feasible as infosys
employees are not familiar with the US market and may
face difficulties. Also, cultural differences might pose
some problems.
Repositioning and Brand Building
Till now, Infosys has been considered only as a main-
tenance provider. These projects have been low value-
adding and price-sensitive. Now Infosys needs to project
itself as a company providing end-to-end solution to
PFS procurement process. Infosys does have experience
in similar projects in healthcare industry, which needs
to be highlighted. This would help in gaining a greater
share of the customers IT expenditure.
Global Competition
Players like Excalibur and Merrimac Consulting are
among the top 15 consulting firms of the world parti-
cularly when it comes to applying IT to ERP, process
engineering, and logistics. Infosys needs to prove the
quality of their work in the same field.
Quantifiable Cost savings
Time to Market Savings
Time to market savings is saving the cost incurred in
timely delivery. The target delivery time for PFS is 91
per cent while that achieved by Infosys is 99.6 per cent.
This timely delivery helps PFS to process and analyse
data at the right time and on an ongoing basis. If the
data are delayed, the loss to the company would be
enormous as it serves around 50 million customers who
could have switched to competitor on not receiving the
timely service. This is a great advantage for Infosys.
Reduce Learning Curve Time
The advantage of timely delivery by Infosys helps the
PFS in reducing the Learning Curve which in turn can
be helpful in achieving an early completion of the project
thus reducing the cost to the company.
Transfer of Surplus Infoscions to other PFS Projects
The transfer of surplus manpower is never mentioned
in the contract. So, if Infosys is delegating the workforce
to some other project, it is saving the cost of PFS as the
company does not have to spend on manpower in that
project.
Saved Cash Reserves
Streamlining and reengineering of the claim manage-
ment process helped PFS complete the related tasks
faster and more accurately. Thus, through Insurance
Regulation, PFS was allowed to reduce its cash reserves
by 10 per cent.
Saving the Cost of Project Proposals
PFS is saving on time and cost incurred in choosing the
right candidate for a proposed project by delegating each
project to Infosys.
Knowledge Transfer Time for Sole Sourcing
Knowledge transfer time is the time required to make
a programmer up-to-date on technical details, if they
enter the project at the maintenance stage (not from the
beginning). It would take five programmers around 12
weeks (with FTE costs being USD 8000 pm) to master
an Ariba e-procurement system that another vendor had
installed. The total costs involved in this case would be:
5 programmer X 3months X $8,000 pm = $ 1, 20,000
Thus, the knowledge transfer time saving for the
company would be around $ 1, 20,000 due to sole sourcing.
Infosys Teams Ability to Deliver End-to-End Solution
Credibility
The Infosys team can prove its credibility in the e-pro-
curement software by showing their past records in the
maintenance of software and client referrals.
Saving on Procurement
Infosys can show the initiation of three e-procurement
software in one year including two for retailers and one
for a healthcare organization in the US and Europe. The
outcome of the project is not yet known but the company
has already been able to save $ 100,000 per year in the
healthcare organization by switching the companys
change order procedures.
Effective Resources
Infosys has effective resources for the implementation
and maintenance of the e-procurement software as they
were already working on three projects of the same
nature.
Well-developed Training Infrastructure
Infosys has a well-equipped training infrastructure which
can be helpful in imparting training on the JAVA-based
Ariba e-procurement software to the PFS employees.
The company has an Education & Research Group which
organizes training sessions and gives demonstration of
JAVA projects that they have successfully completed in
144 INFOSYS TECHNOLOGIES LTD.: GROWING SHARE OF A CUSTOMERS BUSINESS
144
the past. This gives an edge to the company.
Required Technical Expertise
The Infosys team comprises of people who can handle
the routine maintenance tasks such as cleansing corrupt-
ed data, correcting software flaws, and running pro-
gramme and systems tests. They would also be able to
complete higher value maintenance-related work, such
as application development, business process reengi-
neering, installation of certain packaged solutions, pro-
gramme management, and technology consulting. Also
each project is completed under the guidance of a Delivery
Manager, Engagement Manager, Account Manager, and
a Senior Programmer. The required expertise is thus
available with Infosys for looking after a project effi-
ciently.
Proven Skills
Redesigning the maintenance projects. Infosys has prov-
en skills in the maintenance projects. By redesigning the
maintenance projects, the company is able to reduce the
size of the development team from 250 to 75 (onsite) and
100 (offshore) thus saving $12 million p.a. approximate-
ly:
250 members X $ 8,000 p.m. = $ 20,00,000 p.m.
- 175 members X $ 8,000 p.m. = $ 14,00,000 p.m.
+ 100 members X $ 3,200 p.m. = $ 3,20,000 p.m.
Total savings = ~ $ 1 million p.m. = ~ $ 12 million p.a.
Writing a subroutine. Writing a subroutine which au-
tomatically shuts down the batch programmes at 5 a m
saves around $ 500,000 spent to reconstitute the corrupt-
ed data, the details of which are given in the case.
Improved efficiency. The team has been able to improve
the record comparison processing efficiency by 56 per
cent and the processing time by eight hours. This again
has helped in building the brand for Infosys.
It isnt reasonable to ask that we achieve perfection. What
is reasonable is that we never cease to aim for it.
Atul Gawande
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