Electronic copy available at: http://ssrn.com/abstract=1067441
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Vision into Action: Infosys Technologies
Arpita Saha1
Abstract: Infosys is one of the world¡¦s most respected companies. It is one of those companies which have changed the way India is perceived in the global purview. Since its inception Infosys¡¦ founder members shared the vision of becoming a globally recognized organization providing high quality business solutions. Infosys is regarded as a highly respected organization because of the set of values which drive them; like the integrity and transparency with which they conduct themselves, their customer friendliness and their exemplary leadership. This article delves into the company¡¦s growth path and the role played by their vision and mission in their progress.
Introduction
Infosys is the world leader in providing high quality Information Technology and software services to its clients globally. Infosys is one of the companies which spearheaded the software services outsourcing strategies. Offshore outsourcing is a process in which an external organization is contracted to execute some task in an outside territory. And this has several advantages for the organizations which outsource. Infosys delivers offshore IT and software services like infrastructure support, application development, IT consulting, re-engineering and other services like setting up software development centers at different locations for their clients. Adding another feather to the
Infosys¡¦ cap is a banking application that empowers banks to transform their businesses; called
¡¥Finacle¡¦. Finacle is a modular solution which can be customized to address the specific needs of retail and corporate banks globally. Infosys addresses to give end-to-end technology solutions and takes care of the issues encountered in the dynamic business environment.
1 The author can be reached at arpitas2000@gmail.com.
Electronic copy available at: http://ssrn.com/abstract=1067441
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Inception and Growth
Infosys came into existence on July 2nd, 1981 when Narayana Murthy and six others came together.
All seven of those patrons had a common vision. Their vision was to create a globally recognized organization. The company began its operations with a capital of Rs. 10,000 (then US$ 320). During the initial years of its operations, Infosys encountered challenges due to power crisis, lack of prominence and government regulations. However these hindrances induced an unwavering determination among the Infosys team; and they picked up their first project of US$ 120,000. This led to an increase in the exports and a further need for resources. Eventually, Infosys opened a software development center in Bangalore.
Infosys was initially focusing on the US market to gain advantage because of the low labor costs in
India. Infosys got its first US client in 1983 - Data Basics Corporations; which had a software solution for garment industry and Infosys undertook the task of development, implementation and maintenance of that solution. Infosys opened up its first international office in California in 1987 and also instituted a joint venture with Kurt Salmon Associates (KSA) in the US. Kurt Salmon
Associates is a management consulting firm. In the history of Infosys, the year 1988 proved to be a milepost as the company received a major project from Reebok (France). Infosys developed an application which enabled Reebok to manage its order entries, inventory, etc., and the package was named as Distribution Management Application Package (DMAP). Infosys then further remodeled and standardized DMAP for other businesses. The company also started an offshore development center for General Electric (US), a manufacturing, technology and services conglomerate.
Infosys came into existence in the year 1981. After a decade it became a public limited company in the year 1992. It received ISO 9001 certification in 1993. The year 1999 was a year of achievements for Infosys as in this year it became the first Indian company to have got listed on NASDAQ, and it crossed the $100 million mark in terms of annual revenues. And in the same year the company achieved SEI-CMM Level 5. The annual revenue growth grew multifold in subsequent years. It crossed $ 400 million in 2001, crossed $ half a billion the following year. In 2004, Business Week adjudged Infosys as the 74th company among the World¡¦s Top 100 InfoTech companies. Infosys reached the $ 1 billion milestone in the same year; followed by $ 2 billion in 2006 with employee strength of 52,715 (Annexure 1).
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From 1996 to 2006 the overall growth in employee strength is 4398%, while revenue growth has been 7870% and the net income growth comes to 7829% which speaks volumes about the company¡¦s vision and their present standing in the global arena. (The growth rate over the years is illustrated in the fiscal highlights in Annexure I.)
Infosys: Vision and Mission
A vision statement depicts an organization¡¦s goal. It portrays where the organization wants to reach in subsequent times. Along with a vision, organizations have a purpose and mission also. The mission underlines the reason for which the organization was created. A mission statement precisely elucidates the reason of an organization¡¦s existence and what it aims to achieve in future. It enunciates the ethics and principles of the organization. A mission statement reverberates with its employees and transpires loyalty and enthusiasm among them. The vision depicts the business future and mission illustrates how to achieve it. The mission statement of a corporation helps it to align its business strategies with its primary goal.
Infosys¡¦ Vision is ¡§To be a globally respected corporation that provides best-of-breed business solutions, leveraging technology, delivered by best-in-class people.¡¨2
Infosys¡¦ Mission is: ¡§To achieve our objectives in an environment of fairness, honesty and courtesy towards our clients, employees, vendors and society at large.¡¨3
Today Infosys has more than 52000 employees across the world providing software and IT consulting services. Its leader Narayana Murthy envisioned a globally admired organization and
Infosys today is one of those organizations which forged their ways into the global software outsourcing industry.
2 &3 www.infosys.com
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The values that influence the enterprise are termed as C-LIFE;
„h Customer Delight: A commitment to surpassing our customer expectations.
„h Leadership by Example: A commitment to set standards in our business and transactions and be an exemplar for the industry and our own teams.
„h Integrity and Transparency: A commitment to be ethical, sincere and open in our dealings.
„h Fairness: A commitment to be objective and transaction-oriented, thereby earning trust and respect. „h Pursuit of Excellence: A commitment to strive relentlessly, to constantly improve ourselves, our teams, our services and products so as to become the best.4
Impact of the Indian Economic Liberalization
In the year 1991, the government stepped up towards liberalization of the Indian economy. As a result of those changes, private concerns were enabled to issue public equities. As a result of technological upgradations and a liberalized economy, companies not only started to open offices but employees also began to migrate to distant countries to reap the benefits. With the advent of liberalization the company began to invest on infrastructure. It became a Public Limited Company in
1992 under the name Infosys Technologies Ltd. Infosys completed its initial public offering (IPO) in
India with a market capitalization of US$10 million in the year 1993. During the mid-1990s Infosys started facing competition not only from Indian companies like Wipro and Satyam Computers but also from the global counterparts like Sun Microsystems, IBM, etc. During 1995-99 Infosys spread its wings with development centers across different parts of India and offices in Australia, Belgium,
Germany, Sweden, Toronto and Milton Keynes (UK). It had also set up two development centers in the US. The liberalization induced further developments; during 2000-01 Infosys opened up its marketing offices in Hong-Kong, France, UAE and Argentina. The development centers were also set up in Canada, UK, Japan and three more in the US.
In the year 2002, Nandan Nilekani became the new CEO of Infosys and Narayana Murthy took over the position of Chairman & Chief Mentor. Infosys got into a tie up with Citigroup in the same year and Progeon Ltd (renamed as Infosys BPO) was incorporated. Infosys BPO is a Business Process
4 Source: http://www.infosys.com/about/vision_and_mission.asp
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Management (BPM) subsidiary of Infosys Technologies. Infosys BPO is one of the leading BPOs in
India. The company focuses on mobile commerce (M-commerce) as well. Infosys went ahead with a strategic alliance with Sun Microsystems to promote banking solutions in the global marketplace.
Infosys Corporate Governance Policy
Infosys is known for its corporate governance and its moral organizational conducts. Since the beginning, Narayana Murthy and his team have always promoted fairness and honesty through the company¡¦s mission statement and also their practices. Infosys is one of the best companies in terms of its corporate governance practices in India. It is because of these excellent practices that the company has bagged a number of awards. One of the most prestigious of those was conferred upon by Credit Lyonnais Securities Asia (CLSA). Infosys bagged the second position in a survey conducted by CLSA among 495 emerging companies in corporate governance. Infosys was also voted as India¡¦s Best Managed Company through Asiamoney poll for four consecutive years (1996-
1999). Infosys also received the ¡§Golden Peacock Award for Corporate Governance¡¨ from the
World Council for Corporate Governance, London. The Ministry of Law, Government of India also bestowed upon Infosys the National award for Excellence in Corporate Governance in the year
2002.5 Recently Infosys has also been awarded the 2007 Optimas Award for the second consecutive year. This year Infosys received the award in the ¡§Global Outlook¡¨ category and in 2006 Infosys¡¦
Employee Relations Program received the award in the ¡§Service¡¨ category.6
Infosys¡¦ standpoint on corporate governance and organizational ethics is effective and is a role model to other IT business houses across the globe. Corporate governance is all about having a set of principles, customs, laws and ideologies influencing the organization¡¦s direction and about being committed to those ideals. Corporate governance also encompasses the organization¡¦s culture affecting the way it deals with its employees, customers and shareholders.
Infosys enunciates that, ¡§We believe that sound corporate governance is critical to enhance and retain investor trust. Accordingly, we always seek to ensure that we attain our performance rules with integrity. Our Board exercises its fiduciary responsibilities in the widest sense of the term. Our disclosures always seek to attain the best practices in international corporate governance. We also
5 Source: http://www.infosys.com/about/all_awards.asp
6 Source: http://www.infosys.com/about/infosys-wins-optimas07.asp
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endeavor to enhance long-term shareholder value and respect minority rights in all our business decisions.¡¨7 The participants of corporate governance are the regulatory body (e.g. the company management, board of directors, shareholders etc.) and the stakeholders (e.g. bankers, employees, customer and the society at large). Hence an up-to-date and explicit publication of the organization¡¦s fiscal growth and achievements is necessitated with a view of boosting up investors¡¦ trust in the corporation.
Infosys¡¦ corporate governance philosophy is established on the following principles:
„X Satisfy the spirit of the law and not just the letter of the law. Corporate governance standards should go beyond the law.
„X Be transparent and maintain a high degree of disclosure levels. When in doubt, disclose.
„X Make a clear distinction between personal conveniences and corporate resources.
„X Communicate externally, in a truthful manner, about how the company is run internally.
„X Comply with the laws in all the countries in which the company operates.
„X Have a simple and transparent corporate structure driven solely by business needs.
„X Management is the trustee of the shareholders' capital and not the owner.8
At Infosys, the corporate governance board strives to safeguard the shareholders¡¦ interest in the organization, to ensure long term inflow of financial capital. Today corporate governance is gaining importance by and large all around the world. Organizations are also identifying its significance in the business performance and its ability to attract capital.
Organization¡¦s mission towards tackling social issues
On 4th December 1996, Infosys Foundation the public-spirited wing of Infosys Technologies Ltd was incorporated. Infosys Technologies is guided with the objective of discharging the social responsibilities of the organization; which is also highlighted in the mission of Infosys. The foundation was started with the motto of raising the underprivileged segments of society and linking them to the mainstream. Infosys foundation has taken on the schemes of providing medical aid to far-flung rural areas. This foundation has organized unique pension schemes for the elderly and also
7 Source: http://www.infosys.com/investor/corporategovernance.asp
8 Source: http://www.infosys.com/investor/corporategovernance.asp
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aids street children and orphans. Infosys Foundation offers support for renovation of old school buildings, have set up around 5500 libraries in government schools across villages as a part of the rural education program called, ¡§A library for every school¡¨9. The foundation also lends its support in rejuvenating the dying traditional forms of culture and fine arts.
Infosys Vision - 202010
Twenty five years ago, the Infosys team envisaged a globally admired organization. Over the years their vision has turned into reality. Infosys now portrays their vision for the years to come. As per their stand the current propensity towards globalization will continue and will ¡§flatten¡¨11 the world.
The fiscal markets will further open up, as that will benefit the world economy. The existing market regulations would also be reduced leading to further technological upgradations in order to augment the security measures. Thus it will be an era of globalization and technological advancements.
In the financial market there will be power shift from the financial institutions to the consumer; the consumer would be technologically equipped to access data and analytics. The financial services will be enhanced and the technology may also bring about novel forms of e-currency. Thus in the years to come, technology will attain a significant position. Technology could revolutionize the facet of financial markets. Technology will change the scenario with consumers acquiring more power and control. Conclusion:
About the successful organization what Infosys today is, Nandan Nilekani; one of the founder members and CEO of the company says, ¡§It's because the founders believed in this larger vision of
Infosys, and were willing to sacrifice their personal aspirations and goals for a larger goal. I think that's very important when you found a company because it's all about deferred gratification. It took us 10 years to reach a point where we even had decent money with us.¡¨12
9 Source: www.infosys.com
10 Source: www.infosys.com
11 Source: www.infosys.com
12 Interview with Nandan Nilekani, www.edition.cnn.com, September 26th, 2006
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N.R. Narayana Murthy and his team of seven founder members of Infosys started with a vision to create a world class organization. The team today can feel proud of the organization¡¦s remarkable achievements as it celebrates 25 years of existence. Starting with a small capital of Rs. 10,000 the company has skyrocketed itself to being a US$ 2-billion global software and IT service provider.
During the journey Infosys vision has transformed into its commitment towards ethical conduct, honesty and fairness towards staff members, dealers, customers and the society as a whole. Infosys is the first Indian business house to have recognized and highlighted the importance of corporate governance and is also the recipient of a number of corporate governance excellence awards from different institutions across the globe. Infosys¡¦ focus towards corporate governance has also raised the standards of other Indian organizations in the corporate governance standpoint. Social responsibility is viewed very highly by Infoscions. They reciprocated to the recent disasters in the
US and Asia in the most ingenuous manner. For the flood affected part of north Karnataka, Infosys also announced a relief of Rs. 1 crore.
The vision with which the Murthys started their journey 25 years back is now a reality in the form of a globally recognized Infosys Technologies. The mission of Infosys set by Narayana Murthy was to deliver the best out of the best to the masses in terms of its standard. One of the long term goals of
Infosys is their commitment to environment, the people at large followed by their values imbibed in their vision and mission.
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Annexure I
Fiscal Highlights
As per US GAAP
Fiscal Year ended March 31st
Employees
(Nos.)
Employees
Growth
(%)
Revenue
($ million)
Revenue
Growth
(%)
Net income
($ million)
Net Income
Growth
(%)
1996 1172 30 27 47 7 72
1997 1705 45 40 49 9 27
1998 2605 53 68 73 13 * 60
1999 3766 45 121 77 30 * 119
2000 5389 43 203 68 61 102
2001 9831 82 414 103 132 115
2002 10738 9 545 32 164 25
2003 15876 48 754 38 195 18
2004 25634 61 1063 41 270 39
2005 36750 43 1592 50 419 ** 55
2006 52715 43 2152 35 555 32
5-Year
CAGR
40 39 33
* This excludes a one-time deferred stock compensation expense arising from a stock split amounting to US $ 13 million and US $ 2 million in fiscal year 1999 and 1998, respectively.
(Source: Infosys Annual Report 2005-06, Page 136)
** Includes US $11 million gain on sale of investment in Yantra Corporation, USA (Source: Infosys
Annual Report 2005-06)
Source: Infosys Annual Report 2005-06, Page 136
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0
10000
20000
30000
40000
50000
60000
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Years
Employees
Employees
Exhibit 1 ¡V Infosys Employee Strength
From 1996 to 2006 Infosys observed an exponential growth in its employee strength with the highest growth percentage in the year 2001
0
500
1000
1500
2000
2500
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Years
Revenue
Revenue ($ millions)
Exhibit 2 - Infosys Revenue
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0
100
200
300
400
500
600
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Years
Net Income
Net income ($ millions)
Exhibit 3 ¡V Infosys Net Income
0
20
40
60
80
100
120
140
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Years
Revenue & Net Income
Growth (%)
Revenue Growth(%) Net Income Growth (%)
Exhibit 4 ¡V Infosys Revenue & Net Income Growth (%)
The revenue and net income also exhibits an exponential growth over the years. The revenues moved up from $ 27 million in 1996 to $ 2152 million in the year 2006, while the highest percentage growth in revenue can be seen in 2001 amounting to 103%. The net income grew up from $ 7 million to $
555 million between the fiscal years 1996 and 2006. The net income growth reached the peak in the year 1999 wherein it touched a figure of 119%.
From 1996 to 2006 the overall growth in employee strength is 4398%, while revenue growth has been 7870% and the net income growth comes to 7829% which speaks volumes about the company¡¦s vision and their present standing in the global arena.
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References
1. www.infosys.com
2. Transcript: Nandan Nilekani Interview, www.edition.cnn.com, September 26th, 2006
3. www.ethicsworld.com
4. The Icfai University Press
5. www.ecch.com
6. www.businessworld.in
7. www.timesofindia.indiatimes.com
8. www.hindustantimes.com
9. www.economictimes.indiatimes.com
10. www.businessweek.com
11. www.time.com