Besides The Upheaval at The Top, it has been a Defining year for Infosys, which saw some Welcome Growth in Revenue Terms. However, Rupee EPS Guidance is a Concern
Going forward, while the company continues to seek opportunities in other emerging markets, the key is going to remain the US, since that is where it still gets around 65% of its revenues. As far as the US market is concerned, Forrester Research concludes in its report that the market for Information & Communication Technologies or ICT (which includes both products & services & involves both government & corporate spending) will grow by around 8% to touch $805 billion in 2011. Of this, IT outsourcing is expected to account for around $104 billion. Though slower than the growth of 8.9% in 2010, it is bullish from the standpoint of the larger base. Consumer spending, which is two thirds of the US GDP, has risen by 4% in Q4, 2010 and unemployment rate has fallen to below 9%, according to Forrester. If these trends continue, the economy should be on a strong growth path.
Besides the protectionist pressures that Indian firms like Infosys faced, there is one more important point to take care of – the fact that location centric advantages are becoming less relevant, thanks to multiple sourcing opportunities being explored by clients. So far, Indian software companies have been able to weather the storm and even gain market share. Dean Blackmore, senior research analyst at Gartner, comments, “In a market that grew 3.1% in 2010, India-based vendors collectively grew by 18.9% (in context of the global IT outsourcing market), increasing their market share from 4.8% in 2009 to 5.5% in 2010.” Yet, caution is advised.
Now the greatest criticism of Infosys has been more towards its conservative nature, particularly towards inorganic growth. Cash is indeed one area, where the company has been far more defensive, with its policy of keeping enough cash reserves for one year of employee salaries at all times. But when it comes to succession planning, Infosys has done a major shift in terms of getting K. V. Kamath in as the Chairman of the company. While promoting S. D. Shibulal to the CEO chair was anticipated, Kamath’s elevation is a first for the company that has traditionally been known to reserve higher positions for its own people. In a past interview to B&E, Kris remarked, “We very rarely select people in direct leadership positions from outside. I also believe that if a company wants a CEO from outside the company, that means the company is not doing well.” While the issue may not be with performance at the moment, recent developments indicate that the company wants to inject some new thinking into its DNA, particularly the kind that took ICICI Bank to new heights. Besides, it does silence quite a few voices that consistently point out how the company is still very founder driven.
Besides the protectionist pressures that Indian firms like Infosys faced, there is one more important point to take care of – the fact that location centric advantages are becoming less relevant, thanks to multiple sourcing opportunities being explored by clients. So far, Indian software companies have been able to weather the storm and even gain market share. Dean Blackmore, senior research analyst at Gartner, comments, “In a market that grew 3.1% in 2010, India-based vendors collectively grew by 18.9% (in context of the global IT outsourcing market), increasing their market share from 4.8% in 2009 to 5.5% in 2010.” Yet, caution is advised.
Now the greatest criticism of Infosys has been more towards its conservative nature, particularly towards inorganic growth. Cash is indeed one area, where the company has been far more defensive, with its policy of keeping enough cash reserves for one year of employee salaries at all times. But when it comes to succession planning, Infosys has done a major shift in terms of getting K. V. Kamath in as the Chairman of the company. While promoting S. D. Shibulal to the CEO chair was anticipated, Kamath’s elevation is a first for the company that has traditionally been known to reserve higher positions for its own people. In a past interview to B&E, Kris remarked, “We very rarely select people in direct leadership positions from outside. I also believe that if a company wants a CEO from outside the company, that means the company is not doing well.” While the issue may not be with performance at the moment, recent developments indicate that the company wants to inject some new thinking into its DNA, particularly the kind that took ICICI Bank to new heights. Besides, it does silence quite a few voices that consistently point out how the company is still very founder driven.
Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
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An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles.
IIPM Best B School India
Management Guru Arindam Chaudhuri
Rajita Chaudhuri-The New Age WomanIIPM's Management Consulting Arm-Planman Consulting
IIPM Prof. Arindam Chaudhuri on Internet Hooliganism
Arindam Chaudhuri: We need Hazare's leadership
Professor Arindam Chaudhuri - A Man For The Society....
IIPM: Indian Institute of Planning and Management
