In February 2001, Infosys Technologies Ltd. (Infosys) was voted as the best managed company in Asia in the Information Technology sector, by Euromoney’s1 Fifth Annual Survey of Best Managed Companies in Asia. Infosys was started in 1981, with an equity capital of Rs.10,000 brought by seven2 professional entrepreneurs led by Narayana Murthy, Chairman and CEO of Infosys. By 2000, Infosys’ market capitalization reached Rs.11 billion. By 2001, Infosys was one of the biggest exporters of software from India. From the beginning, Narayana Murthy focused on the world’s most challenging market - the US. He had two reasons for this. First, there was no market for software in India at the time. He believed that Indian software companies should export products in which they had a competitive advantage. In 1987, Infosys entered into a joint venture with Kurt Salmon Associates (KSA), a leading global management consultancy firm. KSA-Infosys was the first Indo-American joint venture in the US. In 1988-89, Infosys set up its first office in the US. Reebok of France was looking for a software system to handle its distribution management at the same time. Infosys bagged the contract and developed the Distribution Management Application Package (DMAP) for Reebok’s French operations. Infosys decided to use this package to create a standard application package for similar operations of any company. In 1989, Infosys bagged another major contract from Digital Equipment. In the early 1990s, with the opening up of the Indian economy, many export-oriented software companies were set up in India that created the momentum: Infosys leveraged this very successfully. By mid-1990s, Infosys was competing not only with Indian software majors like Tata Consultancy Services, and Wipro, but also with overseas players like Cambridge Technology Partners and Sapinet, which offered software solutions. Narayana Murthy believed that Indian software professionals had the ability to deal with complex projects. Analysts felt that unlike elsewhere, India’s sharpest minds were heading for a career in software, and the best of these aspired to be at Infosys. Infosys also competed with consultancies as Anderson Consulting and Ernst & Young, which positioned themselves as information management specialists. In 1994, the joint venture with KSA was dissolved. In 1995, Narayana Murthy created Yantra Corp.4 in Acton, Mass. US. Around the same time, Infosys entered into a joint venture with Satyam Computers and DCM. During 1998-99, Narayana Murthy planned to position Infosys as a true global company – global clients, global operations, global staff and a global brand image. In 1998, to support his global ambition, Narayana Murthy listed the shares of Infosys on Nasdaq through American Depository Receipts (ADR) issue worth US$75 million. With this, he took the Indian software industry global. Narayana Murthy’s global strategy comprised three features. The first one was the “global delivery model.” The model emphasized on “producing where it is most cost effective to produce and selling where it is most profitable to sell.” Cost effective production meant doing as much of the software development work in India and profitable selling meant focusing almost exclusively on foreign markets, particularly the US. The second feature of the strategy was “moving up the value chain” – which meant getting involved in a software development project at the earliest stage of its life cycle. However, analysts felt that for this, Infosys would have to compete with big companies like Cambridge Technology Partners or even Andersen Consulting, and that could be tough. Agreed Narayana Murthy, “Yes, it is not going to be easy. But we don’t have to be unduly concerned about unmitigated success. We may succeed in some and not in others – which is not to say that we will not succeed as consultants.” The third feature of the strategy was the PSPD. According to Narayana Murthy, there are four fundamental tenets of any well-run business. One: predictability of revenues; two: sustainability of the predictions; three: profitability of revenues; and four: a good de-risking model. ‘De-risking’ meant that Infosys had put limits on its exposure to businesses of various kinds. For instance, it limited its exposure to Y2K projects to less than 25% of its total revenues because this was a business that could disappear overnight and Infosys didn’t want to take the risk.

1. Infosys is one of the biggest exporters of software from India. Describe briefly, how Infosys reached this enviable position? 2. Narayana Murthy tried to position Infosys as a true global company. What are different features of the global strategy he used in this positioning effort?